Employment Law Attorneys

A Ferrari, A Frame, An SEC Suit & Criminal Indictment2 min read

SEC SUES SEITEL, INC. AND FORMER CEO FOR UNDISCLOSED EXECUTIVE PAYMENTS;
COMPANY AGREES TO SETTLE
The Commission filed a complaint on June 6 in the United States District
Court for the Southern District of Texas against Seitel, Inc. and its
former chief executive officer Paul A. Frame. Seitel has consented to
the entry of a permanent injunction barring future violations of the
record-keeping, reporting and proxy statement provisions of the federal
securities laws.
The complaint alleges that Frame deceived Seitel into paying almost $1.2
million to resolve personal litigation brought by his former girlfriend
and to fund his participation in a private Ferrari racing club, and that
Frame intentionally misrepresented these expenses as company costs.
According to the complaint, these illicit payments were not disclosed to
investors. The complaint further alleges that Seitel’s lax internal
controls facilitated these payments, as well as other unauthorized
payments, including $148,000 for a security system for Frame’s mansion
and $2 million of advances to Frame for as-yet unearned bonuses, none of
which Frame’s employment contract permitted. The complaint further
alleges that Debra D. Valice, Seitel’s then-CFO, also received
contractually unauthorized bonus advances of $375,000. Finally, the
complaint alleges that, in March 2002, Seitel’s Board declined to award
Frame and Valice bonuses and instead agreed to accept promissory notes
for amounts previously advanced. However, according to the complaint,
the face amount of the notes exceeded what Frame and Valice actually had
received in advances, so Seitel’s accounting department, at Valice’s
direction, paid them the difference, in the amounts of $159,437 and
$176,844, respectively.
On June 6, the Commission also instituted cease-and-desist proceedings
against Valice and simultaneously accepted her offer of settlement in
which she agreed, without admitting or denying the findings in the
Commission’s order, to cease and desist from future violations of the
federal securities laws and to certain undertakings.
The Commission’s complaint was filed simultaneously with a criminal
indictment against Frame announced by the U.S. Attorney for the Southern
District of Texas. (Rel. 34-47997; File No. 3-11155) [SEC v. Seitel,
Inc. and Paul A. Frame, Civil Action No. 03-CV-1980, USDC, SDTX, Houston
Div.] (LR-18177; AAER-1797)
SEC NEWS DIGEST JUNE 6, 2003 Issue 2003-108