Texas Wildcatter’s Family Says Ex-CFO Extorted $100 Million in Pay

(Bloomberg) -- The widow and two daughters of the late Texas wildcatter J. Cleo Thompson are trying to get back $100 million they say a former executive of the family’s oil company extorted.

Dorothy Thompson and her two daughters, Linda and Christy, said Paul Rudnicki and another executive took advantage of a lawsuit brought by oil tycoon T. Boone Pickens and a sale of assets in the Permian Basin to pressure the women into paying each $100 million bonuses in 2016, when Rudnicki served as chief financial officer of Thompson Petroleum Corp.

They have claimed that Rudnicki and former chief operating officer Frank Peterman were already receiving multimillion-dollar compensations to run the company in positions of trust when they sought the “outlandish bonuses.” Both were hired after J. Cleo Thompson died in 2010.

The issue with the “COO” was resolved, according to the latest claim against Rudnicki filed last week. Jeff Mills, a lawyer for Peterman, confirmed the matter had been resolved and said “Mr. Peterman wishes the Thompsons the best.”

Rudnicki has claimed he deserved the payout because he helped engineer the sale of the company’s “Red Bull” assets in West Texas, earning the Thompsons a net $1 billion in proceeds. His lawyer, Donald Godwin, referred questions to a court filing in which Peterman and Rudnicki called the complaint “an unjust attempt to claw back compensation willingly paid to and rightfully earned.”

Permian Pioneer

J. Cleo Thompson was an early mover in the Permian, now the world’s hottest oil play, acquiring a handful of leases in the early 1950s with his father and later expanding the business to operate hundreds of wells across West Texas and New Mexico. “People knew him as an old wildcatter who still believed a handshake sealed a deal,” an obituary in the Dallas Morning News said at the time of his death. The Thompsons still have assets in West Texas and New Mexico, though the company is now structured as a family office.

Pickens, who died last month at the age of 91, alleged the Thompsons had violated a decade-old contract over ownership interests and revenue from more than 160 wells in Reeves and Pecos counties in West Texas that were potentially worth up to $1 billion.

Much of this latest dispute centers around how Rudnicki portrayed the severity of the Pickens lawsuit.

According to the latest complaint, Peterman and Rudnicki told the Thompsons on the way back from a mediation meeting with Pickens in the summer of 2016 that the women would likely be left with nothing if they lost the suit and that, without the bonuses, the two executives would not be around to help them. “This caused the Thompsons enormous worry and stress,” the complaint said.

A lawyer who had represented Peterman earlier stated that Rudnicki months later told the Thompsons that they were expecting to win the case, a November 2018 affidavit shows. The “case is almost completely gutted!” a copy of a November 2016 text message from Rudnicki to Christy Thompson said.

A jury ultimately awarded Pickens’ Mesa Petroleum damages totaling $141.9 million, though J. Cleo Thompson was responsible for just $12.2 million of that, with a separate company responsible for the remainder. The case was later settled for an undisclosed amount.

For the Thompsons and Rudnicki, the dispute is in the discovery phase, with a trial possible next year.

The case is Thompson Petroleum Corporation and J. Cleo Thompson v. Frank Peterman and Paul Rudnicki, DC-18-00644, District Court of Dallas County, Texas.

To contact the reporter on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Peter Blumberg

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