Russo asks for new trial, claims Superior turned blind eye to activities

In a motion for a new trial filed late last week, attorneys for Chris Russo say there is ample evidence his former employer’s parent company, oilfield services giant Superior Energy, knew about Russo’s side business interests and therefore has no right to recover damages and profits.

Armed with a $72 million judgment against Russo and Marty LeBlanc, two ex-executives at their Stabil Drill subsidiary, Superior Energy told The Current last week that it wants the Russo name stripped from the UL baseball complex.

“I can’t imagine [the university] wanting to have his name [on the park.] He’s probably one of the biggest fraudsters in recent history of Lafayette,” says Superior Energy’s general counsel, Bill Masters. “I can’t remember anyone getting tagged for that big a fraud verdict in Lafayette.”

“This is all personal, and it’s not serving Superior’s business interests,” says Shaun Clarke of the Houston-based law firm Smyser Kaplan & Veselka, which represents Russo.

Court records show that Russo, who was Stabil Drill’s chief operating officer, doesn’t deny he used his position at the Lafayette-based company to enrich himself. “We’ve contended that Superior knew all along exactly what Chris was doing,” Clarke says, noting that Superior has also tried to have his client arrested and pursued the civil fraud case despite knowing Russo doesn’t have the wherewithal to pay the judgment.

In their motion, Russo’s attorneys argue that Superior Energy time and again turned a blind eye to Russo’s activities because Stabil Drill was one of its most lucrative subsidiaries, a defense the jury apparently did not buy when it rendered a verdict in favor of Superior Energy last year. The attorneys maintain Russo was prevented, at least in part, from strengthening his defense because the court allowed a key witness to invoke his constitutional right against self-incrimination.

Superior Energy declined to comment on Russo’s and LeBlanc’s separately filed motions for a new trial. “Out of our respect for our judge, we’ll only want to do our talking in front of her,” Masters tells me in an email.

How this all started. Superior Energy dropped a bombshell of a lawsuit in April 2016, accusing Russo and LeBlanc, Stabil Drill’s former CFO, of engaging in complex self-dealing schemes that defrauded the company of tens of millions of dollars over an eight-year period. The suit claimed Russo and LeBlanc used their positions of trust and responsibility to siphon cash from the company via multiple entities they jointly owned or controlled.

“The officers hid from Plaintiffs the true business of the companies they owned in order to profit from Stabil Drill,” the petition read. “All of the Defendants had a meeting of the minds and worked in a concerted fashion to send fake or inaccurate invoices to the Plaintiffs, conceal true ownership interests, and/or engage in covert real estate transactions.”

Superior prevailed in December, and in April, Harris County District Judge Caroline Baker signed the $72 million judgment. Russo was ordered to pay $23.7 million in damages and return $27.7 million in profits from the schemes, while former LeBlanc was ordered to pay $7 million in damages and return $3.4 million in profits. Another $10 million in interest was tacked onto the award (Masters tells me the other defendants named in the suit settled with the company before the case went to trial).

Last week’s pleadings represent a first step in the appeals process. Centrally, Russo’s attorneys argue the court should have compelled specific testimony of Perry McGraw, the former head of North American operations for Stabil Drill, but instead allowed McGraw to exercise his Fifth Amendment right against self-incrimination.

McGraw, the lawyers claim in the motion, was told by Christine Chaney, Superior’s vice president of ethics and compliance, that a Superior executive had instructed her to stay away from Stabil Drill after McGraw “expressed issues regarding Chris Russo’s actions.” Yet, when they asked McGraw about this during the trial, the judge didn’t compel him to answer.

The executive who allegedly told Chaney to overlook Russo’s extracurricular activities was Guy Cook, Superior’s EVP in charge of Stabil Drill and the entire rental tools division, according to the Russo pleading. “It was uncontested that Stabil Drill was one of Superior’s most profitable subsidiaries,” Clarke tells me.

On Jan. 31, 2016, just three months before the suit was filed against Russo and LeBlanc, Cook resigned from the company after nearly two decades, collecting all of his unused vacation and a $1.5 million severance. Clarke is suspicious about the timing of that separation from the company. “He received a $1.5 million severance, and at trial he denied any knowledge of the activities at issue,” Clarke writes in an email.

The motion for a new trial asserts that McGraw’s testimony would have been critical to establishing that Superior waived its right to recover from Russo because it knew about his activities. “[Superior] allowed [Russo] to continue while Stabil Drill remained highly profitable,” the motion reads. “The exclusion of this evidence probably caused the rendition of an improper verdict because it represented the most conspicuous example of a Superior employee’s knowledge … of Mr. Russo’s conduct, and its subsequent failure to take action.”

The motion claims more evidence was presented showing Superior (as well as Russo’s late father) knew what Chris Russo was up to — but continued to promote him and pay him bonuses. Throughout much of the pleading, the attorneys rehash what they say is more than a decade of evidence showing that Superior knew about the side deals Russo was involved with. “By ignoring [that evidence], the jury rendered a verdict that was against the great weight and preponderance of the evidence,” they write. In other words, they say the jury got it wrong.

“On multiple occasions Superior — through several corporate officers — discovered that Mr. Russo engaged in breaches of his fiduciary duty — and similar conduct. Rather than suing, terminating, or even investigating Mr. Russo, Superior promoted him, raised his salary, paid him bonuses, and continued to entrust him with significant purchasing decisions,” the motion reads.

Russo’s motion points out that LeBlanc himself testified that he had informed Cook about companies Russo was operating and using Stabil Drill equipment for and even told Sammy Russo, Chris’ father who founded the company and served as president until shortly before his 2013 death, about Chris engaging in conflict-of-interest transactions. According to the motion, LeBlanc testified that Sammy Russo responded: “What do you expect Superior to do about it? Have you ever … have you seen how much money we’re making?”  

Russo’s lawyers say a new trial should be granted because Superior engaged in “improper and prejudicial jury argument” by deliberately inflaming the jury. They say a member of Superior’s legal team referred to their client and LeBlanc as “ferocious wolves,” who “came seeking money, greed, dishonesty,” and “breached every moral of society, every rule that we live by.” If isolated, some of these “prejudicial statements may have been cured through an appropriate instruction,” they assert, but “their cumulative effect could not be.”

Read the Russo motion for a new trial here and LeBlanc’s brief in support of his post-trial motions here.

Attorney Clarke claims that in January 2016, Stabil Drill began losing money for the first time since Superior bought it in the late 1990s for $25 million in cash and notes. Three months later, he says, Russo and LeBlanc were fired, and the suit accusing them of masterminding an elaborate scheme to defraud the company was filed.

Attorneys for LeBlanc and his companies separately filed three motions — for a new trial, to disregard jury answers (in essence reverse the jury verdict for lack of a factual basis for the verdict), and to modify the judgment. Among other arguments, they claim Superior excluded multiple jurors on the basis of race, and that the court improperly submitted broad form jury questions rather than questions “granulated on an alleged scheme-by-scheme basis,” which the attorneys say can mislead and confuse juries.

If the court declines his request for a new trial, LeBlanc is alternately asking for a reduction in the net award.

While he seeks relief for his client in Judge Baker’s Texas courtroom, Clarke remains perplexed about Superior’s campaign to take Russo’s name off the baseball park, especially at a time when its stock price is in the tank.

“Why would a publicly traded company be spending time and energy to get a guy’s name taken off a baseball park?” he asks, suggesting the company has more pressing matters to attend to. “Superior’s stock was at $9.08 the day we started the trial. … Today their stock is at $2.78,” Clarke says. “They’ve spent millions of dollars to get a worthless judgment from a guy who can’t pay it. It might as well be $60 billion because he doesn’t have the money.”