Quest Resource Corporation, Quest Energy Partners, L.P., and Quest Midstream Partners, L.P. declared the termination of the companies' chief financial officer and the status of their internal investigation into certain questionable transfers of funds to an entity controlled by the former chairman and chief executive officer of the companies.

On September 13, 2008, the boards of Quest Resource and the general partners of Quest Energy Partners and Quest Midstream Partners terminated Mr. David Grose as the chief financial officer of the companies, effective immediately. The companies have commenced their search for a new CFO, but pending the appointment of a new CFO, Mr. Jack T. Collins will continue to serve as interim CFO of the companies and Kroll Zolfo Cooper LLC will continue to assist in the accounting and finance functions for the companies. Mr. Kevin Golmont of Kroll will continue to lead Kroll's efforts in those functions.

On August 25, 2008, the companies issued a press release, and Quest Resource and Quest Energy Partners each filed a Current Report on Form 8-K, announcing the resignation of Mr. Jerry Cash as chairman and chief executive officer following the discovery of the questionable transfers after the companies received an inquiry from the Oklahoma Department of Securities. The companies also announced at that time that they had commenced an internal investigation of the matter and its effect on the companies' financial statements. A joint special committee of the boards of Quest Resource and the general partners of Quest Energy Partners and Quest Midstream Partners was appointed to conduct the investigation with the assistance of external counsel and forensic accountants. The companies had also reported the matter to the Securities and Exchange Commission and are cooperating with the SEC, the Oklahoma Department of Securities, and the United States Attorney's office in Oklahoma City in connection with their investigations of the matter.

The internal investigation is continuing at this time. The special committee has cautioned the companies that, although it and its advisers have reviewed substantial numbers of company records and conducted numerous interviews of company personnel and others, significant additional work remains to be done to confirm the full extent of inappropriate uses of the companies' assets and their effects on the companies. Based on the information obtained in the investigation to date, the special committee believes that the questionable transfers to the Cash-controlled entity involved a total of approximately $10 million (as originally announced).

The special committee and its advisers are also working to determine the effect of those transfers on the companies' financial statements, the methods by which the companies' internal controls may have been circumvented by those transferring the funds, and the appropriate remedial measures. In addition, the special committee is attempting to identify possible sources of recovery of the assets that were inappropriately transferred. At this time, the companies cannot accurately predict when the investigation will be complete, what the results of that investigation will be, or whether any recovery of the missing assets can be made.

Tags: Quest Resource Corporation