Alliance Resources, the oil and gas company whose shares have been suspended on the London stock market at 4.5p since early last month, yesterday issued legal proceeedings against its former chief executive, the Cork businessman John O'Brien.
The company, which is now being run by a three-man management committee, says it is suing its former head for damages for alleged fraudulent misrepresentations, fraud and/or deceit, breach of his service agreement, breach of fiduciary duty as well as for reimbursements of certain sums received as a result of false declarations.
Mr O'Brien, who said yesterday he had "nothing to hide", is defending the writ and is opposing a Mareva injunction that was obtained by the company last month freezing his financial assets. The company's action relates to statements made in documents that accompanied a pounds 7.2m money- raising exercise earlier this year.
Yesterday the company said the value of the Valentine Sugar Plantation, located 30 miles south of New Orleans, was less than had been described in the prospectus. The company took issue mainly with the prospects of a particular well, Well 14.
"As a result of investigations made by the company, it is now apparent that the true position in respect of this well has been concealed and misrepresented to the company by its former chief executive," a state- ment said yesterday.
The company said that contrary to indications given in the prospectus, it was now the company's understanding that the well, which was said to house a large gas discovery, was in fact never capable of commercial production and was finally plugged and abandoned in August this year.
As part of the lease there was a provision that in order to maintain its interest in the undeveloped field Alliance had an obligation to drill a well every 110 days. It is the company's contention that at the time of the money-raising, the company had not complied with this provision, but that Mr O'Brien had nonetheless indicated the company had been granted an extension on certain conditions.
The Serious Fraud Office was called in by the company last month and is still said to be involved in conducting its own inquiries into Mr O'Brien.
Mr O'Brien said he had not been approached by the fraud office. "But I would be delighted to meet with them at any time."
Alliance says the company is still viable and that its shares will be able to be traded again when full-year financial figures are released later this month.
Mr O'Brien said yesterday the company's decision to proceed with the drilling of the Valentine well (Valentine 14) was based upon a substantial number of independent reports, which included a process of continuing evaluation.
"The decision to plug and abandon Valentine 14 was not my decision and appears to contradict the technical reports," he said.Reuse content