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HOUSTON — Energy XXI says it has learned its CEO John Schiller borrowed funds from acquaintances and some of the company’s vendors and received a personal loan from a member of the company’s board before the director’s appointment.

The Houston oil producer said earlier this week its board is reviewing results of an internal investigation into the loans but has found Schiller’s dealings in 2007, 2009 and 2014 were not illegal and didn’t impact the company’s financial reporting or statements.

But Schiller’s failure to disclose the personal loans to the board before they were made was not in compliance with the company’s code of business conduct and ethics, Energy XXI Chief Financial Officer Bruce Busmire told investors in a conference call Tuesday.

Public company boards often require top executives to keep their relationships with vendors at an arm’s length to avoid entanglements that work against the company’s financial interests.

“The loans themselves are not necessarily the issue. The issue is the incentive structure those loans can create, ” said Todd Mensing, a lawyer specializing in commercial litigation at Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing in Houston.

“If vendors are doing favors for an executive, it could create the risk the executive may give the vendor more favorable terms and may not put them on an even playing field, ” he said.

Spokesman Greg Smith said the company isn’t commenting further on the matter until the board completes its review of the probe, which was conducted by independent legal counsel and assisted by outside forensic accountants. Schiller in 2005 was one of Energy XXI’s founders, and he has served as chief executive since then.

Energy XXI’s disclosures came as the company reported a net loss of $1.69 billion in its fiscal fourth quarter, which ended June 30, largely because it wrote down the value of its oil and gas properties by $1.85 billion amid cheap energy prices.

The company’s shares have fallen 90 percent since this time last year to a close of $1.05 on the New York Stock Exchange on Wednesday.

In regulatory filings, the company said it had $4.19 billion in total debt in September, with most of its obligations maturing within a decade and a substantial portion due in five years. It expects to have a $367 million interest payment due in fiscal 2016, and last month, it had about $679 million in total liquidity.

During the conference call, Schiller, who is also the company’s chairman and president, said Energy XXI cut several jobs in July, bringing its headcount from about 500 from the time of its merger with EPL Oil & Gas last year to about 260 now.

“We believe that oil prices will eventually rebound, ” Schiller said. “However, we’ve established a culture that is highly focused on efficient use of capital and keeping a strong focus on our cost at the same time.”

CEO John Schiller at the Energy XXI offices in Houston on Sept. 19, 2012. (Dave Rossman/For the Chronicle)

Last year, the company said, Schiller received a personal loan from board member Norman Louie before Louie’s appointment. Previously, Louie was a managing director at an investment firm that owned 6.3 percent of Energy XXI’s shares. Schiller’s loans from last year are still outstanding, the company said.

“In general, companies prefer for their corporate officers to not engage in transactions with vendors or board members because they want to avoid perverse incentives, ” Mensing said, adding that outside dealings between directors and executives could compromise a board’s supervisory role over company managers.

Energy XXI said it is revising its vendor policies “to address any potential conflicts of interest that could arise from Mr. Schiller’s personal loans” and will ban such loans in its business conduct and ethics code. Schiller’s overall executive compensation was $14.5 million in the fiscal year ended June 30, 2014, regulatory filings show.

“It’s fair to say the oil and gas industry is not well loved, ” said Bud Weinstein, an associate director of Southern Methodist University’s Maguire Energy Institute. “In today’s politically charged environment, it’s absolutely critical that oil and gas companies be transparent.”

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