There's nothing like a good old-fashioned story of fraud and embezzlement to start your week off right. Land driller Patterson-UTI Energy
Directly before joining Patterson-UTI as comptroller in 1996, Jonathan "Jody" Nelson served as an external auditor to the firm. He therefore knew the blind spots of the audit process quite well, which would prove useful when he went about subverting internal controls five years later as CFO.
Nelson started small in 1998, by forging about $4.6 million worth of checks made out to himself or an entity he controlled, and stamping them with the CEO's seal. He subsequently got a lot more ambitious.
From 2001 to 2005, ol' Jody wired $69.4 million of company funds to the Bank of America
Nelson was sentenced in October 2006. His prison term was reduced to 25 years because he cooperated with investigators and entered a guilty plea.
Before the recent court judgment dealing with the return of frozen assets to the company, Patterson had recovered several million dollars from Nelson, but it now stands to receive roughly $40 million over the next two months. To put that in perspective, last quarter the company earned $116 million on $547 million in sales.
I have a better understanding of the damage to the firm's reputation now than I did a month ago, when I wrote that Patterson looks even cheaper than fellow driller Grey Wolf
Fool contributor Toby Shute recommends that you study financial statements rather than take an auditor's opinion at face value. He doesn't own shares in any company mentioned. Bank of America is an Income Investor recommendation. The Motley Fool's disclosure policy keeps us honest.