The federal government on Monday unveiled criminal charges in a new case against the former head of the embattled company that hopes to explore the Arctic National Wildlife Refuge’s oil potential.
The federal charges are for his role in attempting to fool investors and his own company in a multimillion-dollar scheme, according to documents released in federal district court in Alaska on Monday.
The Federal Bureau of Investigation presented four counts against Jeff Hastings, the former board chairman and chief executive of SAExploration, who previously led the company’s so-far unsuccessful plans to pursue extensive seismic exploration in the refuge’s coastal plain.
The counts filed against Hastings on Monday include securities fraud and making false statements in public financial reports filed with the U.S. Securities and Exchange Commission. The federal government is represented in the case by the Frank Russo, an assistant U.S. attorney based in Anchorage.
A notice of arrest was posted for Hastings on Monday, according to court records. He was being held at the Anchorage Correctional Complex.
Jeffrey Johnston, a Houston-based attorney for Hastings, could not immediately be reached on Tuesday.
Hastings was suspended last year from SAExploration when the company became aware of “possible issues,” a spokeswoman with SAExploration said in an emailed statement. The charges say Hastings was separated from the company in August 2019.
That month, the company announced it was under investigation by the SEC.
SAExploration is headquartered in Houston, Texas, with offices in Anchorage.
SAExploration applied with the federal government in 2018 to conduct seismic work in the ANWR coastal plain, often a first step in oil exploration. The exploration plan is on hold for now, according to SAExploration’s new chief executive.
It’s unclear if the company’s seismic plan for ANWR will advance. The Trump administration is expected to soon allow the federal government’s first-ever lease sale in the refuge, after Congress approved legislation permitting it in 2017.
Between late 2015 until August 2019, Hastings conspired with three now-former SAExploration officials who are not named in the filing, in a scheme that artificially inflated SAExploration’s reported revenue, the charges say.
Hastings and one of the company’s former executives, named “co-conspirator-1” in the filing, “set up” Alaskan Seismic Ventures as a data library company that purchased seismic data from SAExploration to sell to others, according to the charges.
Hastings and the co-conspirator set up the company to appear independent from SAExploration, since they were looking for a way to take advantage of Alaska’s oil tax credits to offset the costs of exploration, the charges say.
“In addition to the fact that SAEX was not eligible to apply for the Alaska tax credits, the board of SAEX was opposed to operating its own data library, including because of concerns about the ability to ensure payment to SAEX, including through the monetization of Alaska tax credits,” the charges say.
“In order for ASV to qualify to receive Alaska tax credits, ASV’s purchase of seismic data from SAEX was required to be an arm’s length relationship," the charges say.
In fact, "ASV was not independent and could not pay SAEX for seismic data,” the charges say.
Hastings and co-conspirator-1 hid the relationship from SAExploration’s board, shareholders and the investing public, the charges say.
The Alaska Department of Revenue is also investigating SAExploration over questions related to the tax credits, according to the company’s annual filing with SEC for 2019. The report said that SAExploration has an allowance of millions of dollars related to the tax credits earned by Alaskan Seismic Ventures.
The charges assert that in March 2016, Hastings signed an annual financial performance report, filed with the federal government, that falsely reported 2015 revenue from Alaskan Seismic Venture of about $84 million, the charges say.
That amounted to about 37% of SAEX’s consolidated revenue that year, according to the charges, filed by Fatima Haque, a special FBI agent.
In March 2017, Hastings signed another annual financial report that falsely reported 2016 revenue from ASV of $57 million, about 28% of SAExploration’s consolidated revenue for 2016, the charges say.
Hastings and the three co-conspirators “misappropriated more than half of the $12 million in SAEX funds” that were intended to support Alaskan Seismic “for their own personal use,” the charges say.
“The misappropriation of these funds for the benefit of Hastings and the conspirators was also not disclosed to investors,” the charges say.
Hastings, conspiring with the other former SAExploration officials, made “false and misleading statements of material fact in applications, reports, and documents required to be filed" with the SEC, according to the charges.
As part of the conspiracy, co-conspirator 1 created a shell company that in late 2015 pumped more than $5 million into Alaskan Seismic Ventures. SAExploration also intended to use millions more of its money to support Alaskan Seismic Ventures.
The co-conspirator told officials at investment institutions in New York that SAExploration had no involvement in the shell company or Alaskan Seismic Ventures, including in early 2016 when the co-conspirator solicited an investment from one institution into Alaskan Seismic Ventures.
The unnamed co-conspirator “has potential criminal liability” for securities fraud and other wrongdoing but “is not currently charged with any crimes” and is working with authorities to enter a cooperation agreement with the federal government, the filing says.
Mike Faust, SAExploration’s new chief executive who replaced Hastings in August 2019, in previous interviews with the Daily News said SAExploration entered bankruptcy with a plan that strengthens its balance sheet and clears much of its debt.
Faust previously said the company is not anticipating any layoffs, and vendors and suppliers who are owed money will all be paid.
Faust in June, discussing the SEC investigation, said SAExploration has taken “tremendous” steps to prevent similar activity from ever happening again.
Faust on Tuesday declined to comment.