CONTROVERSIAL RESOURCES company and would-be PNG gas developer, InterOil, is embroiled in a potentially damaging lawsuit in the US.

New York-based lawyer, Howard Sirota, has announced he is investigating InterOil, whose share price plunged following a press article detailing apparent discrepancies between its public regulatory filings and court transcripts.

InterOil’s CEO, Phil Mulacek told a federal bankruptcy judge in Texas that the company faced a “devastating” impact from a pending lawsuit against another firm he controlled.

The bankruptcy judge dismissed the deposition as having been filed “in bad faith”.

There was a huge sell down of InterOil stock as rumours of apparent discrepancies began to circulate ahead of public disclosure.

Mr Sirota said he had been monitoring InterOil for the past year after learning that known securities law violators in the US and Canada were involved in selling InterOil securities.

“Heavy recent insider selling appears with hindsight to have been prescient, and suspicious,” Sirota said.

In a statement released in Port Moresby, InterOil said it believed the allegations had been raised in an attempt to divert attention from the company’s successful operations.

InterOil said the article was timed to benefit short selling activities and company policy was “to not provide commentary on ongoing litigation.”

The statement said InterOil was not involved in the US filing.

Texas-based InterOil operates a refinery at Napa Napa processing oil for domestic consumption in PNG. But it has proposed a controversial $6 billion liquefied natural gas project with first production targeted for 2014.

Prime Minister Somare and Energy Minister William Duma support the project, but the PNG cabinet has been divided on the matter, with a key opponent being Sir Michael’s son, Arthur, Minister for Public Enterprises and chairman of the ministerial gas committee.

A recent US analysis of InterOil’s PNG resources concluded that:

• Far from being a "frontier" drilling site, InterOil's sites in PNG were explored and abandoned years ago by other energy companies.

• The type of rock at the InterOil sites produces an enormous initial pressure of gas but the initial pressure is not sustained.

• The renewed confidence investors have in InterOil may be misplaced.

• Some of InterOil's descriptions of the promise of the new site, Antelope 2, don't add up and critical flow tests have not yet been conducted.

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