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Gulf Keystone CEO Gained in ‘Unusual’ Share Deal, Lawsuit Says

Todd Kozel, the founder and chief executive officer of Gulf Keystone Petroleum Ltd., was accused in a U.K. lawsuit of making a 17.2 million-pound ($27 million) profit by using an offshore trust to buy stock just before the London-listed company announced it had struck oil in Iraq.

Excalibur Ventures LLC, which is seeking a 30 percent stake in Gulf Keystone’s Kurdistan oil fields in its lawsuit, said Kozel’s holdings in the Alternative Investment Market-listed company were “opaquely structured and incompletely disclosed,” according to documents filed at the court and seen by Bloomberg News. Gulf Keystone says it has fully complied with the exchange’s rules.

Gulf Keystone, based in Bermuda, plans to join the FTSE 250 Index next year. Its shares have risen more than 1,000 percent since finding as much as 10 billion barrels of oil in northern Iraq’s Shaikan field in 2009.

Excalibur’s lawyers claim Kozel transferred 968,000 pounds to his Swiss lawyer’s bank account so the investment vehicle Gokana Trust could buy Gulf Keystone shares at 9 pence in a private placement announced on Aug. 3, 2009. The trust’s participation in the share sale wasn’t publicly announced.

Three days later the company said it had made a “significant oil discovery” in the Kurdistan region of Iraq and its shares soared. Kozel’s links to Gokana are being contested in lawsuits in Britain and the U.S., where his divorce is being fought out in the courts.

‘Regulatory Issues’

“It would be very unusual for a director to loan monies to a third party for the purposes of participating in a fundraising, given the potential legal and regulatory issues that this would throw up,” said Tandeep Minhas, a partner at London law firm Taylor Wessing.

Gulf Keystone’s lawyer Harvey Rands said Kozel was specifically excluded from receiving any benefit or interest in assets owned by Gokana Trust. The 968,000-pound “loan” he made to Gokana didn’t have to be revealed under AIM rules, disclosure and transparency rules or the U.K. Companies Act, he said in an e-mailed statement.

Gokana Trust was set up in April 2009 to house 20 million Gulf Keystone shares formerly owned by Kozel as part of “advised estate planning,” the company said in a release at the time. Excalibur’s lawyers said the shares Gokana has are held for Kozel or members of his family.

Excalibur claims it worked with Gulf Keystone to secure the concession in Kurdistan and that it is entitled to a 30 percent share of revenue from the region. Gulf Keystone is contesting that claim.

Father, Brothers

In its lawsuit, Excalibur also questioned Kozel’s links to Gulf Keystone Petroleum LLC, another entity that owns 40 million Gulf Keystone shares, or 4.7 percent of the company. Kozel has said some or all of his interest in the limited liability company was held on behalf of his father and brothers, Excalibur’s lawyers wrote in court filings.

Rands said Kozel didn’t have a legally attributable interest in the shares until they were distributed by Keystone Petroleum LLC in June. He then received 11.6 million Gulf Keystone shares from the firm and planned to transfer them to his family as soon as possible, the company said in an announcement at the time.

Kozel is facing a suit in the U.S. by his wife and another, by his brothers and father, over his Gulf Keystone stake. David, Frank and Robert Kozel filed a lawsuit against the Gulf Keystone founder in Pennsylvania on June 16. In Florida divorce proceedings, his wife won an injunction in February freezing the assets of Gokana, now worth more than 44 million pounds.

Lavish Spending

Under questioning by his wife’s lawyer in December, Kozel revealed lavish spending on business trips. He said he spent $180,000 entertaining business contacts on a yacht in the south of France and $7,711.67 on an event at a strip club for “customers and company members,” according to court documents.

“There are various law suits/divorce proceedings which state a claim over the shares currently held by Mr. Kozel,” Rands said in an e-mail. “These allegations are neither true nor announceable.”

The case is: Excalibur Ventures LLC v. Texas Keystone Inc, 10-1517, High Court of Justice, Queen’s Bench Division.

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