Tulsa World: SemGroup challenges former execs' insurance

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SemGroup challenges former execs' insurance
Kivisto and others want to use the policy to cover legal costs.

By ROD WALTON World Staff Writer
Published: 8/7/2009 2:25 AM
Last Modified: 8/7/2009 4:48 AM

Complete coverage: Read all the stories and documents related to the SemGroup collapse.

SemGroup LP and its unsecured creditors are challenging the right of co-founder and ex-CEO Tom Kivisto and other former executives to claim a $10 million insurance policy to cover their defense costs for lawsuits, including one against them filed by the bankrupt Tulsa-based company.

Last month, Kivisto, Gregory Wallace, Kevin Foxx, Brent Cooper and Alex Stallings asked a bankruptcy court to approve use of a company-paid policy, titled Directors and Officers liability coverage.

The former SemGroup leaders argued that the insurance policy, which cost $178,957 in premiums, was not the property of their former company.

SemGroup disagreed in its objection, filed this week in U.S. Bankruptcy Court in Wilmington, Del.

The company and its unsecured creditors committee noted that a Bankruptcy Examiner's report alleged "multiple acts of mismanagement and breaches of fiduciary duty" by the defendants.

Among those accusations was that Kivisto, Cooper and Wallace misled creditors and other employees about the risky, secretive oil futures trading strategy that ultimately bankrupted SemGroup.

"To now allow these same defendants to deplete the proceeds of the D&O policy to fund their defense costs in the adversary proceeding stands in the

face of principles of fairness, equity and justice," the objection states.

Kivisto's attorney, John Tucker, responded Thursday by noting the D&O title on the coverage.

"The insurance should apply to the persons who are named as insured," he said. "The name of the policy is Directors and Officers liability coverage."

The policy is intended to cover directors and officers from November 2007 to November 2008, court documents state.

SemGroup filed for Chapter 11 bankruptcy protection in July 2008 after being forced to meet margin calls on losing oil futures positions exceeding $2.4 billion, according to reports.

Kivisto, Wallace and Foxx co-founded the company in 2000.

Wallace served as chief financial officer before stepping down last year, while Foxx resigned from the board and stayed as CEO of publicly traded subsidiary SemGroup Energy Partners, or SGLP.

Cooper took disability leave last summer from his post as SemGroup treasurer. Stallings was SemGroup's chief accounting officer and now serves in the same role for SGLP.

The lawsuit also names Westback Purchasing Co., a wholly owned Kivisto trading operation.

SemGroup accuses Westback of losing more than $300 million in margin calls on futures trades made in the bankrupt company's account, according to reports.

Tucker compared the situation to automobile coverage that protects policy holders in a dispute over an accident.

"The insurance provides coverage if somebody claims you did something wrong," the Tulsa attorney said.

"The company claims these people did something wrong."

Kivisto has denied wrongdoing in court documents. He did not answer questions by the examiner's investigators.

Rod Walton 581-8457
rod.walton@tulsaworld.com By ROD WALTON World Staff Writer

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Some reader comments for this story were copied from "SemGroup opposes former executives tapping insurance for legal defense," which was published on 8/6/2009.

	Report Comment Thunder196, Tulsa (8/6/2009 8:07:33 PM) Never thought about something like this. I would hate to be the bankruptcy judge deciding this one. Either way there is going to be a lot of unhappy people.
	Report Comment O&Gtrader, ft. worth (8/7/2009 8:43:00 AM) It would be interesting to know if they had that coverage on an annual renewing basis or did they just have it for the period defined by the policy in the story above?

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