SEC Charges Principals of a Texas Oil and Gas Company with Conducting a Fraudulent Offering of Preferred Stock and Limited Partnership Interests, and Charges Seller with Acting as an Unregistered Broker
Securities and Exchange Commission v. Paul R. Downey, et al., Civil Action No. 1:14-CV-00185-C (N.D. Tex. Abilene Division)
Fort Lauderdale, Boca Raton, Deefrield Beach and Pompano Beach, Florida Oil and Gas Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney:
Securities and Exchange Commission v. Guardian Oil & Gas, Inc., Guardian Oil and Natural Gas, Inc., and Rick D. Mullins, Civil Action No. 3:14-cv-01533-L (N.D. Tx.)
SEC Charges Texas Resident and His Companies for Selling Fraudulent Oil and Gas Investments
Fort Lauderdale, Hollywood, Davie, Pompano Beach, Deerfield Beach, Lighthouse Point and Boca Raton, Florida Oil and Gas Fraud and Sale of Unregistered Securities Litigation and Arbitration Attorney:
Securities and Exchange Commission v. Jason A Halek, Joshua D. Spivey, Patrick J. Booths and Steven J. Little, Civil Action No. 3:14-cv-01106-D (NDTX) (March 28, 2014)
SEC Charges Four Texas Residents for Selling Fradulent Oil and Gas Investments
South Florida Oil and Gas Suitability, Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney.
The Financial Industry Regulatory Authority, Inc. (FINRA) is a self-regulatory authority assigned the responsibility, by the Securities and Exchange Commission, to license, regulate and discipline securities broker/dealers and their employees, including account executives. In the event that FINRA elects to institute an enforcement action, firms and licensed individuals have the responsibility to reflect such action on their U-4 and/or U-5 filings, which can be viewed on the FINRA website under the broker-check section of the site or by viewing the monthly disciplinary information also provided on the FINRA site.
The monthly disciplinary information is referenced on the FINRA site generally in alphabetical order. This post relates to the following company or individuals. If the reader would like to review the entire FINRA release or the broker-check information concerning this matter, you can follow these highlighted links:
Oil and Gas Limited Partnerships and Oil and Gas Offering Fraud, Misrepresentation and Mismanagement – South Florida, including Fort Lauderdale, Pompano Beach, Deerfiled Beach, Boca Raton, Boynton Beach, Delray Beach, Lake Worth and West Palm Beach, Litigation and Arbitration Attorney
An oil and gas limited partnership is legally set up using the same format as any type of limited partnership. It is created by filing articles of limited partnership or its equivalent in the state of its domicile. For example, Florida Statute, Chapter 620 governs the legal requirements that must be followed in the formation, operation and dissolution of the limited partnership, whether it is engaged in the oil and gas business or not. This post is limited to a general discussion of an oil and gas limited partnership.
An oil and gas limited partnership is made up of one or more general partners and one or more limited partners. Generally, it is structured to find, extract, and market commercial quantities of oil and natural gas. These types of investments are usually offered by prospectus, in the case of a public offering, and by a private offering memorandum, in the case of a private offering of securities. In either offering document, it is important to consider, among other things, who is making the offering, which brings to the forefront such items as experience, prior success and financial stability. The next important section of the document relates to the “risk” factor section of the document. Usually, in bold type there is a phrase such as “this offering involves a high degree of risk and should be considered only by those investors who can stand to lose their entire investment.”
South Florida Unregistered Securities, Joint Venture and Securities Misrepresentation and Litigation Attorney:
Securities and Exchange Commission v. Arcturus Corporation, et al., Civil Action No. Civ. Action No. 3:13-cv-04861-K (N.D. Tex., Dallas Division, filed December 12, 2013)
SEC Charges Texas Oil and Gas Promoters for Securities Fraud
Florida Oil and Gas Fruad, Misrepresentation and Ponzi Scheme Litigation and Arbitration Attorney:
The Securities and Exchange Commission recently announced charges and an emergency asset freeze against the perpetrators of a Texas-based Ponzi scheme involving purported investments in oil and gas projects.
The SEC alleges that Robert A. Helms and Janniece S. Kaelin, who work out of an office in Austin, misled investors about their experience in the oil and gas industry while raising nearly $18 million for supposed purchases of oil and gas royalty interests. Despite representations that nearly all of the money they raised would be used to make oil and gas investments, Helms and Kaelin actually used only a fraction of the offering proceeds for that purpose. Instead, the vast majority of investor funds were used to make Ponzi payments and cover various personal and business expenses.
Securities and Exchange Commission v. Ronald E. Walblay, Energy Securities, Inc., and RyHolland Fielder, Inc., Civil Action No. 9:13-cv-80978 (S.D. FL.)
The Securities and Exchange Commission recently charged the owner of two Florida-based companies with defrauding investors in five oil and gas offerings by misrepresenting such key facts as the amount of available reserves, the use of investor funds, and his past success in the oil and gas industry.
The SEC alleges that Ronald Walblay of Delray Beach, Fla., perpetrated the fraud through RyHolland Fielder Inc., which has managed a number of oil and gas limited partnerships, and his former brokerage firm Energy Securities Inc., which sold the partnerships’ interests – none of which were registered with the SEC as required under the federal securities laws. Walblay raised at least $12 million from more than 195 U.S. and foreign investors by falsely touting in sales brochures that RyHolland Fielder offered millions of barrels of oil and natural gas reserves. Walblay also falsely touted in offering materials that investors could receive potential returns of up to 2,270 percent. Meanwhile, not a single investor had ever profited from any of the partnerships, and Walblay used a greater percentage of investor funds than was disclosed to pay salaries and marketing expenses for investor conferences.
The Securities and Exchange Commission (Commission) recently announced that it barred Johnny Clifton, who was president, chief executive officer, and principal of MPG Financial, LLC, a former Commission-registered broker-dealer, from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, entered a cease-and-desist order, and imposed a $150,000 third-tier civil money penalty. The Commission found that Clifton violated Sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933 because he made material misrepresentations and omissions in the offer and sale of oil-and-gas limited partnership interests, and through those misrepresentations, omissions, and other misconduct he engaged in a fraudulent scheme and course of business that operated as a fraud on prospective investors. The Commission also found that Clifton violated Section 15(b) of the Securities Exchange Act of 1934 because he failed reasonably to supervise at least one MPG Financial sales representative with a view towards detecting and preventing the sales representative’s securities law violations. Concluding that it was in the public interest to impose a full collateral bar on Clifton, the Commission stated that “[h]is repeated and egregious misconduct evidences an unfitness to participate in the securities industry that goes beyond the professional capacity in which he was acting” and “demonstrates his unfitness to participate in the securities industry in any capacity.”
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Securities and Exchange Commission Sues Texas Oil and Gas Promoters for Securities Fraud
On June 28, 2013, the Commission charged Matthew Madison and Dwight McGhee, and their Irving, Texas based company Infinity Exploration, LLC, with conducting a fraudulent offering of oil and gas related investments. The Commission’s complaint alleges that, between March and October 2008, Madison and McGhee raised over $2 million from at least 40 investors from the fraudulent offer and sale of interests in Infinity’s two oil and gas joint ventures. Infinity’s offering materials misled investors into believing that Infinity’s ventures would own the leases and control drilling operations. Indeed, Infinity’s communications with investors were peppered with references to as “our wells” and “our crew.” In reality, Infinity’s ventures did not have direct interests in any oil and gas leases and no direct involvement in operation of any leases. The complaint alleges that Madison and McGhee concealed this fact from investors. The complaint further alleges that the defendants’ offering materials falsely described Madison as experienced and successful in the oil and gas industry and failed to disclose McGhee’s 2007 federal felony conviction.
The complaint alleges that Infinity, Madison, McGhee violated Section 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and civil penalties against each of the defendants. [SEC v. Infinity Exploration, et al., Civ. Action No. 3:13-cv-2499-L, USDC, NDTX (Dallas Division, June 28, 2013)].
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