The U.S. Securities and Exchange Commission informed the company, Fairmount Santrol now called Covia Holdings Corp., that it was considering enforcement action.
Fairmount was selling specially manufactured sand, including one product that was touted as “revolutionary.” The company’s special sand was never a dominant product, but in a competitive industry its marketing campaign drew attention to Fairmount Santrol. The company merged with another to form Covia in June 2018. It became the biggest frack sand producer in the country. Houston investment bank Tudor Pickering Holt & Co. called the new company the “800-pound gorilla in the sand game.”
Some of its success, however, may have been based on a lie, according to interviews with former employees, multiple whistle blower complaints, and other court documents. They tell the story of Fairmount Santrol scientists running tests on the proprietary sand that found that some of the company’s most-hyped products didn’t perform all that much better than the stuff that came straight from the ground. One whistleblower said in 2017 in a complaint to the SEC. “This fraud is particularly brazen because the company aggressively markets scientific testing to create the illusion of proven performance and reliability,” The next year another whistleblower blamed executives who “wholly adopted and reinforced a culture of covering up its lies without regard to who might suffer.”
Covia has suffered especially because many drillers grew tired of fancy sand and decided the cheaper, local type worked just fine. In June 2020, Covia filed for bankruptcy protection.