Spitzer V. Shanley Corporation

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John Havel SPITZER v. SHANLEY CORPORATION United States District court, No. 89 Civ. 8549 (MEL). (1994) FACTS Norstate Limited Partnership was created in Oklahoma with the intention of financing in oil and gas wells in Oklahoma and Texas. Shanley Production Company, corporation in Texas, was the general partner and was a wholly-owned subsidiary of Shanley Corporation, parent company based in Delaware. James Spitzer and Leonard Lichter (plaintiffs) were limited partners. All profits generated from property owned by the partnership, which included oil and gas wells, were to be distributed in percentages to the limited partners. Neal McCabe, at the time, was chairman of the board for Shanley Corp and Shanley Production respectively. He was in charge of acquisitions of Shanley Corp and had the duty to identify companies to be acquired and the negotiation of such acquisitions. John Shanley, president of Shanley Corp and CEO of Shanley Productions, did not have a single, well-defined are of responsibility. However, he was responsible for the overall direction of the enterprise and reporting to the SEC. All payments from Norstate properties were payed to Shanley Production, the general partner. Shanley Production would deposit those funds in a Fidelity National Bank account that was one of Shanley Corp's general bank accounts. Amounts in these accounts paid business expenses, which included rent, payroll and well expenses. Neal McCabe was the signatory on this account and on all of Shanley's accounts. Distributions from this account would transfer to a bank account in the name of Norstate, LP. These distributions would then be given to the limited partners. McCabe, and other Shanley Corp executives, would sign distribution checks earned by the partnership wells. Sometimes, rubber stamps and electronic signatures would be used on these checks, a comparison to

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