Oil company CEO John D. Schiller Jr. failed to disclose more than $10 million in personal loans he received while serving as chief executive officer of now-defunct Energy XXI. He sought the money in exchange for business contracts in 2014, when he was facing margin calls on a highly leveraged account secured by his company stock.
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“Executives of public companies have a duty to act in the best interests of investors,” said Anita Bandy, an assistant director in the SEC’s enforcement unit. “Secret back-room deals for the benefit of corporate insiders violate those duties and deprive investors of important information.”
The SEC said that in addition to hiding the personal loans, Schiller caused the company to violate disclosure rules by failing to report compensation in the form of first-class travel, a shopping spree and an office bar stocked with high-end liquor and cigars. Schiller, who agreed to settle the case without admitting or denying wrongdoing, will pay a $180,000 fine and accept a five-year ban from acting as an officer or director of a public company, the SEC said….One of the loans Schiller received was $3 million from Norman Louie, a portfolio manager at Mount Kellett Capital Management who was at the time a candidate to join Energy XXI’s board. Louie was fined $100,000 for his role in hiding the loan and Mount Kellett agreed to pay $160,000 for failing to disclose its plan to put Louie on the board. Louie and the firm agreed to settle without admitting or denying wrongdoing.