Former Calgary oilfield services company executive Joseph A. Kostelecky has been sentenced to three years in prison by the U.S. Department of Justice for defrauding shareholders of a publicly traded company of more than $886 million.
Kostelecky, 61, pleaded guilty Oct. 31, 2021, to causing Poseidon Concepts Corp. to falsely report about $100 million in revenue from long-term contracts with oil and natural gas companies.
He was also ordered to pay about $406.2 million in restitution.
He was the highest-ranking U.S. executive at Poseidon from November 2011 to December 2012.
The North Dakota man fraudulently directed Poseidon’s accounting staff at their U.S. corporate headquarters in Denver to record revenue from those contracts as collectable when the contracts either did not exist or the revenue was not collectable. Following a drop in the company’s stock value, Kostelecky fraudulently caused the issuance of a public filing, falsely reporting he had purchased a substantial number of company shares when he had not.
He admitted to the fraud at the end of 2012 when the inflated revenue came to light and Poseidon’s stock price plummeted and the company was delisted from the Toronto Stock Exchange, forcing the company into bankruptcy and causing more than $886 million in shareholder losses.
Kostelecky said he did this to inflate the value of the company’s stock for his own financial gain.
The case was investigated by the U.S. Postal Inspection Service Criminal Investigation Group’s DOJ Mail Fraud team and prosecuted by assistant deputy chief Anna G. Kaminska and trial attorney Jason M. Covert of the Criminal Division’s Fraud Section.
In 2017, he was ordered by the Alberta Securities Commission to pay $750,000 in fines and costs and has been banned for life from taking part in securities markets. As of Thursday, the ASC was still trying to collect those fines.
“Based on our records, we can confirm he has not paid what he was ordered to pay by the ASC panel,” said Theresa Schroder, senior adviser of communications for the ASC.
Poseidon manufactured and rented out tanks for storing fluids used in the oil and gas sector in the U.S. and Canada.
In 2018, the company reached an agreement in a class-action lawsuit that would boost the potential payout to as much as $36.6 million, but specified that the agreement did not constitute an admission of guilt. The agreement was approved by the Alberta Court of Queen’s Bench.
Twitter: @JoshAldrich03
— With files from The Canadian Press
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