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.
SENTENCED TO 25 YEARS IMPRISONMENT

Jody Nelson Embezzled More than $77 Million From Employer

Jonathan D. Nelson was sentenced today in federal court in Lubbock, Texas, by the Honorable Sam R. Cummings, United States District Judge, to imprisonment for a term of 25 years, restitution in the amount of $77, 787,649.97 and a fine of $200,000.00 announced United States Attorney Richard B. Roper. Nelson has been in federal custody since July 31, 2006.

Nelson, age 37, also known as Jody Nelson, pled guilty in April to a two-count Information charging him with 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.

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.

U.S. Attorney Roper said, “I’m very happy with the sentence Judge Cummings imposed today on Mr. Nelson.” Roper continued, “I don’t recall ever seeing a case in this district that involved more greed than that displayed by Mr. Nelson. He deserves every one of the 25 long years he will serve in federal prison.” “I especially want to thank the SEC for their investigative assistance in this case and for bringing it to the attention of my office,” Roper added.

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.

At sentencing, Judge Cummings imposed a sentence of 235 months incarceration as to Count 1 (wire fraud) and 65 months as to Count (money laundering), with the sentences to be served consecutively. In setting this sentence the Judge noted that corporate malfeasance was a major problem in our society and that such conduct cannot be tolerated. The Judge stated that Patterson-UTI had given Mr. Nelson a very generous compensation package that included a large salary, bonuses and stock options that in some years exceeded $500,000, yet Mr. Nelson still chose to embezzle over $77 million. Judge Cummings also stated that the losses suffered by the victim Patterson-UTI exceeded the amount embezzled with the company having to spend additional large sums for lawyers and accountants to determine the extent of Mr. Nelson’s fraud, and to defend against three share holder derivative suits that were filed as a result of the embezzlement. In addition to the loss of money, Judge Cummings stated that Patterson-UTI had also been harmed by its loss of reputation. Finally, the Judge stated that he imposed a sentence of 25 years instead of 30 years because Mr. Nelson had cooperated with investigators and pled guilty.

U.S. Attorney Roper thanked the U.S. Securities and Exchange Commission for its assistance and for bringing it to the attention of the U.S. Attorney’s Office. Mr. Roper also praised and thanked the Federal Bureau of Investigation, the Internal Revenue Service - Criminal Investigation and the Texas Rangers for their extensive investigative efforts. The case was prosecuted by Assistant United States Attorney Roger McRoberts of the Lubbock, Texas, United States Attorney's Office.

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