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A real gusher…

images-3.jpegWhile footnoted.org doesn’t normally pay a lot of attention to pink sheet stocks, it was hard to ignore this 8-K filed by Key Energy Services (KEGS.PK) late yesterday. That’s because the company, which hasn’t filed a K or Q since the fall of 2003 (though that didn’t stop the stock from reaching a new 52-week high last week), noted that it had reached a $23 million settlement with its former CEO. Oddly enough that wasn’t mentioned in the selective earnings release that went out last week, despite the fact that the 8K notes that the settlement was reached on the very same day.

Without deliving too deeply into Key’s history, the company’s financials were a bit of a mess. In May 2004, Francis John was essentially fired “for cause” after the company discovered big-time accounting problems that wiped out a whopping $214 million in pre-tax profits. The company also discovered a “misappropriation of funds” and a “diversion of company assets” (there’s more history here). Two years later, John filed a lawsuit claiming that the company breached its employment and stock option agreements and on June 20, the company agreed to pay John the $23 million. That’s a significant multiple to the$600K that John was making as CEO and will probably be used as some sort of lesson on what happens to companies (and their boards) when they try to pin the company’s failure on the poor, hapless CEO.

On a separate note, did anyone catch the SEC commissioners in action yesterday up on Capitol Hill? I only made it through hour 1 of the four-hour marathon because the comments seemed to be the same, despite the different people who were speaking (or at least reading from comments their staffs had prepared). For the Republicans, it was all about how American markets are losing their edge because of over-regulation and too many lawsuits. Meanwhile, the Democrats kept talking about how the SEC was too business friendly. Maybe Bloomberg, who criticized both major parties last week for their “rigid adherence to any particular party ideology” has it right.