Oil and Gas

Lawsuit: Stabil Drill’s Russo, LeBlanc bilked company for millions Publicly traded Superior Energy Services claims subsidiary’s former COO and CFO engaged in complex scheme of “self-dealing” over the past eight years.

by Leslie Turk

Publicly traded Superior Energy Services claims subsidiary's former COO and CFO engaged in complex scheme of "self-dealing" over the past eight years.

While there had been talk in oil and gas circles for weeks that something was amiss at Stabil Drill, the jolt was delivered in Texas' Harris County District Court April 19. That's when parent company Superior Energy Services filed a civil suit against its subsidiary’s former chief operating officer, Christopher Russo, and former chief financial officer, Martin LeBlanc, accusing the duo of masterminding an elaborate scheme to defraud the company.

Marty LeBlanc

The 42-page petition lays out allegations of self-dealing — and profiting from both sides of transactions — dating back to 2008 and claims Russo, LeBlanc, Scott Kerstetter (all of Lafayette), Daniel Anthony (Texas) and Mike Sheffield (Oklahoma) enriched themselves to the tune of tens of millions of dollars at the expense of Stabil Drill and its related entities. Among the numerous corporate defendants named in the suit are Laguna Oil Tools, Renegade Performance Properties, Renegade Oil Tools and LeBlanc Real Estate Investments, all of Louisiana, and Quest Holdings, Triton Hardbanding Service and MSI Inspection Service, all of Oklahoma.

Plaintiffs are Houston-based publicly traded oilfield service company Superior, which has a market cap of $2.4 billion, and two of its subsidiaries, Stabil Drill Specialties LLC and SESI LLC (the direct parent company of Stabil Drill). Lafayette-based Stabil Drill, which sells and rents oilfield tools and equipment for downhole projects, was acquired by Superior Energy in the late 1990s for $25 million in cash and notes. Chris Russo’s father, Sammy Joe, retired as president of Stabil Drill, which he'd founded, shortly before his death in 2013.

Chris Russo

Chris Russo, many in Lafayette might recall, in recent months pledged to donate $5 million toward UL Lafayette’s $10 million renovation to its baseball stadium, which is set to be renamed Russo Park at M.L. Tigue Field. The status of that commitment from Chris and his wife, Mamie, is unknown in light of the legal troubles now facing the local businessman.

A woman answering the phone at Stabil Drill’s Lafayette office confirmed early Monday afternoon that Russo and LeBlanc are no longer employed by the company, but she declined comment when asked for information on their departures. Both still list Stabil Drill as their employer on their LinkedIn pages, with Russo’s page indicating he has been COO for the past 26 years.

The suit claims Russo and LeBlanc, as corporate officers of the company, used their position of trust and responsibility to siphon cash from the company via multiple entities they jointly owned or controlled.

“The officers hid from Plaintiffs the true business of the companies they owned in order to profit from Stabil Drill,” the petition reads. “All of the Defendants had a meeting of the minds and worked in a concerted fashion to send fake or inaccurate invoices to the Plaintiffs, conceal true ownership interests, and/or engage in covert real estate transactions.” The plaintiffs, who claim Stabil Drill wrongfully paid out more than $65 million, maintain that the company continues to risk losing even more as contractual obligations come due — “obligations which would not have existed but for the wrongful conduct of the Defendants.”


The chart below details the amounts paid to entities in which Russo and LeBlanc have a personal, financial or business interest, according to the lawsuit.

Company - Total payments by Stabil Drill
Laguna Oil Tools - $38.7 million
Triton Hardbanding Service - $9.3 million
MSI Inspection Service - $13.5 million
Quest Holdings - $4.34 million


The plaintiffs, who became suspicious of Russo and LeBlanc’s activities in early 2016 after noticing deficiencies in their corporate disclosures, say they soon discovered that Youngsville-based Laguna Oil Tools is a sham corporation set up so that Russo, LeBlanc and Kerstetter could divert corporate opportunities from Stabil Drill to themselves, direct profits from Stabil Drill transactions to themselves and overbill Stabil Drill for various products and services using other entities they controlled. In other words, Laguna, whose only listed officer in the Louisiana Secretary of State records is Scott Kerstetter, was merely a pass-through entity designed to create an additional layer of separation between Russo and LeBlanc and another Kerstetter company, Renegade Oil Tools. The plaintiffs say Laguna and Renegade share the same physical address, employees and general liability insurance and contend that their investigation revealed that Russo, LeBlanc and Kerstetter actually jointly manage and/or control Laguna. “[T]he Officers personally made fortunes by sending work to, and creating purchase orders for, an entity that hired other companies owned by the Officers ... The amount of money paid to Laguna in furtherance of Defendants scheme to milk Stabil Drill is approximately $38.7 million,” the lawsuit alleges.

The suit contains allegations of at least two property transactions the plaintiffs say were not arms-length. One, which does not clearly spell out how the transaction was carried out to the detriment of Stabil Drill, involved the sale of Stabil Drill property in Youngsville to Laguna for $535,000 in December 2012. A few months later, according to the suit, Laguna turned around and sold the property to Renegade Performance Properties for $700,000. Renegade Performance Properties members are Kerstetter, Triple RRR Investments LLC (of which Chris Russo is a member) and Marty LeBlanc.


According to the lawsuit, defendants Russo, LeBlanc and Kerstetter have ownership interests in other companies that were doing business with Stabil Drill either directly or through Laguna Oil Tools, which Superior Energy calls a “sham” company.

Company
Renegade Performance Properties (LeBlanc, Russo, Kerstetter)
Renegade Oil Tools (LeBlanc, Russo, Kerstetter)
Renegade Performance Coatings (LeBlanc, Russo, Kerstetter)
Quest Holdings (LeBlanc, Russo)
LeBlanc Real Estate Investments (LeBlanc)
Triple RRR Investments (Russo)
Maverick Rental Tools (Russo)
Renegade Manufacturing (Kerstetter)
Laguna Oil Tools (Kerstetter)


Superior Energy also claims that Russo and LeBlanc did not disclose their ownership interest in Quest Holdings, which owns various properties that were leased or sold to Stabil Drill. Russo, Marty LeBlanc’s LeBlanc Real Estate and defendant Mike Sheffield are the owners of Quest, according to the suit. Since 2008, Stabil Drill paid at least $1.7 million to Quest for rent on a building in Yukon, Okla., and $2.67 million to purchase the same property, as well as additional property in Midland, Texas.

In another allegation that Russo and LeBlanc did not act in Stabil Drill’s best interests, the suit claims they failed to bring a business opportunity for development of an oilfiled agitator tool to the parent company and instead gave the idea to Kerstetter so that he could develop the agitator and sell it — or the products derived from it — back to Stabil Drill.

A voice message left on Chris Russo’s cell phone was not returned, nor was a call to Kerstetter at Laguna’s office. ABiz was unable to locate contact information for LeBlanc.

Mamie Russo, wife of Chris Russo, posted a message to her friends Tuesday.

An email to Superior Energy Services’ attorneys seeking comment was not returned.

Mamie Russo, however, did take to Facebook Tuesday to proclaim her family's innocence.

Click on the image to read the lawsuit.

Superior, which is asking for actual and punitive damages for breach of fiduciary duty, conspiracy, gross negligence, fraud and trade secret violations, does not spell out the specific amount it is seeking to recover. The company is also asking for monies it paid for false or inflated expense reports (the suit claims Russo et al even submitted expenses for their related businesses to Stabil Drill), any profits made by Laguna from the sale or rental of tools, and any salary, bonus and other long-term incentive paid to the officers after they allegedly began breaching their fiduciary duties.

In addition to its domestic offices, Stabil Drill also operates in Brazil, Canada, Colombia, Mexico, Trinidad and West Africa, according to its website.

Allegations of corporate officers violating their fiduciary duty to a publicly traded company are almost certain to spark an investigation by the Securities and Exchange Commission. And one would surely expect the Federal Bureau of Investigation to come calling as well.

Read the lawsuit here.