Former Quest Chief Financial Officer Found Guilty of Defrauding Company Out of $1 Million

February 25, 2010 - OKLAHOMA CITY, OK—Today, a federal jury in Oklahoma City has found DAVID GROSE, 56, of Edmond, Oklahoma, guilty of three counts of wire fraud stemming from a scheme to defraud Quest Energy Partners, L.P., out of $1 million, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma.

“Corporate officers owe special fiduciary duties to their companies, to their investors, and to their employees,” stated U.S. Attorney Sanford C. Coats. “In this case, that fiduciary trust was violated by Mr. Grose solely for the sake of personal profit.” From 2004 to 2008, Grose served as the Chief Financial Officer for Quest Energy Partners, L.P. (“Quest”), a publicly-traded oil and gas exploration and production business based in Oklahoma City. Grose’s responsibilities included supervising Quest’s financial accounting and books, coordinating quarterly reviews and annual audits by outside auditors, certifying the accuracy of reports filed with the U.S. Securities & Exchange Commission (“SEC”), and ensuring that all employees complied with Quest’s internal ethics policies.

According to the evidence at trial, in the summer of 2008, Grose planned to make a $1 million personal investment in a hydrogen fuel technology company. He told the hydrogen fuel technology company that the investment would be funded with his own money. Instead, under the pretext of paying for the purchase of pipe, Grose wired approximately $1 million from Quest to a pipe supplier. Within minutes of the transfer, Grose contacted the pipe company to cancel the order and instructed the pipe company to wire the money to the hydrogen fuel technology company instead of returning the money to Quest. Evidence showed that Grose then caused the transaction to be documented on Quest’s financial records as payment for pipe but did not inform the accounting department he had cancelled the order. As a result of this scheme, Quest lost $1 million. The company cooperated with law enforcement in the investigation.

The trial lasted two days and the jury deliberated approximately one hour before finding Grose guilty on all counts of wire fraud.

At sentencing Grose faces up to 20 years in federal prison on each count and a fine of not more than the greater of twice the gross gain in this case, e.g., $2 million. A sentencing hearing will be set by the Court in approximately 90 days.

The investigation was conducted by the Western District of Oklahoma’s Financial Fraud Task Force, which is comprised of special agents from Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigative Division, and personnel from the U.S. Attorney’s Office. U.S. Attorney Coats thanked the Securities and Exchange Commission and the Oklahoma Department of Securities for their continuing coordination and assistance in the government’s investigation. This case was prosecuted by Assistant U.S. Attorney Jeb Boatman and U.S. Attorney Sanford C. Coats.