Up and Down 17th Street: Owens faces hard task on Key board

Published January 31, 2007 at midnight

Text size

More Business Columns & Blogs

Bill Owens could have chosen an easier task for his first corporate board.

Earlier this month Houston-based Key Energy Services said Owens would become a director.

In years past when directorships were easier, the corporate board was an excellent source of post-government income. After Enron, et al, Sarbanes-Oxley made the job a lot more challenging everywhere.

But at Key Energy Services? Owens might drop down a hole as deep as one of the oil wells the company drills.

The company has been unable to file an annual report since 2002. That's landed the company on the "pink sheets," where only the most risky stocks reside.

The trouble started in March 2004 when the company said it was still working on its 2003 audit. Two weeks later it became more serious. A potential writedown was bigger than first believed and the company discovered "misappropriation of funds" and "diversion of company assets."

Key Energy said it replaced managers and terminated employees. Unsurprisingly, the SEC began to investigate.

Ultimately 14 executives including the company's CEO, general counsel and chief financial officer left. According to SEC filings all three are now suing the company for breach of contract, as are the former controller and assistant controller.

Former general counsel Jack Loftis Jr. claims he was fired after making allegations about CEO Francis John. The company said CFO Royce Mitchell also made allegations against John, and several of their concerns led to an accounting review.

The company finished its work on years through 2002, wiping out more than $214 million in pretax profits. It couldn't figure out the proper period for another $87 million of adjustments so it put them in the 2003 financials, violating generally accepted accounting principles. Auditor KPMG provided a qualified opinion on the income statement, then got fired.

So, governor?

"Just as good people came into Qwest after Joe Nacchio, good people have come in here," he said. "It's a good, solid, fundamentally strong company, and I'm trying to be part of bringing this company back."

Owens was recruited by Key Energy Chairman Phil Marcum, a board member since 1996 who's also the CEO of Denver-based Metretek Technologies.

"Probably the best board in the world to join is a company that's about to be certifiably cleaner because of the scrutiny," Owens said.

He got $85,000 worth of stock in Key Energy when he agreed to serve on the board and will make $65,000 in cash each year. That's a lot more than his $90,000 state salary. But Key Energy may provide headaches that make governing look easy.

David Milstead and James Paton take turns writing Up and Down 17th Street. milstead@rockymountainnews.com or 303-954-2648

Subscribe to the Rocky Mountain News