We have been short on InterOil Corp. (IOC) for some time now, mainly because we believe that the company exhibits characteristics of a company which has been involved in fraud (See our original post HERE)

Now, it turns out that a company controlled by Phil Mulacek, chief executive officer of InterOil Corp. filed a “bad-faith” federal bankruptcy in December in an attempt to derail a potentially massive civil judgment in a fraud case against him and companies he controls, according to court documents filed in Houston.

Less than a month after the filing, federal Judge Marvin Isgur in Houston ruled that Nikiski Partners—a corporation whose $2 million investment in a used oil refinery gave birth to InterOil, one of Wall St.’s high-flying stocks in 2009—had filed the bankruptcy in “bad faith.”

Two days before filing for bankruptcy, Mulacek, through his holdings in Nikiski Partners, dumped nearly $1.5 million worth of InterOil stock, according to the Canadian Securities Commissions. The insider transaction was filed 40 days after it took place. 

In the bankruptcy filing, Nikiski Partners declared $71.5 million in assets and just $5,751 in debts, but argued it needed bankruptcy protection so the 5-year-old civil case could be swept into federal bankruptcy court to avoid a judgment that would be “devastating,” as Mulacek termed it, to InterOil stock–Nikiski’s only asset.

About 20 of the original investors in Nikiski Partners are plaintiffs in the lawsuit (Todd Peters, et al. v. Phillipe Mulacek, et al.), and they allege that Mulacek diluted their investment shares by falsifying records, giving away for free 25% of InterOil stock to a “shadowy” Bahamian company secretly owned by Mulacek’s grandfather, and ignoring “crippling conflicts of interest” in order to benefit family, friends and himself.

In court filings, the defendants in the suits—Mulacek and the companies he controls, including InterOil—deny the allegations in the Peters lawsuit, calling them frivolous and arguing, among other things, that the statue of limitations has run out on the claims.

The Peters plaintiffs are asking between $275 million and $1.3 billion in damages. The case, which makes derivative or stockholder claims, is scheduled to go to trial in early May.