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A former executive at a now defunct Canadian services firm has been indicted on multiple charges for orchestrating a $100 million fraud scheme.

The U.S. Department of Justice (DOJ) said Joseph A. Kosteleck orchestrated a scheme to fraudulently inflate the revenue reported by Poseidon Concepts Corporation’s U.S. division by $100 million.

Poseidon Concepts was a provider of fracking fluid storage tanks.

Kostelecky, 55 of North Dakota, was charged in an indictment filed on Thursday with five counts of wire fraud and one count of securities fraud for his alleged role in the scheme.

The indictment alleges that the fraud took place between November 2011 and December 2012 when Kostelecky was the sole executive in Poseidon Concepts Corporation’s U.S. division.

The DOJ alleges that Kostelecky “engaged in conduct” that caused the company to falsely report about $100 million in revenue from “purported contracts” with oil and natural gas companies.

Kostelecky’s alleged misconduct included fraudulently directing the company’s accounting staff at its U.S. corporate headquarters in Denver to record revenue from the purported contracts.

The DOJ said Kostelecky also assured management that the associated revenue was collectable “when he knew that such contracts either did not exist or that the associated revenue was not collectable.”

The DOJ said when the fraud was exposed at the end of 2012, the company’s shares lost nearly $1 billion in value.

The impact on the company’s share price forced Poseidon into bankruptcy.

The indictment alleges that Kostelecky orchestrated the scheme in order to inflate the value of the company’s stock price and to “enrich himself through the continued receipt of compensation and appreciation of his own stock and stock options.”

According to the Bismark Tribune, Kostelecky pleaded not guilty to all charges during a hearing before Magistrate Judge Charles Miller on Friday.

Kostelecky was released under the conditions that he surrender his passport and stay in North Dakota and Montana.

A trial date has been scheduled for March 7 before U.S. District Judge Daniel Hovland, the Bismark Tribune added.

“The defendant is charged with a $100 million fraud that led to the collapse of an entire company and harm to thousands of individual investors,” Assistant Attorney General Caldwell said in a statement.

In February 2015, Kostelecky agreed to settle charges brought by the U.S. Securities and Exchange Commission related to the fraudulent revenue reporting scheme.

Kostelecky paid a $75,000 penalty and was barred from serving as an officer or director of a U.S. publicly-traded company.

As part of the settlement, Kostelecky did not admit or deny the SEC’s allegations.

The SEC’s action was filed in conjunction with an enforcement proceeding by the Alberta Securities Commission against Poseidon’s senior management, including Kostelecky.


  1. Actually Kostelecky was only the front man to the fraud. The organizers of the fraud were based in Calgary under a company originally named Open Range.
    In November, 2011, Poseidon Concepts was spun out of the original company and launched as a separate entity. This resulted in the management and BOD of Open Range making a killing by cashing in on the options that they issued to themselves only 6 months earlier. On the other end of the spectrum, a large short position occurred almost overnight due to the fact that the people in the know shorted the stock almost from day one after the spinout.
    What the US Department of Justice now needs to do is to look at when the officers at Open Range began to sell their own holdings in Poseidon and exactly when they began to short their own former company’s stock.
    What has also been brought out are the shady dealings with the U.S. accounting and operations departments for Poseidon in located in Denver. Employees working in that office actually believed that Poseidon was no more than a Pump and Dump scam!

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