United States Attorney
Northern District of Texas

1100 Commerce St., 3rd Fl.
Dallas, Texas 75242-1699

Telephone (214) 659-8600
Fax (214) 767-0978

FORMER CFO OF PATTERSON-UTI ENERGY, INC.
ADMITS TO EMBEZZLING
MORE THAN $77 MILLION FROM EMPLOYER

Jody Nelson Pleads Guilty to Wire Fraud and Money Laundering Charges

Jonathan D. Nelson pled guilty this morning in federal court in Lubbock, Texas, before the Honorable Sam R. Cummings, United States District Judge, to a two-count Information charging one count of wire fraud and aiding and abetting and one count of engaging in monetary transactions derived from specified unlawful activity and aiding and abetting, announced United States Attorney Richard B. Roper. Nelson, also known as Jody Nelson, was employed by Patterson-UTI Energy, Inc from 1996 to November 2005 and in 1999 he became the Chief Financial Officer (CFO). He was also vice president, secretary and treasurer of the company. Patterson-UTI is the nation’s second-largest onshore oil drilling provider and is headquartered in Lubbock, Texas.

Judge Cummings ordered a pre-sentence investigation with sentencing to be scheduled after that investigation is complete. Nelson, age 36, faces a maximum statutory sentence of 30 years imprisonment and a $500,000 fine. In addition, Nelson acknowledges that he owes restitution. Nelson admitted in court documents that from January 1998 until November 2005, using various schemes, he embezzled approximately $77,787,649.97 from Patterson-UTI.

Nelson began his embezzlements from Patterson-UTI in 1998 when, as Comptroller, he had access to and custody of the Patterson-UTI checkbook for its account at the Norwest/Wells Fargo Bank. Between 1998 and 2000, Nelson forged approximately 38 checks, totaling approximately $4,639,750.00. Each check was made payable to Nelson or “Chisum Capital,” an entity created and controlled by Nelson. To make these checks appear legitimate, Nelson would stamp the signature of Patterson-UTI’s Chief Executive Officer (CEO) on the check. These checks were then cashed or deposited into bank accounts controlled by Nelson for his own personal benefit. To further the scheme and conceal the true nature of the checks, Nelson would falsify Patterson-UTI’s accounting records, showing that the checks had been used for legitimate business transactions of Patterson-UTI.

Between January 2001 and October 31, 2005, Nelson continued his embezzlements by causing 49 wire transfers to be made from Patterson-UTI accounts at Snyder National Bank in Snyder, Texas, and the Wells Fargo Bank in Houston, Texas, to XIT Land and Energy, Inc., a company owned and controlled by Jonathan D. Nelson. Nelson submitted bogus invoices to Patterson-UTI on behalf of XIT, purportedly for goods and services sold by XIT to Patterson-UTI, when there were no such goods or services sold or purchased. XIT was not a legitimate vendor of Patterson-UTI and Nelson caused the payments of bogus invoices to XIT without the authority of Patterson-UTI. To effectuate the scheme, Nelson forged signatures and initials on internal company documents purportedly approving the invoices for payment, circumventing company policy and frustrating the company’s internal controls. By using this wire transfer method, Nelson embezzled a total of $69,434,342.00 from Patterson-UTI. Included in these wire transfers were 26 wire transfers and deposits, each greater than $10,000.00, of monies embezzled from Patterson-UTI and wire-transferred from the Wells Fargo Bank in Houston, Texas, and deposited into the bank account of XIT Land and Energy, Inc. at Bank of America in Lubbock. After the fraudulently obtained funds were deposited into the XIT account at Bank of America in Lubbock, Nelson then transferred the embezzled funds from the XIT bank account into other entities he controlled and used the funds for his own personal benefit.

In another scheme, in February 2004 Nelson defrauded Patterson-UTI of approximately $2,126,891.25 by using Patterson-UTI funds, without their knowledge or authorization, to purchase a Beechcraft King Air executive aircraft for his own personal use and benefit. At some point prior to February 2004, Patterson-UTI merged with TMBR-Sharp Drilling Company and in that process acquired a Beechcraft Baron aircraft that had been owned by TMBR-Sharp. On February 3, 2004, Nelson sent an e-mail to the Assistant Treasurer and Comptroller at Patterson-UTI instructing him to wire transfer $2,126,891.25 to Aero-Space Reports, Inc., in Oklahoma City, Oklahoma, representing to him that the funds were to fund a seven-year maintenance contract on a Beechcraft aircraft. The Assistant Treasurer and Comptroller, based on representations from Nelson, believed the Beechcraft aircraft was the airplane acquired by Patterson-UTI from TMBR-Sharp, and transferred the money according to Nelson’s instructions. However, the transferred funds weren’t for a maintenance contract, but were used to purchase a Beechcraft King Air N350AJ from a company in North Carolina. Aero-Space Reports, Inc. acted as the escrow agent in the transaction and the buyer of the aircraft was Three Stars Aviation, a company owned and controlled by Jonathan D. Nelson.

In yet another scheme, in order for Nelson to purchase shares for his personal benefit in a Snyder, Texas, based construction company, Arrow Construction Company, Nelson created a bogus Patterson-UTI invoice in the amount of $1,586,666.7 which fraudulently showed that Patterson-UTI had purchased air compressors, sandblasters, commercial painters, trucks, and other vehicles from Inter American Oil Works. Nelson forged the signature of Patterson-UTI’s Chief Operating Officer (COO) on this fraudulent invoice when in reality, Patterson-UTI had not purchased these items from American Oil Works. But based on this fraudulent invoice, Patterson UTI’s bank account at the Snyder National Bank was debited in the amount of $1,586,666.72 and this transaction funded three cashier’s checks and paid off a loan of an Arrow Construction Company shareholder. In return for these payments, Arrow Acquisition, LCC, a company created by Jonathan D. Nelson, was able to purchase 16 shares of stock of Arrow Construction Company.

U.S. Attorney Roper commended the investigative efforts of the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigations Division and the Texas Rangers. The case is being prosecuted by Assistant United States Attorney Roger McRoberts of the Lubbock, Texas, United States Attorney's Office.

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