Kirk Kerkorian
Kirk Kerkorian’s investment company is suing a former friend of the casino billionaire, charging the Las Vegas man perpetrated a “massive” stock fraud costing Kerkorian most of his $684 million investment in a Colorado energy company.
Kerkorian’s investment firm, Tracinda Corp. of Beverly Hills, Calif., filed suit Tuesday in Clark County District Court in Las Vegas against Edward Michael Davis of Las Vegas and potential unnamed defendants that may be added later. For now they’re identified as “Does 1-25.”
Besides owning Tracinda, Kerkorian founded and is the largest shareholder of casino resort owner MGM Resorts International of Las Vegas.
Davis, known in oil industry circles as “Tiger” Mike Davis, in 2008 promoted a deal to Kerkorian in which Tracinda paid $684 million for a 35 percent stake in Delta Petroleum Corp. of Denver.
The deal was touted at the time as providing the Colorado company much-needed cash to expand drilling and development operations for oil and natural gas in Colorado, Utah and Washington.
Tracinda’s lawsuit charges that in the Delta Petroleum deal, Davis was supposed to be representing the interests of Tracinda as its “trusted advisor” but in fact was conspiring with Delta Petroleum’s CEO at the time to defraud Tracinda and enrich himself.
This was accomplished by Davis and Roger Parker, then Delta Petroleum’s CEO, conspiring to make false statements about Delta Petroleum and to conceal from Tracinda that “Davis had a financial stake in plaintiff’s investment in Delta and stood to reap significant undisclosed profits and secret kickbacks upon consummation of the deal.”
Attorneys who have represented Davis, Parker and Parker’s new company, Recovery Energy Inc. of Denver, were contacted for comment on the allegations Wednesday.
Lawsuit records show Davis has a Las Vegas home on Rancho Circle, near Alta and Rancho drives. There’s no publicly available phone number for him at that address.
Also contacted for comment was the Denver office of the law firm Brownstein Hyatt Farber Schreck.
Tracinda’s lawsuit says a founder of that firm, prominent attorney Norman Brownstein, joined with Davis in repeatedly assuring Tracinda “that Delta’s management team and, in particular, Parker had extensive experience in the energy sector, that Parker had positioned Delta for future success and, most importantly, that Parker was a person of the highest character and integrity.”
The suit says that after Tracinda bought 36 million shares of Delta Petroleum at $19 per share in early 2008, it saw the stock price tumble to what are currently penny stock levels — 56 cents — effectively wiping out Tracinda’s investment.
While the stock had initially risen to $24.78, it then “began a precipitious decline” and by March 2009, because of its financial problems, Delta’s auditors issued a “going concern” warning about the company’s viability, the suit says.
Tracinda charged in the lawsuit that Delta was hurt not just by the global decline of commodity prices but by “Parker’s gross mismanagement and incompetence” that included drilling projects that had not been properly assessed and surveyed. Parker resigned from the company in May 2009.
The suit says Tracinda and Parker agreed in 2008 that Davis would receive about $5 million worth of Delta shares as a finder’s fee for connecting Tracinda with the Denver company, but Tracinda later learned “Parker secretly arranged for Davis to receive additional compensation in the form of lucrative contracts and business arrangements with Delta as a quid pro quo for Davis having deceived plaintiff into making its initial Delta investment.”
The suit charged that Davis wasn’t the only beneficiary of the “fraudulent scheme” as Tracinda has also learned that Brownstein’s law firm was receiving a $25,000 monthly consulting payment under a 48-month contract for lobbying work for Delta.
The suit says his law firm was awarded that contract “in consideration of his services in the transaction for plaintiff’s investment in Delta.”
“Brownstein, of course, had repeatedly vouched to plaintiff for the competence and integrity of Parker during the due diligence process,” the suit says.
The suit asserts counts of fraud, negligent misrepresentation, breach of a confidential relationship and demands from Davis unspecified compensatory and punitive damages for Tracinda’s “nearly-complete loss.”
“Plaintiff brings this action to recover all of the losses that it suffered as a result of Davis’ fraudulent and unlawful scheme,” the suit says.
Despite the allegations about Parker and Brownstein in the lawsuit, neither are named as defendants.
Tracinda is represented in the lawsuit by attorneys with the Las Vegas office of the law firm Glaser Weil Fink Jacobs Howard Avchen & Shapiro LLP.
Besides investing in Delta Petroleum, Kerkorian appointed to the Delta board of directors two Tracinda executives, Anthony Mandekic and Daniel Taylor, along with MGM Resorts International Chairman and CEO James Murren.
Murren resigned from the Delta board on Nov. 21 for undisclosed reasons, though Delta said in a regulatory filing: “Mr. Murren did not indicate any disagreement with the company or the board of directors in connection with his resignation.”