FARMINGTON — After a recent court battle over leadership, the new chairman of the Navajo Nation Oil and Gas Company board of directors said the board will fund an independent forensic audit of the company's financial records over what he says are questionable expenditures under former company president and CEO Robert Joe.

The audit report is due July 31.

In a statement released on Monday, Lennard Eltsosie, the board's chairman since January, accused Joe of mismanagement and improper use of company finances that he said have jeopardized the company's fiscal health.

"Since the lawfully constituted board of directors has resumed oversight of the NNOGC's operations and finances after a long court battle, it has discovered numerous instances of unauthorized or otherwise questionable expenditures of NNOGC funds, and will look to independent auditors to determine the extent and magnitude of the problems," Eltsosie wrote in the press release.

Earlier this month, a federal district court in Phoenix, Ariz., declined to hear a case filed by Mel R. Begay, Russell Begaye, Charles Damon and Ken Maryboy — each Navajo Nation Council delegates and acting shareholder representatives for the Navajo Nation Oil and Gas Company — seeking to overturn a Navajo Nation Supreme Court ruling last month that reinstated five board members, including Eltsosie, who were, the court said, improperly removed or terminated.

The legal move garnered a rebuke against the four shareholders by Navajo Nation President Ben Shelly in a July 3 press release. Two of the four, Begaye and Maryboy, are currently running against Shelly for president.

In the release, Shelly wrote that the shareholders' attempt to overturn the Supreme Court ruling had subverted the tribal leadership's authority and "attempted to diminish Navajo sovereignty and the jurisdiction of our judicial system."

Financial reports on the multi-million dollar Navajo-owned company show steady growth under Joe's leadership since he was named CEO by the board in June 2013. The company saw gains of 37 percent for fiscal year 2014, including $156.3 million in total revenue. Total assets for the company grew from $437 million to $458 million.

"I'm particularly proud of our latest financial performance and the significant growth to the company's net income, which demonstrates NNOGC's commitment to managing cost and promoting fiscal responsibility," Joe said in a press release last month before his removal by the board.

Joe, reached by phone on Wednesday, had no comment, citing potential litigation.

Eltsosie — who was himself suspended from the board along with four other board members after a December 21 meeting of the company's shareholders — accuses Joe of questionable expenditures totalling $850,000. Much of it, Eltsosie said, was spent on attorneys hired to assist shareholders' efforts to unseat board members as payback for board criticism of Joe.

"The shareholders meeting in December, at that time we were informed to attend so we did," Eltsosie said. "We all attended at our own expense thinking we would be able to address the shareholders over any accusations and have a chance to respond, but when executive session came out, a decision had been made. Our due process was never given to us."

The shareholder representatives, all of whom are sitting Council delegates serving on standing committees, voted to remove two board members, Diandra Benally and Jennifer Hatathlie, and suspend Mae-Gilene Begay, Nelson Toledo and Eltsosie.

According to court documents, four of the five board members' terms had expired. Begay's term expired nine years prior in December 2004, Toledo's term had expired in March 2009, Hatathlie's term had expired in January 2013 and Eltsosie's term had expired the following month in February 2013.

Despite the shareholders' vote, Eltsosie and four other board members named as defendants in the lawsuit continued to meet.

"We were upset, that's for sure. But we continued to serve as a board," Eltsosie said. "The five of us met and did public notice to the other two members, Shelly appointees, to attend — Frances Totsoni and Perry Shirley."

On January 21, the ousted board members met and voted unanimously to remove Joe on the basis that he had violated certain charter laws and articles and bylaws by not working closely with the board, Eltsosie said.

Begaye, a shareholder representative who was chairman of the group's December meeting, said he doesn't know whose decision makes the least sense — the board's or the Navajo Nation Supreme Court's.

"We felt (the five board members) were clearly outside their authority. The five were removed. That's the authority that (shareholder representatives) have," Begaye said by phone on Thursday. "The Supreme Court decision was really strange. Three things were unusual. The first, it gives the board members authority over the company, which is (for) the Navajo Nation people. The board is higher than the owners. To me, anyway, that's wrong."

Begaye also said that the decision strains the intent of Section 17 of the Indian Reorganization Act under which the corporation is federally chartered by leaving the company open to undue political influence.

Potential corporate liability from the decision also puts the entire Navajo Nation at risk, he said.

"I think our court really needs to revisit this case, get help from lawyers that understand section 17 corporations," Begaye said. "This whole oil and gas struggle can be stopped by one thing, which is the council charter that was approved by the Bureau of Indian Affairs.

"The Navajo Nation Council should fix this as an internal issue. The only way is by getting the charter back to council for a vote. And that's it. Let's not waste another penny on lawyers."

Eltsosie stands by his and the board's actions, including the rehiring of Louis Denetsosie as CEO last month. Denetsosie was the CEO before Joe.

"I believe today we want to bring stability back to the company and also bring harmony back, even though damage is done," Eltsosie said. "Eventually those will be fixed."

James Fenton covers Aztec and Bloomfield for The Daily Times. He can be reached at 505-564-4621 and jfenton@daily-times.com. Follow him @fentondt on Twitter.

Daily Times reporters Noel Lyn Smith and Erny Zah contributed to this story.