BISMARCK — A Dickinson man and former Poseidon oilfield executive was sentenced to three years in federal prison for his role in a stock exchange fraud scandal that resulted in shareholder losses in excess of $886 million.
Joseph A. Kostelecky, 61, was sentenced and ordered to pay restitution in the amount of $406.2 million. Assistant Attorney General Kenneth Polite Jr. of the U.S. Justice Department’s Criminal Division, and Inspector Eric Shen of U.S. Postal Service criminal investigations made the announcement Tuesday.
From November 2011 to December 2012, Kostelecky served as executive vice president of U.S. operations — the highest ranking official in Poseidon's U.S. division. After lengthy investigations by the U.S. Postal Inspection Service and the Justice Department, he was indicted in February of 2015 on charges filed by the U.S. Securities and Exchange Commission.
He directed accountants at the companies offices in Denver and Dickinson to falsely report approximately $100 million in long term contract revenue from client companies. A news release from the U.S. The Department of Justice stated that Kostelecky either knew these contracts were non-existent or had no collectible revenue. His misconduct also included actions to prompt false reports that he bought a substantial number of stocks in Poseidon, although he never made such a purchase.
Kostelecky pleaded guilty to SEC charges on Oct. 13, 2021. In that plea, he admitted that when the inflated revenue came to light at the end of 2012, Poseidon’s stock price plunged and the company was forced into bankruptcy, causing more than $886 million in shareholder losses.
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Poseidon Concepts Corp. is a Canadian gas and oilfield services company based in Calgary, Alberta. It has American corporate headquarters in Denver and a field office in Dickinson. According to Bloomberg News, Poseidon, “develops frac tanks which are used primarily for containment of water and oil frac fluid, and can also be used for secondary containment of flowback fluid and sediment ponds.”
“Kostelecky further admitted that he perpetrated the scheme to inflate the value of the company’s stock price in order to enrich himself through the continued receipt of compensation and appreciation of his own stock and stock options,” the press release by the United States Department of Justice stated.
