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Texas man convicted of defrauding Chesapeake subsidiary

The owner of a Texas oil-field service company has been convicted of defrauding a subsidiary of Oklahoma City-based Chesapeake Energy Corp.
BY JAY F. MARKS jmarks@opubco.com Published: October 27, 2012
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A Texas man has been convicted of six counts of mail fraud.

Wilbur Delmas Whitehead, who ran an oil-field service company, had been accused of submitting 10 false invoices to a Chesapeake Energy Corp. subsidiary in 2009 for equipment that was never produced.

Whitehead, whose attorney maintained the company delivered 31 separators to Chesapeake as ordered, was convicted Thursday on six of the 10 counts of mail fraud against him. He was found not guilty on the other four.

Defense attorney Garvin Isaacs and a Chesapeake spokesman declined to comment Friday on the verdicts.

Whitehead, 33, faces up to 20 years in prison and a $250,000 fine on each count.

The case against Whitehead originally was filed last year.

Whitehead ran an oil-field service company in Sinton, Texas, called Whitehead Production Equipment, according to court papers.

The company was retained by a Chesapeake subsidiary to build code separators to help remove water and other liquids from natural gas.

Whitehead submitted invoices to Chesapeake Operating Inc. through a Texas-based factoring company that provided immediate payment for accounts payable in exchange for a percentage of the bill, the indictment states.

In early 2009, Whitehead began submitting fraudulent invoices for equipment that was not ever delivered, according to the indictment.

He received more than $850,000 from Chesapeake between May 2009 and November 2009.

Isaacs argued Whitehead delivered the separators to Chesapeake.

“They had the equipment,” he said Oct. 15 in his opening statement to the jury. “What they did with it we don't know.”

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