Former Quest CFO to Serve 16 Years in Prison for Defrauding Company
Sentence Took Into Account Other Fraud Schemes

OKLAHOMA CITY—Today, DAVID GROSE, 58, of Edmond, Oklahoma, was sentenced by United States District Judge Stephen P. Friot to serve 192 months in federal prison for wire fraud stemming from a scheme to defraud Quest out of $1 million, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma. In addition, Judge Friot ordered Grose to serve three years of supervised release upon his release from prison, forfeit $1 million in assets, and pay $1 million in restitution to the company.

“This significant sentence reflects the severe consequences that await corporate officers who commit fraud,” said Coats. “Hopefully, this brings closure to the company and its shareholders. I again commend the extraordinary efforts of the IRS, FBI, SEC, and the Oklahoma Department of Securities, who worked cooperatively in exposing this illegal conduct, bringing those responsible to justice, and protecting company investors and employees.”

From 2004 to 2008, Grose served as the chief financial officer (CFO) for Quest Energy Partners, L.P. (“Quest”), a publicly-traded oil and gas exploration and production business based in Oklahoma City. Grose’s responsibilities included supervising Quest’s financial accounting and books, coordinating quarterly reviews and annual audits by outside auditors, certifying the accuracy of reports filed with the U.S. Securities & Exchange Commission (“SEC”), and ensuring that all employees complied with Quest's internal ethics policies.

On February 24, 2010, a jury found Grose guilty of three counts of wire fraud stemming from a scheme to defraud Quest out of $1 million. According to the evidence at trial, in the summer of 2008, Grose planned to make a $1 million personal investment in a hydrogen fuel technology company. He told the hydrogen fuel technology company that the investment would be funded with his own money. Instead, under the pretext of paying for the purchase of pipe, Grose wired approximately $1 million from Quest to a pipe supplier. Within minutes of the transfer, Grose contacted the pipe company to cancel the order and instructed the pipe company to wire the money to the hydrogen fuel technology company instead of returning the money to Quest. Evidence showed that Grose then caused the transaction to be documented on Quest's financial records as payment for pipe but did not inform the accounting department he had cancelled the order. As a result of this scheme, Quest lost $1 million. The company cooperated with authorities in the investigation.

In announcing his sentence, Judge Friot took into consideration Grose’s role in facilitating Jerry Cash’s $10 million fraud scheme and over $800,000 in kick-backs Grose received from a Quest vendor.

Other Cases Arising Out of Investigation

1. United States v. Jerry Dale Cash (Case No. CR-09-0241-F). On November 12, 2010, Cash was sentenced to serve 108 months in federal prison for making a false Sarbanes-Oxley certification to the SEC by failing to disclose his diversion of $10 million in corporate funds. In addition, Cash was ordered to serve three years of supervised release upon his release from prison and pay an additional $5 million in restitution towards the $12 million stipulated restitution amount. The parties agreed that Cash had already paid $7 million prior to sentencing.

2. United States v. Brent Mueller (Case No. CR-09-068F). On May 14, 2019, Mueller, 53, of Edmond, Oklahoma, Quest's former purchasing director, was sentenced to serve two years in federal prison and ordered to pay over $1 million in restitution. Mueller pled guilty on March 25, 2009, to misprision of a felony and admitted that in the summer of 2008, he learned that Grose had illegally wired $1 million out of Quest to use for a personal investment and that he took several steps to cover up the crime, including trying to recover the $1 million to prevent Quest from discovering the illegal diversion.

3. The SEC has filed a related civil complaint in the United States District Court for the Western District of Oklahoma styled SEC v. Jerry D. Cash and David E. Grose, (Case No. 09-CV-639). A copy of the SEC’s press release and civil complaint can be found at http://www.sec.gov/litigation/litreleases/2009/lr21087.htm. That action is pending.

4. The Oklahoma Department of Securities also has filed a related civil action, which can be found at www.securities.ok.gov.

The investigation was conducted by the Western District of Oklahoma’s Financial Fraud Task Force, which is comprised of special agents from Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigative Division, and personnel from the U.S. Attorney’s Office. Coats thanked the Securities and Exchange Commission and the Oklahoma Department of Securities for their continuing coordination and assistance in the government’s investigation. This case was prosecuted by Coats and Assistant U.S. Attorney Jeb Boatman.