One of SandRidge Energy Inc.'s largest shareholders is asking the company's board to commission an independent investigation into “serious” allegations against CEO Tom Ward.
Mount Kellett Capital Management, which called for Ward's ouster in November, said Thursday that Ward should be suspended as the company's chief executive while an independent law firm and forensic accounting company investigates allegations that a trust purportedly run by Ward's son, Trent, persistently secured mineral rights from third parties and then sold them to SandRidge or other companies, often retaining a stake in future wells.
“If true, these allegations may constitute a breach of Mr. Ward's noncompete obligations to the company and ‘cause' for terminating Mr. Ward,” wrote Jonathan Fiorello, Mount Kellett's chief operating officer. “Pending completion of the investigation, Mr. Ward should be suspended from serving as chairman and chief executive officer of the company.”
Mount Kellett owns 22.2 million shares, or about 4.5 percent, of SandRidge's outstanding stock. The stock was up 20 cents, or 3 percent, Thursday to $6.99 a share.
Another SandRidge shareholder, TPG-Axon Capital, has raised allegations of “front-running” by Ward and his son as it pushes for new management at the company, but the company maintains it has done nothing wrong.
“SandRidge has disclosed related-party transactions in the company's public filings, as appropriate,” spokesman Greg Dewey said Thursday.
Dewey said the board had just received the Mount Kellett letter, so it was not prepared to address the request for an investigation.
TPG-Axon is lobbying other SandRidge shareholders to amend the company's bylaws to make it easier to replace the current board. It also has proposed its own slate of directors to lead the company.
Mount Kellett intends to support TPG-Axon's proxy efforts, according to a source familiar with the situation.
Mount Kellett's Fiorello said he is concerned about SandRidge's silence on the allegations surrounding Ward and WCT Resources LLC.
“We had expected that the company and its CEO would quickly issue an unequivocal denial of these allegations,” Fiorello wrote. “To date there has only been silence, other than the assertion, which we believe lacks credibility, that Tom Ward had no involvement in WCT.”
WCT listed its principal office at SandRidge until 2011. Its current address is 428 Dean A. McGee.
WCT, which was formed in 2002, is owned by trusts established for the benefit of Ward's children, according to SandRidge's proxy statement last year.
It sold working interests on acreage in northeast Oklahoma to SandRidge in 2011 for $391,000. WCT also received $168,000 in revenue as a working interest owner in SandRidge wells in northwest Oklahoma, SandRidge reported.