justiceawaits, Claremore (2/19/2009 7:24:21 AM)

Sounds like embezzelment to me.Some people use a gun to steal, others a college degree. This punk belongs in prison.

Hawktalk, (2/19/2009 8:06:05 AM)

If KU or OU offer courses in corporate destruction and selfdealing, Kivisto & his associates should be given an adjunct teaching role.

Eagle 4, Tulsa (2/19/2009 8:17:48 AM)

One Fat cat caught, many more to go. How sad.

O&Gtrader, ft. worth (2/19/2009 9:20:33 AM)

For those of you who aren't in the business, when you open a commodity account with a firm like Merrill Lynch, you have to state what the purpose of the account, i.e., speculative trading or hedging. But, if you want to open a "sub" account, or second one under the same name, you don't have to discuss the purpose for the subsidiary account under the "master" account. That way, if you wanted to keep all your oil hedging in one account and your gasoline hedging in another "sub" account for ease of audit, it is no problem to do so. It requires the trader or traders to place specific trades into the specific accounts at the end of the day during "checkout". So, the purpose of the alleged ETI account would be interesting to know.

The Merrill Lynch folk would be very interesting to talk to about the alleged ETI and ETI2 account activity. However, a company the size of SemGroup at the time would have had at least 5 commodity accounts with varying brokers and not just Merrill Lynch. That's pretty much the practice among energy trading firms during the period in question.

rodeoclown99, West of Mississippi (2/19/2009 9:46:11 AM)

O&Gtrader,

You have been a knowledgeable source of info on the nature of the trading business. Thank you for taking the time to educate those of us who are unfamiliar with the nature of the biz. Can you describe what you believe happened to create this mess for SEM? The nuts and bolts are crude hit $70 and someone said, "this is a money maker for sure because oil is going to go down in price". Bets were placed (what were the bets and what created "the line in the sand" to have to cover these bets at a specific time) and oil went up from there. Also, in your opinion, could the situation at hand have "possibly" affected the market and the run up in oil prices? There are people out there who believe this "could have been an influence".

Thanks in advance for anything you might be able to share.

Granny in OK, (2/19/2009 11:50:29 AM)

And the greedy live on........"get a rope"

Arbythree, Tulsa (2/19/2009 11:54:46 AM)

Excellent post O&Gtrader.

Maybe the TW should interview you....seriously. You explained to many of us what has been going on in a way even I could understand.

Thanks!

TyrasFatAx, B.A. (2/19/2009 11:57:05 AM)

Kivisto is a weasel....lock him up!

O&Gtrader, ft. worth (2/19/2009 1:35:50 PM)

rodeoclown99: Thank you for your kind words. The answer probably is in the "hedging agenda" at SemGroup pre July 2008. What had been SemGroup's trading hedging goal(agenda) when it imploded? One one hand I see the obvious answer: to hedge risk. On the other hand, the trading and hedging accounts could have been used as capital pools to pull bonuses from later on depending on which account was in the money or not. That is something the investigators have to find out if true or not.

As for the oil market, as you noted it rallied up to $70/bbl in July of 2007 and then accelerated in Feb 2008 by rocketing through $100/bbl. Why SemGroup was picking "tops" or adding to losing trades could possibly be traced back to global energy analysts who suggested the insanity of price at the time. I would wager that as the market remained irrational in SemGroup's opinion, by going on up and up, SemGroup was running out of cash in 2Q'08 and may have started selling options at higher crude price strikes against/or with their position to bring in "cash" against daily margin calls. (See reports from Blackstone to RZB Financial) However, selling options gives the seller "infinite risk", sort of like trying to use gasoline to put out a fire if conditions aren't right.

So, continuing the analogy, as the oil market rallied I think SemGroup got into some rather large losing positions early (started smoldering). Then they might have added to those losing positions (fire breaks out) then when financial panic set in they could have sold options they never thought would be called (poured gasoline on the fire to put it out). Then, Ka-Boom. No more cash for margin calls.

The above was all speculation on my part. I hope that isn't what happened but it has happened at a lesser scale at smaller companies in the past so it is possible. I learned of ETI and ETI2 today and my gut reaction as a trader and hedging instructor was not a comfortable one without further info about ETI2 coming to light.

Cooldaddy, Broken Arrow (2/19/2009 2:51:22 PM)

Kivisto is a crook!

Transformer, (2/19/2009 3:29:03 PM)

Maybe some of us need to expand our knowledge of this and go to Tulsa Business online and see what was posted there about this.

Sludgworks, Arlington (2/19/2009 5:16:59 PM)

I know they're not set up the same but ETI 1 and ETI 2 sound familiar. Kinda reminds me of someone else's LJM1 and LJM 2.

Happy New Work, (2/19/2009 6:37:16 PM)

Consider this - if an employee would have taken a check for $100,000 and deposited it into a personal account, SemGroup would have filed charges, authorities would have tracked down the employee and put him in jail. Period.

Tom Kivisto, Greg Wallace and likely others take money in the $300 million range, and they are running free. Does that make sense?

O&Gtrader, ft. worth (2/20/2009 9:14:44 AM)

Just observed via recent public statements that Kivisto's lawyer possesses a prominent "hot button": Carlysle/Riverstone.

The Carlysle "part" is in the business of buying broken companies like SemGroup, fixing them and then selling them. That's who's probably behind Ronan's efforts to sell the asphalt group. So, I guess when Carlysle/Riverstone wants to a "play a card" in this game, they talk to the press about some of the former big SemGroup names.

Transformer, (2/20/2009 10:06:04 AM)

O&Gtrader, I believe you may have hit the "nail on the head" so to speak about Carlysle/Riverstone and Ronan being in it together!

O&Gtrader, ft. worth (2/20/2009 12:21:33 PM)

This might be why Kivisto's lawyer is making news of late (forgive me for not getting the "Carlyle" spelling correct earlier):

On Sept. 6th, 2008, The TW published "Bank seeks review of trades by SemGroup , Key lender Bank of America wants an examiner on the case."

This was stated in the article:"Two of SemGroup's main equity holders, Carlyle/Riverstone Energy Partners II LP and Ritchie Capital Management LLC, filed documents Friday indicating that they had reached an agreement with the Unsecured Creditors Committee about the documents pertaining to oil futures trading. The two capital firms may release some documents but reserved the right to withhold others based on legal considerations."

Could recent bloviating be happening perhaps before a trading document is released? Time will tell I suppose.

Also, as an aside, I am wondering why SemGroup LP sold 30% of itself to Carlyle/Riverstone for $75 million back in late 2004. I read one article about it and was curious about how that $75 million was figured. Some would say it's none of my business and they'd probably be right.

Transformer, (2/20/2009 4:12:53 PM)

O&Gtrader, thank you for the correct spelling of Carlyle, I had it incorrect as well. :)
Once again I am curious. Isn't Blackstone the bankruptcy company that Riverstone brought in and Riverstone operates?

O&Gtrader, ft. worth (2/22/2009 2:03:14 PM)

Blackstone is sort of a publicly traded "hedge fund of financial services". You can visit their website for additional info. Some bloggers via the NY Times Dealbook suggest Blackstone was hired as soon as the cash crunch at the SemGroup parent started developing. Blackstone is allegedly the firm that ratted out alleged "unauthorized options trading" to RZB Financial as a large part of the SemGroup LP failure. RZB stated that in a court filing last year and was mentioned in a TW article.

As I ponder the SemGroup financial trainwreck, I am wondering why someone who is allegedly paying himself tens of millions of dollars from the acquision and sale of ongoing businesses is messing around with oil trading (outside of proper hedging) anyway? If you cornered one of the supertraders at that big multi-energy trading company in Tulsa and asked them what they'd do with just $1 million of personal money, I dare say not a one of them would answer, "Trade the heck out of energy futures!" Their bosses forbid them to comment here anyway.

I did notice that SGLP, back when they reported financials, posted a relatively small losses for 2007. I wonder if some criticism for the spin-off's loss was directed at the parent company's management and perhaps someone decided to try to fix that in the future with some not-well-thought-out business strategy?

Also, after Ronan came on board, SGLP press releases start firing up about SGLP buying assets from SemGroup LP all the way to just before the implosion of the parent. There are no press releases that I could find quoting SemGroup's CEO at the time discussing the merits of the various sales to SGLP. That was sort of curious. It made me wonder if SGLP's balance sheet was being built up to gain larger credit lines that perhaps the parent could tap into later?

The SemGroup/SGLP story is like watching a destructive tornado.....you just can't take your eyes off of it.