Catsimatidis Explains SemGroup Bankruptcy

By Dan Bewley for NEWS 9

TULSA, Oklahoma -- The man who wants to take over SemGroup told financial expert Steve Forbes he knows why the Tulsa-based energy company went bankrupt.

But John Catsimatidis isn't blaming the leaders of SemGroup.

The New York billionaire sat down with Steve Forbes for a 16-minute interview posted on Forbes.com.

For 3 1/2 minutes the men had Tulsa on their minds.

Catsimatidis wants to run Tulsa-based SemGroup. The energy giant went bankrupt last summer after it couldn't pay its creditors for money owed on oil.

Catsimatidis told Forbes his quest to take over SemGroup has discovered not only why the company went bankrupt but also why the price of oil skyrocketed last spring.

"It wasn't the oil companies that raised the price of oil," Catsimatidis said. Instead, he says it's based on Wall Street tactic "short selling."

As the price of oil continued to rise early last year, Catsimatidis said, SemGroup thought it was too high and that the price would drop.

So SemGroup bought oil on credit, hoping the price would fall before they actually had to pay. But Catsimatidis said others on Wall Street got wind of what they were doing and worked to raise the price of oil, eventually to $147 a barrel.

"It was certain hedge funds that were playing ping-pong with each other, raising it and squeezing this company that had the shorts," he said.

Tulsa financial consultant Jake Dollarhide watched the Forbes interview. He agrees that SemGroup was short selling oil and says the company made bad decisions that led to its bankruptcy.

But what about those who knew SemGroup's game and muscled up the price of oil forcing SemGroup out of the market?

"There is a zero percent chance that they would want anyone to know what their position is," Dollarhide said.

Those who knew their position could take advantage of that information, he said.

"Ethically it would be wrong," Dollarhide said. "Whether it's legally or otherwise, I'm not exactly sure."

Dollarhide said it's not uncommon for energy companies to short sell but SemGroup didn't have the proper controls inside the company to stop before it was too late.

Watch Forbes' interview with Catsimatidis.