HOUSTON – By the standards of recent financial scandals, Stephanie Rae Roqumore's alleged $6.8 million natural gas trading scam may be small potatoes, but it raises some big questions.
How could a lone natural gas trader in Houston dupe some of the world's biggest energy companies for eight years, despite a veritable forest of red flags? After all, the overhaul of trading rules and credit practices in the wake of Enron's collapse was supposed to make it tougher, if not impossible, to perpetuate such a fraud.
In September, FBI agents raided Roqumore's suburban Houston home, searching for evidence she scammed at least 11 energy companies. Among the stacks of paperwork seized from the ornate 3,000-square-foot house were bank records for trading firms Roqumore is accused of using to dupe companies including Occidental Petroleum, Royal Dutch Shell Plc's Coral Energy Resources, Hess Corp and privately-held commodities giant Cargill.
Federal agents also recovered two handguns -- one found under a mattress -- ammunition, documents for a million-dollar life insurance policy and a summons from the Internal Revenue Service, according to the search and seizure warrant.
The $6.8 million scheme laid out in a 19-count indictment charging wire fraud and money laundering seems straightforward. "We are sifting through the evidence at this point and Ms. Roqumore maintains her innocence," Wendell Odom, Roqumore's attorney, said in an statement.
Roqumore, 48, who has pleaded not guilty to the charges, is accused of purchasing natural gas from firms by submitting false financial statements to the companies to obtain lines of credit. She would then sell gas to counter-parties like ConocoPhillips, paying back either a fraction of the purchase price or nothing at all in some instances, according to her indictment.
Court records and public documents contain numerous red flags indicating Roqumore was in financial trouble. Public records also show a guilty plea to a felony theft charge in 1999. Roqumore and her parent company, SRR Energy Management Resources, filed for Chapter 7 bankruptcy in 2006, yet firms continued to extend her credit to buy natural gas up until April 2010.
"What is sort of surprising is that she was able to get away with it for so long," said Craig Pirrong, director of energy markets at the Global Energy Management Institute at the University of Houston's Bauer College of Business.
Her arrest warrant was signed by a federal judge on September 13. She is free on $50,000 bond, but is banned from working in finance and may not be self-employed. She is also barred from taking out any lines of credit. U.S. District Judge Lynn Hughes in Houston has set a trial date for January 18.
According to her attorney, Roqumore has a new job, a condition of her release. Gas Energy Management, one of the companies she created to trade, is now shuttered. Gas Energy Management's former office suite, located in a leafy Houston neighborhood, now houses a staffing company.
Roqumore faces a lifetime in prison if convicted and sentenced for the maximum penalty on all charges. She also faces a $3.75 million forfeiture fine, according to the indictment.
Hess, Cargill, Shell and Occidental declined to comment on the case.
WHO IS SHE?
A relative unknown in Houston's active gas trading community, Roqumore nonetheless managed to gain entry to do business with well-established companies at a time when trading practices were under heavy scrutiny by regulators.
As a one-person company, Roqumore's alleged false financial documents might have been difficult to verify, said Art Gelber, founder of Gelber & Associates, a Houston-based advisory firm specializing in energy trading practices and protocols. Established energy marketers might have been willing to do business with new partners at that time, Gelber said. "In times of trauma, there is opportunity," he said.
According to a transcript of a creditors meeting for her bankruptcy case, Roqumore said she worked as an accountant in the oil and gas industry for 15 years at companies including Halliburton Co, Dynegy Inc and failed energy giant Enron Corp.