Special Report: In oil baron's divorce, company lawyer plays star role

Epic divorce of U.S. oil baron may end after ex-wife deposits check Thu, Jan 08 22:46 PM EST image 1 of 3 By Joshua Schneyer NEW YORK (Reuters) - Sue Ann Arnall, the ex-wife of Oklahoma oil magnate Harold Hamm, has deposited a handwritten $975 million divorce check, Hamm's lawyer said on Thursday, in a move that may end an epic divorce battle over a fortune worth billions. Arnall, 58, deposited the check after earlier this week declining the payment and pledging to pursue her appeal of a divorce ruling she viewed as unfair. In the November ruling by an Oklahoma County Court judge, Hamm, the chief executive of Continental Resources was allowed to keep his 68 percent stake in the firm, now worth about $9 billion, while Arnall was awarded about $1 billion in cash and assets from the marital estate. The check represents the entire remaining balance of what Hamm owes Arnall based on the November ruling, including interest. The oilman's divorce lawyer, Craig Box, said he believes Arnall's deposit of the check will end her efforts to appeal the case and that Hamm also wants the case resolved. "We have received confirmation that the check was deposited in an Oklahoma City bank," Box said. "We feel this is the end of the case from her perspective. It means she's done and should dismiss her appeal." A person familiar with Arnall's case confirmed the deposit, which represents one of the largest divorce awards in U.S. history. Arnall could not be reached directly for comment. It was not clear whether she intends to pursue an appeal after the check clears. "If she's cashing the check, I would think the reasonable conclusion is that they both will accept the trial court's decision, dismiss their appeals and put an end to the case," said Oklahoma family law expert Carolyn Thompson. Earlier, Hamm had filed his own appeal, seeking to have Oklahoma's Supreme Court reduce what he owes Arnall, after a plunge in oil prices shaved billions from the value of his Continental shares in recent months. During a trial last year, the shares had been worth as much as $19 billion. The Hamm case, initially filed in 2012, has pitted Oklahoma's most successful oil wildcatter against his former wife of 26 years, an attorney and longtime executive at Continental. The firm, a leading oil driller in North Dakota, was dragged into the case but has said it did not affect business. In an appeal document, Arnall contended a trial judge wrongly allowed Hamm to keep more than 90 percent of the wealth the couple accrued during their marriage. Although Hamm owned Continental before the marriage in 1988, the value of his shares surged 400-fold during the union. Arnall has been seeking a multi-billion dollar portion of those gains. To limit what he would owe, Hamm's defense sought to show that his company's growth during the marriage resulted mostly from "passive" factors beyond his control, such as rising oil prices. Under Oklahoma law, only the growth in wealth stemming from the active efforts and skills of either spouse during the marriage is split in a divorce. Arnall contended that Hamm's deft management of the firm led to its growth. Hamm has already paid Arnall more than $20 million during the case, and the parties have spent millions in legal fees. (Additional writing by Josephine Mason; Editing by Chris Reese, Alan Crosby and Ken Wills) = Special Report: In oil baron's divorce, company lawyer plays star role Wed, Nov 05 14:11 PM EST By Joshua Schneyer and Brian Grow OKLAHOMA CITY (Reuters) - During the divorce trial of oil baron Harold Hamm and wife Sue Ann, an unusual relationship took shape in the Oklahoma courtroom as the marriage was being dismantled. From the bench, Special Judge Howard Haralson playfully tossed red and white peppermints to a lawyer sitting alone in the jury box who didn't represent either of the Hamms in the case. The man, Eric Eissenstat, serves as general counsel, senior vice president, secretary and chief risk officer for Continental Resources, the publicly traded oil company founded and run by Harold. And during a trial that could result in one of the largest divorce judgments in U.S. history, Eissenstat emerged as one of the most important people in the courtroom. For all but a few hours of testimony in the nine-week trial, the proceedings were closed to the public and to the media – a practice atypical in divorce cases that don't involve child custody disputes. But interviews with a half-dozen people who were present in the courtroom, and with others familiar with the case, indicate that Eissenstat played an extraordinary role throughout the trial: 'GENERAL CHITCHAT' On several occasions, Eissenstat, 56, passed through the judge's chambers or into a court staff room and engaged the judge and his staff in conversations, said Haralson's bailiff (1. A court attendant entrusted with duties such as the maintenance of order in a courtroom during a trial. 2. An official who assists a British sheriff and who has the power to execute writs, processes, and arrests.), Jessica Rodriguez. The conversations were “general chitchat,” Rodriguez said. “We're all pretty friendly around here.” In a statement, Continental said Eissenstat “did not speak privately with Judge Haralson in his chambers, and his relationship with Judge Haralson is professional and no different than the other individuals present in his courtroom.” To at least one witness, Eissenstat, a tall, slim career litigator, was an imposing presence. “Eric positioned himself in a very tactical way in the room, in the jury box, basically right on the witness's shoulder,” said a former associate of Harold's who testified in the case. “When the judge looks at the witness, he's also looking at Eric. It just seems intimidating.” Reuters interviewed more than a dozen legal experts including family law attorneys, law professors, retired judges and marital dissolution consultants. All said that Eissenstat's level of involvement in his boss' divorce trial seemed uncommonly deep. Some said that the role Eissenstat – and by extension, Continental – played at the trial raises questions about whether the company supported the personal agenda of Harold Hamm, the company's top shareholder, to the detriment of other shareholders. On Thursday, the day after Continental releases its quarterly earnings, analysts will have a chance to ask about the divorce case during a conference call the company is hosting. “It sounds like the corporation is part of the divorce case,” said Arnold Rutkin, a lawyer at Rutkin Oldham in Connecticut. Rutkin represented the wife of Gary Wendt, a former chief executive at the General Electric Capital unit of GE, in one of the biggest U.S. divorces of the 1990s. “There are only two parties in a divorce: husband and wife.” In that case, Rutkin said he did not recall GE Capital's attorneys playing anything close to the role that Eissenstat is playing in the Hamm divorce. A key difference in the cases is that although Wendt was a top executive, he wasn't a major owner of GE. Hamm owns about two-thirds of Continental. Haralson did not respond to questions from Reuters. His bailiff said the judge would not speak publicly about the case before ruling. MAJOR ROLE Continental, in its statement, said it "did not seek to participate in the divorce case." It was compelled to by Sue Ann, it said. In a court filing last month, Continental said the extent of its involvement in the case may be unprecedented. It contends it has been required to turn over more documents and data than any company “has ever been forced to produce in divorce proceedings in Oklahoma and possibly the nation.” Hamm started Continental in 1967, and about 68 percent of the firm's shares are in his name. His stake was worth more than $18 billion when the trial started in August. It's worth around $14 billion today. Since the couple wed in 1988, Continental has grown from a smalltime driller worth less than $50 million into a $20 billion behemoth (Something enormous in size or power.) and one of Oklahoma's largest companies. Because Harold owned his shares before he and Sue Ann were married, they belong to him. But under Oklahoma law, their “active” appreciation since 1988 is subject to “equitable distribution” with Sue Ann, a former executive at Continental who filed for divorce from Harold in 2012. Her legal team contends that the amount of marital wealth the court should divide is more than $17 billion, a sum that included most of Harold's stake in Continental a few months before the trial began. Court filings show that his attorneys argued that the couple's shared wealth is a tiny fraction of that amount. The couple never signed a prenuptial agreement. (a contract made between a man and woman before they marry, agreeing on the distribution of their assets in the event of divorce) Harold Hamm's leadership at Continental is central to the case. In court, his lawyers attributed most of Continental's success not to Hamm's business savvy but to factors beyond his control. If Haralson accepts the argument – that market factors such as rising oil prices, or decisions made prior to marriage caused Continental's growth – the award to Sue Ann could be much smaller. The trial ended on Oct. 9, and Haralson is poring over thousands of pages of evidence before he issues a judgment in the coming weeks, or the two sides settle. Last week, Haralson denied a motion by Reuters to intervene in the case to have trial transcripts and other records unsealed. The Oklahoma Supreme Court, which heard the Reuters request to unseal the records this week, has not yet ruled. In a filing before those hearings, Continental said it opposed opening court records because the documents contain confidential business information, including strategic plans, board minutes, and highly sensitive information on its oil reserves, among other things. “A corporate counsel would have a legitimate role in trying to keep confidential information about the company from being disseminated,” said Ilan Hirschfeld, head of the marital dissolution practice at the consultancy firm Marcum LLP in New Jersey. Continental may also have a significant interest in the outcome of the trial. If Sue Ann, 58, wins a multi-billion dollar award, a judgment that size could prompt Harold to sell Continental shares, a move that could lead to a change in control of the company. In one court filing, Continental dismissed that possibility as "unfounded speculation." Eissenstat, appointed as Continental's general counsel in 2010, previously had represented Continental and Harold Hamm personally during 27 years in private practice. As recently as 2010, he served as Harold's personal lawyer in a case involving Oklahoma oil and gas wells. Continental was not a party in that case. As of Feb. 22, Eissenstat also owned shares in Continental valued at more than $7 million, SEC filings show. Months before the Hamm divorce trial, Continental expanded Eissenstat's role at the firm, naming him its chief risk officer. The new responsibilities put Eissenstat in charge of keeping Continental out of corporate governance trouble and guarding against conflicts of interest and reputational damage – duties that would give Eissenstat reason to be concerned about the divorce trial. In court filings, Continental said it was brought into the case by Sue Ann Hamm's broad and “abusive” demands for evidence from the company, and because dozens of its current or former employees were subpoenaed ( A writ requiring appearance in court to give testimony. tr.v. sub·poe·naed, sub·poe·na·ing, sub·poe·nas To serve or summon with such a writ). “Continental doesn't like being here,” Eissenstat said at a pre-trial hearing, according to a transcript. Eissenstat told the judge he was only present in court to protect the firm's interests, not Harold's. Allegations by Sue Ann's team that Continental meddled in the case to help Harold have been a sore point between the spouses. In one court filing, his divorce attorneys wrote that the divorce is a matter of “common interest for Mr. Eissenstat,” citing his duty to “all shareholders to oversee any litigation impacting the company.” They added: “Harold Hamm and his counsel are frankly insulted by Petitioner's veiled suggestion of some collusion between them and (Continental) against her interests.” Although Continental says it hasn't taken sides in the divorce, the company has taken unusual steps that could help Harold's case. In September, Reuters reported that the company revised its corporate history in ways that diminish the part Hamm played in its success. In downplaying the CEO's role, the firm recently deleted, added or revised at least 18 items on its website or in corporate filings, Reuters found. (http://reut.rs/1uYWqpH) In addition, Continental has weighed in against Sue Ann. In one of the company's many filings in the case, a “friend-of-the-court” brief in February, Continental urged the judge to deny Sue Ann additional time to prepare for the trial. “To say the least, it's highly unusual for a company to file a friend-of-the court brief in its CEO's closed-door divorce proceeding to oppose his wife's request for more trial preparation time,” said appellate attorney Lawrence Ebner, a Washington-based partner at law firm McKenna Long & Aldridge. Court records show that Haralson denied Sue Ann Hamm's request for another five months of trial preparation. Being hurried to trial could hurt her case, her lawyers contended in court filings, because they were racing to examine about 700,000 pages of uncategorized Continental documents that Eissenstat had delivered to them in response to evidence requests. 'ENORMOUS EXPENSE' A spokeswoman for Continental, Kristin Miskovsky, has repeatedly said the divorce has had no effect on the company. “Mr. Hamm's divorce proceeding is a private matter and has not and is not anticipated to impact Continental Resources' business or operations,” the company said. In one court filing, however, the company says its role in the case has come at “enormous expense.” Eissenstat and his in-house team handled discovery requests in the case. They have filed more than 40 briefs, objections or motions in the divorce case. “Mr. Hamm has an interest in winning, and Continental should not have an interest in Hamm winning per se,” said Paula Dalley, a professor of corporate law at Oklahoma City University Law School. “That's where a conflict of interest could arise. The outcome for Hamm personally shouldn't matter to the corporation.” Former Continental employees who were deposed or called as witnesses told Reuters that the oil company paid for lawyers to represent them. The employees requested anonymity after signing agreements not to discuss their depositions or testimony. It is not unusual for company lawyers to represent employees who will testify in legal cases about their work. But Judith Maute, a law professor at the University of Oklahoma, said that if Eissenstat and Continental used company resources to help Harold, it could draw the ire of other shareholders. A general counsel's duty is to his corporation, not to the CEO's personal interests, she said. “If the general counsel is spending lots of time or company money to save the assets of the person, then he may be in breach of fiduciary duties to shareholders.” Eissenstat's role and Continental's costly involvement in the marital dispute have not been disclosed in detail to the firm's shareholders. How much the company's board knows about Continental's participation in the Hamms' divorce isn't clear. Continental declined to address the question of whether it plans to bill Harold Hamm for the costs it's incurring related to the divorce case. What is apparent is the trust the company has put in its top lawyer. Asked about Continental's involvement in the case, David Boren, the powerful Oklahoma politician who sits on Continental's board and testified in the divorce trial, had little to say. “I have a policy not to make separate statements as a board member,” Boren said. “If you have any questions, please contact Eric Eissenstat.” (Reporting By Joshua Schneyer in Oklahoma City and Brian Grow in Atlanta. Editing by Blake Morrison and Michael Williams) =========================================== Continental Divide U.S. oil baron rewrites his company’s history; move could stave off record divorce payout By Joshua Schneyer and Brian Grow Filed Sept. 24, 2014, 11 a.m. GMT LEGAL STRATEGY: Continental Resources CEO Harold Hamm holds 68 percent of the company’s publicly traded shares – worth about $17 billion. Legal experts say changes on the corporate website may help convince the judge that the surge in Continental’s share value has little to do with Harold’s deft management(Quick and skillful; adroit) during his 26-year marriage to Sue Ann. REUTERS/Steve Sisney CEO Harold Hamm faces paying billions to his estranged wife. Do revisions to his corporation’s website strengthen his hand? OKLAHOMA CITY – The divorce trial of one of America’s wealthiest men, oil baron Harold Hamm, plays out mostly in secret here at the Oklahoma County Courthouse. For weeks, signs have been taped to the door of Courtroom 121. “CLOSED HEARING,” one reads. The other: “DO NOT ENTER.” But an examination of the website of the company Hamm founded, Continental Resources Inc, reveals part of the billionaire’s legal strategy as he seeks to avoid what could be the largest divorce award in U.S. history. Publicly traded Continental has been revising its corporate annals – in each case diminishing the company’s accomplishments under Hamm’s leadership or changing the dates of key achievements. Downplaying his role in Continental’s success is central to Hamm’s chances of minimizing the financial blow from his divorce, lawyers say. According to state law, if Hamm can show that market conditions – rather than his management prowess – led to Continental’s financial success, he won’t have to share those gains with his estranged wife, Sue Ann. The two never signed a prenuptial agreement. Reporters compared Continental’s current corporate website – www.contres.com – with a version from early this year. The analysis was done using the Internet Archive Wayback Machine, a repository of past web pages. Related items Exclusive: Looming divorce could threaten oil baron’s empire Special Report: Lack of a prenup imperils oil billionaire’s fortune Billion dollar debate in Oklahoma divorce – was oilman just lucky? Exclusive: Wife defines stakes in Oklahoma divorce: $17 billion Continental Resources president quits, leaves leadership gap The comparison identified 18 separate items that had been recently deleted, added or revised. The changes included: • Altering a claim that the company was first to “discover” an important oil field near the massive formation known as the Bakken Shale. • Striking all references to Continental being “first” to successfully use or develop new technology that helped it find or pump more oil. • Backdating the company’s hugely profitable decision to shift its exploration focus from natural gas to oil – to before Hamm’s 1988 marriage to Sue Ann. If that decision came prior to the Hamm marriage, then Sue Ann may not be entitled to reap part of the reward. • Adding a date for when Continental moved into its most profitable drilling area. The company’s website now says that the firm moved into the Williston Basin, which straddles North Dakota and Montana, a year before the Hamms were married. The company also deleted an item that said Continental expanded into the Rocky Mountain region in 1993. The company also removed a notable passage from one of its U.S. Securities and Exchange Commission filings, key documents used by investors to evaluate firms. In 2013 and earlier years, the annual proxy statement described Harold Hamm as “one of the driving forces” behind Continental’s success, a man who had “successfully grown the Company through his leadership skills and business judgment.” That passage was dropped in the 2014 proxy. A spokeswoman for Continental Resources, Kristin Miskovsky, declined to comment about any of the specific website changes or the role of Continental’s board in reviewing them. She didn’t answer questions about the proxy change. In an email, Miskovsky repeated a prior statement: The Hamm divorce “has not and is not anticipated to impact Continental Resources’ business or operations.” Since Hamm vs. Hamm began eight weeks ago, journalists have largely been barred from the courtroom. At the request of Continental, nearly all records and exhibits in the trial have been placed under seal by Oklahoma County Judge Howard Haralson; all but three days of the trial have been completely closed to the public. In most states, including Oklahoma, divorce trials usually take place in open court unless a judge closes the proceedings to protect a child. The Hamms have no minor children. Before and After: Explore the changes made to Continental’s website CEO INSIGHTS: Continental has deleted a link on its website to "CEO Insights," the thoughts of CEO Hamm, shown at top; an external site - www.haroldhammonline.com - now says, "the authors have deleted this site." REUTERS GRAPHIC The reason: to shield Continental. Haralson ruled on the trial’s opening day, Aug. 4, that he did not want to “destroy” the company by allowing the public or media to hear discussion of Continental’s “confidential” business activities. “We’ve got an entire trial being conducted in secret,” said Joey Senat, a communications law specialist and associate professor at Oklahoma State University’s School of Media and Strategic Communication. “Mr. Hamm is saying his divorce is a strictly personal matter, but apparently it’s not, because Continental says it will harm the company if the doors are opened. Meanwhile, on the website, Continental appears to be changing significant facts about itself.” There are also personal reasons why Hamm may prefer to keep the proceedings private. In a filing dated March 7, 2013, Sue Ann Hamm alleged that Harold was “having an affair” that she discovered in 2010. In court testimony last month, Harold admitted to spending $150,000 on an “extra-marital pursuit.” HIGH STAKES At stake in the divorce is the $17 billion piece of Continental owned by Harold Hamm through his 68 percent holding in the company’s publicly traded shares. Legal experts interviewed for this article said the changes on the website appear to be part of Hamm’s strategy. “Very simply, the company may be framing Mr. Hamm’s impact as less important than it had before.” Ilan Hirschfeld, head of the marital dissolution practice, Marcum LLP The purpose, they say, is to persuade the judge that the surge in Continental’s share value has little to do with Harold’s deft management during his 26-year marriage to Sue Ann. Under Oklahoma law, if the growth of Continental was “passive” – that is, owing to market factors beyond Harold’s control rather than to his skill and effort – he won’t have to share those gains. “The corporate website, along with public filings, are places we always look when a divorce case involves a business,” said Ilan Hirschfeld, head of the marital dissolution practice at accounting and advisory firm Marcum LLP. “Lawyers love to use the company’s own reports to prove their case that the growth in marital wealth has been active.” “Very simply,” Hirschfeld said, “the company may be framing Mr. Hamm’s impact as less important than it had before.” Hirschfeld isn’t involved in the case. Attorneys representing the Hamms are under court order not to discuss protected information in the case. They declined to comment. Harold Hamm’s lawyers were given a big clue that Continental’s past accomplishments would be used by his wife’s team to demonstrate the central role the founder played in the company’s skyrocketing growth. That’s because parts of the unrevised version of the website – including its corporate “timeline”– were among the exhibits entered into evidence by Sue Ann Hamm’s lawyers before the trial began. Lists of exhibits are shared with both parties in a case. HAMM VS. HAMM: Continental Resources founder and CEO Harold Hamm (left) is believed to own more oil underground than any other American. His estranged wife, Sue Ann (right), is a former lawyer with the company. REUTERS/Steve Sisney “I’ve not tried to mislead anybody” Harold Hamm, Continental Resources founder and CEO One corporate governance specialist said the website revisions raise questions about Continental’s board of directors, chaired by Hamm: Did the board previously allow the company to overstate its achievements? And is it now allowing Hamm to reshape Continental’s image to serve his personal legal goals – and marshalling company resources to do so? When questioned by an attorney for Sue Ann during open testimony on Aug. 6, for example, Harold said he had ordered his staff to revise Continental’s corporate timeline after he realized it contained inaccuracies. “It puts the board in a very awkward position,” said the governance specialist, David Larcker, professor of accounting at Stanford University’s Graduate School of Business. “The question would be, ‘Would they have made those changes absent the personal situation of the CEO?’” A member of Continental’s board, Edward T. Schafer, declined to discuss the changes, or whether the board knew about them. “Given the legal aspects of what you are talking about, I think I ought to leave that question to the company,” said Schafer, former governor of North Dakota. Another board member, former Oklahoma Gov. David Boren, referred questions to Continental’s general counsel. Today, at 68 years old, Hamm is believed to own more oil underground than any other American. Continental’s assets include around 1 million acres of prime land leases in North Dakota and Montana, the location of the largest U.S. oil discovery in decades. Attorneys following the Hamm divorce say a judgment could award 58-year-old Sue Ann Hamm, a former lawyer for Continental, around $3 billion. CLOSED HEARING: Since Hamm vs. Hamm began eight weeks ago, journalists have largely been barred from the courtroom in the Oklahoma County Courthouse. REUTERS/Steve Sisney REVISING HISTORY Reuters could not determine exactly when Continental altered its website. The changes came sometime after March 29, 2014, the most recent day on which the Wayback Machine archived the site, and before Sept. 2, 2014, when Reuters began comparing the archive and the current site. Also unclear: Which version of Continental’s corporate history – revised or original – is more accurate. In media interviews, in the company’s annual report and in other SEC filings, Continental has for years touted its pioneering role in developing the Bakken Shale formation. And it has highlighted the prescient moves of its founder, Harold Hamm, as central to its success. Continental’s website does contain a disclaimer about its contents. Information is provided “as is, solely for convenience, and without warranty of any kind.” It may contain errors, and investors should not base decisions on it, the website cautions. Guidelines published by the SEC say that corporate websites, though considered “informal disclosure,” should adhere to some of the same standards that apply to formal SEC filings. “The broad principles are that the disclosures have to be truthful and fair and cannot be selective,” said Jim Hamilton, principal analyst for federal securities regulation at Wolters Kluwer Law & Business in New York. The Reuters analysis of archived Continental web pages shows a wide range of changes around the time that the CEO’s divorce trial began. A timeline entry describing a 1995 milestone, for example, previously gave Continental sole credit for a momentous event: “Continental discovers” the Cedar Hills oil field – the first major gusher in North Dakota’s recent fracking boom, which led to the development of the now-legendary Bakken Shale, the web page previously read. The old entry added that Continental “is the 1st to develop Cedar Hills exclusively through precision horizontal drilling,” an oil-industry technological innovation. Today, the timeline says Continental “co-discovers” the Cedar Hills field, and no longer takes credit for developing it first. Rather, the company now describes Cedar Hills passively, as “the 1st oil field in the U.S. to be developed exclusively through precision horizontal drilling.” (In his Aug. 6 testimony, Harold Hamm said he recalled that a competitor, Burlington Resources, had tapped into Cedar Hills several months before Continental did.) Other changes backpedal on Continental’s claims that it was ahead of industry competitors in implementing breakthrough oil extraction technologies, a potentially crucial differentiator in the oil industry. A 2007 entry used to say that Continental “is the 1st to complete a 1,280 long-lateral multi-stage frac in North Dakota.” The line referred to an important milestone in using hydraulic fracturing, or fracking, and horizontal drilling to extract oil from the Bakken. That claim no longer appears on the current website. Two other entries, both for 2008, said Continental was the “first” to use specific fracking or horizontal drilling techniques in two separate oil fields. Those entries have been struck from the site. On the witness stand last month, Harold Hamm said several claims on the company’s website timeline were wrong. He pinned part of the blame on Brian Engel, the former vice president of public affairs at Continental, who left in 2011. Contacted for comment, Engel said he wasn’t aware of Hamm’s testimony. “I left Continental on good terms at the end of 2011 and have moved on,” Engel said. He declined to say whether Hamm reviewed the original items before they were posted. Sue Ann Hamm’s attorney, Jon Hester, questioned Harold about items on the company website. Hamm testified that he only recently discovered that some were inaccurate. Continental produces a significant amount of public information, he explained, and Hamm said he doesn’t personally review all of it. “I’ve not tried to mislead anybody,” Hamm testified. COMPANY’S INTERESTS Continental is not named as a party in the Hamm divorce. The company nonetheless sought to keep the trial closed to the public. Continental’s general counsel, Eric Eissenstat, has been a fixture in the courtroom and has arranged depositions and met with witnesses who are testifying at the trial, according to court records and proceedings viewed by Reuters. STOCK SPLIT? A billboard in downtown Oklahoma City touts the value of publicly traded shares in Continental. REUTERS/Steve Sisney “It puts the board in a very awkward position. The question would be, ‘Would they have made those changes absent the personal situation of the CEO?’” David Larcker, corporate governance specialist, Stanford University’s Graduate School of Business Continental still boasts in its SEC filings that it holds the largest acreage position of any oil company in the Bakken, a shale area that Hamm believes contains some 24 billion barrels of oil. Investors may not care about Continental’s revisions to its corporate history, so long as it continues to produce profits, stock analysts say. The driller is ahead of schedule on its five-year plan to double oil production. “I’m not sure it’s huge,” said Joseph Allman, oil and gas analyst at JPMorgan, which also provides investment banking services to Continental. The company should make sure it gets its public statements right, he said, but he added: “People don’t invest in Continental because it discovered the Bakken. They invest in Continental because of future cash flow generation.” Fidelity – the largest outside holder of Continental shares, with a 6.2 percent holding as of June 30 – declined to comment on the oil company’s history changes. Six other institutional holders of Continental shares didn’t respond or declined to comment. Wall Street has been kept largely in the dark about the divorce. Continental has not disclosed the case in the legal proceedings section of its SEC filings. The company first publicly acknowledged the divorce in response to questions from Reuters in March 2013. Judge Haralson already has ruled that Harold’s shares in Continental are an asset that he owned prior to the marriage. As a result, only the increase in the value of those shares during the marriage is at issue in the trial. The ruling leaves around $17 billion in accrued share value at stake. At trial, Continental’s value in 1988, when the Hamms were married, was estimated at less than $50 million. The company’s market capitalization is now near $25 billion. Haralson’s ruling may also pertain to key decisions that Harold or his company made before the 1988 marriage – decisions that subsequently made the company, and Hamm, billions. One of those big decisions occurred when Continental shifted its exploration focus from natural gas to oil, a move that bucked a prevailing U.S. energy industry trend and proved incredibly lucrative. In a news release dated January 24, 1992, Continental said that the shift to oil began in 1988, the year of the marriage. But in court testimony, Harold Hamm said that the news release was wrong and had been issued without his review. Backing Hamm’s courtroom denial, Continental has updated its timeline. In a new website entry, Continental now says the company “changes focus to oil” in 1985 – three years before Harold and Sue Ann Hamm married. Reporting by Joshua Schneyer in Oklahoma City and Brian Grow in Atlanta. Edited by Blake Morrison Photo editing by Jim Bourg and Stelios Varias ===========

Exclusive: Looming divorce could threaten oil baron's empire

Exclusive: Looming divorce could threaten oil baron's empire Thu, Mar 21 21:01 PM EDT 1 of 2 By Brian Grow and Joshua Schneyer ATLANTA/NEW YORK (Reuters) - Continental Resources chief executive Harold Hamm, one of America's wealthiest and most influential businessmen, is embroiled in a contentious divorce that could lead to a record financial settlement and threaten his control of America's fastest-growing oil company. Sue Ann Hamm, Harold Hamm's second wife and a former executive at Continental, filed for divorce on May 19, 2012, Oklahoma court records show. Documents in the case are sealed. But in a March 7, 2013 filing obtained by Reuters, Sue Ann Hamm alleges that Harold "was having an affair" that she discovered in 2010, prompting her to later file for divorce. Harold Hamm, 67, is a leading force behind the U.S. oil boom and served as the senior energy adviser to Republican presidential candidate Mitt Romney's campaign. Time magazine named him one of the most influential people in the world, and Forbes listed him last year among the 50 richest Americans. Ranked No. 35, Hamm is worth $11.3 billion, the magazine estimated. His estranged wife, Sue Ann Hamm, 56, has held key posts at Continental. She has led oil-industry trade groups in Oklahoma, testified to Congress on behalf of Continental and created Continental's oil and gas marketing units. She is no longer with the company, her lawyer said. The Hamms were married in April 1988 and have two adult children, Jane and Hilary. Harold Hamm has three children from a prior marriage that ended in divorce in 1987. Whether the Hamms signed a prenuptial agreement is unclear. Legal analysts who reviewed court filings said that without one, the case could lead to a record-breaking financial settlement - one that could exceed the $1.7 billion paid by News Corp. founder and chairman Rupert Murdoch to ex-wife Anna in 1999. One outcome could be a split of "marital property" that may include dividing Harold Hamm's controlling 68 percent stake in Continental, currently worth $11.2 billion. "I don't know of anything that's ever been this big," said Barbara Atwood, professor emeritus of family law at the University of Arizona. "There's just so much money involved." Continental was subpoenaed in the case last summer, and it was ordered by the Oklahoma court to hand over documents late last year. Four other companies controlled by Hamm also were subpoenaed. A review of Continental's Securities and Exchange Commission filings and company statements shows no mention of the divorce proceedings. Although corporate governance scholars said Continental had no legal obligation to disclose the Hamms' divorce proceedings to shareholders, "It's a lawsuit that involves a potential impact on the controlling shareholder," said Charles Elson, director of The Weinberg Center for Corporate Governance at the University of Delaware. "Certainly, it would be relevant to an investor if there is going to be or could be a shift in control." After receiving inquiries from Reuters, Continental put out a news release acknowledging the divorce case. The fight, the company said, "is not anticipated to have any impact or effect on the company's business or operations." Hamm couldn't be reached for comment. An attorney for Sue Ann Hamm declined to comment, citing a confidentiality agreement governing the case. After the pending divorce was confirmed by Hamm on Thursday, Continental shares fell by 2.9 percent to $86.17 in afternoon trading. Hamm, the 13th child of Oklahoma sharecroppers, started his career at age 20, scrubbing scum out of oil barrels. A few years later, he drilled a 75-barrel-a-day gusher in his home state, helping pay for university classes in geology. He founded Continental in 1967, two decades before he and the former Sue Ann Arnall were married. She is an economist and a lawyer. Hamm's biggest breakthrough came in the 1990s, when he helped discover the Bakken field of North Dakota, the largest new U.S. oil prospect since the 1960s. The discovery helped Continental lead a resurgence in U.S. oil production, using the controversial drilling method known as hydraulic fracturing, or fracking. The technique pumps water laden with sand and chemicals underground to release previously unreachable oil reserves. Today, the Bakken yields nearly 700,000 barrels a day, roughly 10 percent of American output. Continental controls more than 1 million acres in the formation, which stretches from North Dakota to Montana. The firm also owns oil and gas rights in several other states, including Oklahoma. Continental has said the entire Bakken field - being developed by several companies - may contain 24 billion barrels of oil. That would be enough to meet U.S. oil demand for more than three years. Drilling by Continental alone added 649 million barrels to the company's proved oil reserves between 2008 and 2012. The firm says it controls drilling leases to more oil-rich Bakken acres than any other company, helping to make Hamm the largest oil baron in the United States. Hamm directly controls 126.3 million shares, or 68 percent, of Oklahoma City-based Continental and more through family trusts. Those shares alone are worth at least $11.2 billion. But his stake in Continental could change significantly as a result of a divorce settlement. The firm's massive growth occurred during the marriage. Its share price has surged nearly 500 percent in the five years since an initial public offering in 2007. Under Oklahoma family law, wealth accrued through the efforts of either spouse during a marriage would typically be subject to "equitable distribution" between the parties. "A court in Oklahoma may look closely at what each party has contributed," said legal specialist Atwood. "But it sounds to me like both spouses here were working hard in the business." "Where there are concerns about company control in a settlement, a spouse would usually get paid the value of the shares," she said. "This is going to be really interesting." Court records show that Sue Ann Hamm petitioned for divorce in May 2012. But earlier Oklahoma court records suggest the Hamms' relationship has been rocky. In 1998, Harold Hamm filed for divorce and demanded that Sue Ann undergo a psychological evaluation. He later withdrew the divorce petition and the case file was ordered destroyed this year, on February 13, according to Oklahoma court records. What prompted the destruction of the file is unclear. In 2005, Sue Ann Hamm subsequently filed for divorce; that case also was dropped. Her 2005 divorce filing is now a key issue in the Hamms' divorce battle, according to a court document reviewed by Reuters. Indeed, it could play a pivotal role in determining how property - including interest in Continental - will be divided, legal analysts said. According to Harold Hamm, the couple "actually separated in the fall of 2005 and have lived separate lives ever since," the court document says. But Sue Ann Hamm's attorneys counter that the Hamms "continued to reside together (although they do own four homes), travel together, attend public functions together, raise their children together, file joint tax returns, and work together." In May 2012, for instance, Harold and Sue Ann Hamm jointly hosted a fundraiser for Republican presidential candidate Romney at their $3 million mansion in Nichols Hills, Oklahoma, according to photos and media reports. The event raised more than $2 million for the Romney campaign. Last September, Reuters reported that Harold Hamm had made political contributions that exceeded federal legal limits by as much as 41 percent during the 2011-2012 election period. Continental said at the time that the donations were made from an account held jointly by Harold and Sue Ann Hamm and were intended to be split between Hamm and his wife, which would have kept the donations within legal limits. In 2011, Harold and Sue Ann Hamm also jointly gave $20 million to a diabetes center at the University of Oklahoma named for Harold Hamm, who has Type II diabetes. The same year, the couple signed up for Warren Buffett and Bill Gates' Giving Pledge initiative, indicating their intention to dedicate most of their wealth to philanthropy. In a court filing two weeks ago, Sue Ann Hamm's attorneys say the Hamms agreed "to engage in marriage counseling sessions in an effort to save their marriage" in November 2010, after Sue Ann Hamm concluded that her husband had been unfaithful. Whether the Hamms separated in 2005 or more recently is crucial as the court determines how Harold Hamm's assets will be divided, legal analysts said. Under Oklahoma family law, the increase in the value of an asset during marriage is considered part of the total pool of "marital property." "In general, if you own property prior to the marriage and you bring it to the marriage, it is separate," said Marianne Blair, a professor of family law at the University of Tulsa. "But that separate property can increase in value. To the extent the increase was due to marital efforts or marital funds," it can be divided by the court. Hamm divorced his first wife, Judith Ann, in 1987, according to Oklahoma court records. A document filed by Sue Ann Hamm's attorneys in the current case shows they received access to marital records in the prior divorce in March. Attorneys for both Hamms will present evidence about when the couple separated and the resulting "date of valuation of (the) business" on May 20, according to the court docket. What's decided could help determine whether their divorce settlement rivals the largest reported divorce settlement to date - the $1.7 billion paid by Murdoch to his ex-wife Anna in 1999. That settlement, in California, directly affected shareholders of News Corp. because it awarded Murdoch's three eldest children stakes in the voting shares of the company. Reports of the Murdoch divorce sent News Corp. shares lower. Daniel Jaffe, a family law attorney in Beverly Hills, California who represented Anna Murdoch, declined to discuss the Murdoch case. But after reviewing the court docket and document obtained by Reuters in the Hamm case, he said Sue Ann Hamm's decades of work for Continental was unique compared with most divorce cases. "She has a leg up because she worked for the company and she can claim that a portion of her efforts went into making the company what it is today," Jaffe said. "She was married to him when the value of the company went up. She has got to be looking for a couple of billion dollars." (Reporting by Brian Grow in Atlanta and Joshua Schneyer in New York; additional reporting by Jeanine Prezioso; editing by Blake Morrison and Michael Williams.) ============== Iraq Kurdistan doubles oil exports, shuns Baghdad 23 Apr 2013 - 16:48 * Trade via Turkey rises to nearly 60,000 bpd * Higher crude, condensate flows seen in May * Select Energy buys second Taq Taq crude cargo * Third Taq Taq cargo to be offered for second week May By Peg Mackey LONDON, April 23 (Reuters) - Iraqi Kurdistan's oil exports to world markets, deemed illegal by Baghdad, have doubled since the start of the year and flows from the autonomous region are set to rise higher still. Crude and condensates are being trucked over Iraq's northern border with Turkey, bypassing Iraq's federal pipeline system, in trade that's risen to nearly 60,000 barrels per day (bpd), say industry sources. Rates next month are expected to touch 70,000 bpd, which would require loading about 350 tanker trucks each day. "This trade is here and here to stay," said a source familiar with Kurdish oil operations. "But the ramp up has been more logistical – getting the requisite types and numbers of trucks and tanks – than political." Kurdish crude had been moving to world markets through a Baghdad-controlled pipeline to Turkey, but Kurdish exports via that route dried up last year due to a row over payments. The central government is still using it to ship its own oil to Turkey. Small amounts of condensate, or light oil, kicked off Kurdistan's direct trade last October and the first cargo of crude from the Taq Taq oilfield was exported earlier this month. [ID:nL5N0CS303] A second cargo of Taq Taq was bought by Germany's Select Energy and is expected to sail from Turkey next week, market sources said. A third Taq Taq cargo is being offered for the second week of May. Roughly a third of Kurdistan's current production - 170,000 bpd of crude and 15,000 bpd of condensates - is now being exported. And Kurdistan could be in a position to shift significantly more volume within months after a new pipeline is completed. The Kurdistan Regional Government (KRG) is on track to finish the pipeline in the third quarter, linking the Taq Taq oilfield with the existing Iraq-Turkey crude pipeline. [ID:nL5N0D3109] The move is likely to bring the payment row with Baghdad to a head and Turkey has said it could play an active role in settling the dispute. Oil lies at the heart of a feud between the central government and Kurdistan. Baghdad says it alone has the right to control exports and sign deals, while the Kurds say their right to do so is enshrined in Iraq's federal constitution. Iraq's central government says Kurdistan is expected to provide 250,000 bpd towards Iraq's 2013 oil export target of 2.9 million bpd. In 2012, the Kurdistan Regional Government (KRG) was to contribute 175,000 bpd to the federal budget, but supplied an average of only 61,000 bpd - roughly what it is now exporting independently. Iraqi Oil Minister Abdul Kareem Luaibi said in January the ministry of oil intended to sue Anglo-Turkish firm Genel Energy and other companies for the export of crude from Kurdistan. [ID:nL6N0ALCLB] At the same time, Iraq's State Oil Marketing Organisation (SOMO) sent letters warning customers not to touch any oil that had not been marketed by SOMO. Major oil firms with interests in southern Iraq have opted not to participate in tenders offering Kurdish crude and condensate to avoid angering Baghdad. But buyers of Kurdish condensate have faced no major repercussions, with one notable exception - trading house Trafigura, which was banned from Iraq in December. [ID:nL5E8NBC44] The KRG says the Kurdish oil is being swapped for refined products with a private Turkish company with no cash involved. Kerosene and diesel are now moving into Kurdistan, said industry sources, with gasoline expected at a later stage. (Additional reporting by Julia Payne; editing by Jason Neely) ((peg.mackey@thomsonreuters.com)(+44 207 542 7714)(Reuters Messaging: peg.mackey.thomsonreuters.com@reuters.net)) Keywords: IRAQ KURDISTAN/OIL ====================== At least 26 killed as Iraqi forces raid Sunni protest camp inShare1Share this Email Print Related NewsUp to 500 feared dead in Damascus suburb: activists Mon, Apr 22 2013 Assad's forces kill 85 in Damascus suburb, activists say Sun, Apr 21 2013 Bahrain stages F1 race amid protests, heavy security Sun, Apr 21 2013 Bahrain F1 race to go ahead amid tensions, protests Sat, Apr 20 2013 Bombs, mortars fail to stop first Iraq vote since U.S. exit Sat, Apr 20 2013Analysis & OpinionBoston and the future of Islam in America Radical Pakistani cleric tries his hand at politics, striking fear in Shi’ites Related TopicsWorld » BAGHDAD | Tue Apr 23, 2013 4:39am EDT BAGHDAD (Reuters) - At least 26 people were killed when Iraqi security forces stormed a Sunni Muslim anti-government protest camp near Kirkuk on Tuesday, starting a gun battle between troops and protesters, local officials and military sources said. Iraq's defense ministry had no official death toll and said troops responded after coming under fire from gunmen in the makeshift camp in a public square in Hawija, near Kirkuk, 170 km (100 miles) north of the capital. Protest leaders said they were unarmed when security forces opened fire during the early morning raid. Demonstrators and local officials gave conflicting accounts of the number of casualties but at least three military sources said six troops and 20 demonstrators were killed in the clashes. Thousands of Sunni Muslims have staged regular protests for months in several Iraqi provinces to demand an end to perceived marginalization of their sect by Prime Minister Nuri al-Maliki's Shi'ite-led government. Many Sunnis say they have been sidelined since the U.S.-led 2003 invasion that ousted Sunni strongman Saddam Hussein and allowed the Shi'ite majority to gain power through elections. (Reporting by Suadad al-Salhy; Writing by Patrick Markey; Editing by Louise Ireland) =======================