Texas oilfield services firm ProPetro and former CEO Dale Redman have settled charges that they understated his executive perks by failing to disclose ProPetro had reimbursed him for more than $400,000 in personal and travel expenses.
According to the U.S. Securities and Exchange Commission, ProPetro did not include the expenses, including Redman’s use of his personal Learjet for trips that were not directly related to the performance of his CEO duties, in its proxy statements for fiscal 2017 and 2018.
As a result, the statements identified only $10,800 in perks for 2017, instead of $153,370, and $19,248 for 2018, instead of $304,863, representing a total understatement of $428,125, the SEC said in an administrative order.
Redman also allegedly failed to disclose to ProPetro personnel that he had pledged all of his stock in the company as collateral for a private real estate loan, resulting in inaccurate disclosures of his stock ownership in public filings.
The SEC’s administrative order did not mention the company’s CFO. After an audit committee investigation of a separate matter, which did not result in any financial restatements, in the fall of 2019 ProPetro named a new executive chair as well as a new interim CFO, general counsel, and chief accounting officer.
To settle the allegations around executive perks, ProPetro and Redman agreed to cease-and-desist from further violations, and Redman agreed to pay a $195,046 penalty.
“The federal securities laws are crystal clear: issuers must accurately disclose and record executive compensation and stock ownership. ProPetro failed in both respects,” David Peavler, director of the SEC’s Fort Worth regional office, said in a news release.
Redman served as CEO of ProPetro from August 2006 until his resignation in March 2020. He principally used his Learjet for business travel but according to the SEC, ProPetro reimbursed him $42,519 in 2017 and $117,279 for personal trips.
The SEC said Redman omitted his personal trips on the Learjet in the directors & officers questionnaires he submitted to ProPetro.
Additionally, he allegedly failed to disclose that he and members of his family had used ProPetro credit cards to charge $127,698 of personal expenses and ProPetro allegedly failed to properly disclose $47,591 in additional perks for Redman that were authorized and paid for directly by the company.
The improper disclosures of perks came to light, the SEC said, after ProPetro’s board initiated an internal investigation of a different matter. Redman reimbursed the company for $345,636 in August 2019.