Former financial executives with Calgary-based explorer Penn West Petroleum Inc., now Obsidian Energy Ltd., are facing charges that they helped engineer a multi-year scheme to defraud investors.

The U.S. Securities and Exchange Commission (SEC) last year alleged that former CFO Todd Takeyasu, ex-vice president of accounting/reporting Jeffery Curran and Waldemar Grab, former operations controller, manipulated operating expenses by fraudulently moving hundreds of millions of dollars from operating expense accounts to capital expenditure accounts.

The alleged fraudulent movement caused Penn West to artificially reduce its operating costs by as much as 20% in certain periods, which falsely improved reported metrics for oil extraction efficiency and profitability, according to the SEC.

Penn West was one of Canada’s largest oil producers at the time.

The manipulation, a practice referred to as “reclass to capital,” was done to lower a key publicly reported metric concerning the cost of oil extraction and processing needed to sell a barrel of oil, SEC alleges.

Penn West filed “materially false and misleading” annual reports for 2012 and 2013 and for 1Q2014, according to the SEC. In September 2014, the company restated more than two years of financial statements, and in 2016, it paid about C$53 million ($41 million) to settle shareholder litigation.

About a year ago, Penn West formally changed its name to Obsidian. It also agreed to pay an $8.5 million fine to settle related charges, without admitting or denying wrongdoing.

Grab, who is cooperating with the investigation, last year settled with the SEC. Still facing charges are Takeyasu and Curran.

In an order issued on Monday, U.S. District Judge Judge Gregory Woods of the Southern District of New York said last year’s SEC complaint raised a “strong inference” that Takeyasu and Curran also intended to defraud investors (SEC vs Takeyasu et al, No. 17-04866).

Without ruling on the merits of the case, Woods wrote in his 42-page decision that “in light of all of the facts alleged, the SEC sufficiently pleads that Takeyasu and Curran were at least aware of improper accounting practices and did nothing to correct them or to otherwise ensure the strength of Penn West’s internal controls.”

The SEC investigation found no personal misconduct by Penn West’s two former CEOs, Murray Nunns and David Roberts, who reimbursed the company for cash bonuses and stock awards they received during the period when the company allegedly committed accounting violations. Those amounts were about $262,451 for Nunns and $22,290 for Roberts.

Penn West at one time was among Canada’s oil and gas elite, operating throughout the Western Canadian Sedimentary Basin on a land base encompassing around six million acres. However, downsizing in 2013 led the producer to sell many of its assets.