Texas Oil Investment Fraud Lawyer Represents Investors Who Have Lost Significant Investments and Investors Who Have Original Information of Large Oil Investment Fraud Schemes by Texas Oil Investment Fraud Lawyer

Texas Oil Investment Fraud Lawyer Jason S. Coomer helps investors who have lost significant investments fraud oil investment fraud as well as investors and oil professionals who have original information of significant oil investment fraud schemes.  If you have lost a significant investment in an oil investment fraud scheme or have original evidence of an oil fraud scheme, please feel free to contact Texas Oil Investment Fraud Lawyer, Jason S. Coomer or use our contact submission form.

The Number of Oil Investment Fraud Cases Have Increased Substantially Over the Last Decade

The number of fraud cases related to private securities offerings for oil and gas ventures has increased over the last few years. From few in 2005 and 2006, the number of SEC cases has averaged more than 20 per year since.   state securities regulators have experienced a similar increase in cases over the past five years. All investing involves varying degrees of risk.  Investing in private offerings, however, carries unique risks, and private oil and gas offerings have additional risks to consider. 

These Oil Investment Fraud Lawsuits can include direct actions against brokers and other defendants as well as the basis for Whistleblower Reward Bounty Actions or Whistleblower Reward Federal False Claims Act Lawsuits. 

SEC Charges “Frack Master” With Running an $80 Million Oil and Gas Fraud
2016-130
Washington D.C., June 24, 2016 —

The Securities and Exchange Commission today charged four companies and eight individuals in an $80 million oil and gas fraud orchestrated by a Dallas man who calls himself the “Frack Master” for his purported expertise in hydraulic fracturing.

The SEC charged Chris Faulkner – the CEO of Breitling Energy Corporation (BECC) and recurring guest on CNBC, CNN International, Fox Business News, and the BBC to discuss oil-and-gas topics – with disseminating false and misleading offering materials, misappropriating millions of dollars of investor funds and attempting to manipulate BECC’s stock. The SEC also charged BECC and suspended trading in BECC’s securities for 10 business days.

According to the SEC’s complaint, Faulkner started the scheme dating back to at least 2011 through privately-held Breitling Oil and Gas Corporation (BOG), which offered and sold “turnkey” oil and gas working interests.  Faulkner ran most of BOG’s operations, while co-owners Parker Hallam and Michael Miller oversaw the sales process.  The SEC alleged that BOG’s offering materials contained false statements and omissions about Faulkner’s experience, estimates for drilling costs, and how investor funds would be used.  The SEC further alleged that the offering materials included reports by licensed geologist Joseph Simo that included baseless production projections and failed to disclose his affiliation with BOG.  The scheme evolved to include BOG’s successor, BECC, a reporting company with shares traded on OTC Link and two affiliated entities, Crude Energy LLC and later Patriot Energy Inc. Faulkner allegedly established Crude and Patriot to deceive investors through offerings similar to those conducted by BOG.  The complaint alleges that even though investors thought Hallam and Miller ran these two entities, Faulkner directed much of Crude’s and Patriot’s operations. The SEC alleged that BOG, Crude and Patriot raised more than $80 million from investors as part of these deceptive offerings.

The SEC alleged that Faulkner misappropriated at least $30 million of investor funds for personal expenses, including lavish meals and entertainment, international travel, cars, jewelry, gentlemen’s clubs, and personal escorts.  The SEC alleged that Beth Handkins, a former employee of Crude and Patriot, Rick Hoover, the former CFO of BECC, and Jeremy Wagers, BECC’s general counsel and COO, all played essential roles in assisting Faulkner in the alleged fraud.

“Chris Faulkner allegedly orchestrated a sophisticated and multilayered scheme using BECC and its affiliated entities as a conduit to access millions of investor dollars,” said Shamoil T. Shipchandler, Regional Director of the SEC's Fort Worth Regional office. “The financing for Faulkner’s opulent lifestyle came directly at the expense of unwitting investors across the country.”

The SEC also alleged that Faulkner, Wagers and Hoover misrepresented various aspects of BECC’s operations in BECC’s public reports, including statements about the company’s financial performance, and its relationship to Crude and Patriot.  In addition, while in the middle of perpetrating this fraud on investors, Faulkner engaged in a scheme to manipulate the price of BECC’s stock, with the assistance of former BECC employee Gilbert Steedley, by placing trades at the end of the day to “mark the close” of the stock.

The SEC charged Faulkner, Hallam, Miller, Simo, Handkins, BOG, Crude, and Patriot with violations of the antifraud provisions for their respective roles in the offering frauds, and charged BECC, Faulkner, Wagers, and Hoover with violations of the antifraud, reporting, recordkeeping and internal controls provisions of the federal securities laws.  The SEC also charged Faulkner, Wagers, and Hoover with lying to auditors, and charged Faulkner and Hoover with violating certification provisions of the Sarbanes-Oxley Act. Faulkner faces additional fraud charges based on his alleged manipulation of Breitling Energy’s stock, and the SEC charged Steedley was charged with aiding and abetting Faulkner’s manipulative conduct.

Miller, Handkins and Steedley have offered to settle the Commission’s action against them on a bifurcated basis.  Each will agree to full injunctive relief, including a conduct-based injunction for Miller, and will have the Court determine the appropriate disgorgement and civil penalties at a later date upon motion by the Commission.

The SEC’s investigation, which is continuing, has been conducted by Scott Mascianica, Ty Martinez and Melvin Warren and supervised by Eric Werner and David Peavler. The SEC’s litigation will be led by B. David Fraser and Mr. Mascianica.

Securities and Exchange Commission v. Hartmut Theodor Rose and James Patrick Reedy, Civ. Action No. 3:09-cv-00857-G (United States District Court for the Northern District of Texas, Dallas Division)
 

On May 7, 2009, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court in Dallas against Hartmut T. "Hardy" Rose and James Patrick Reedy for their fraudulent offers and sales of oil and gas interests. The Commission's complaint alleges that, between August 2003 and August 2005, Rose and Reedy, acting through Geo Companies of North America, Inc., Geo Natural Resources, Inc. and Geo Securities, Inc., a broker-dealer registered with the Commission (collectively "Geo"), raised more than $10 million from over 300 investors nationwide. The complaint further alleges that Rose and Reedy made numerous material false and misleading representations and omissions in connection with the offers and sales of the joint venture interests. Among other things, the complaint charges that Reedy touted Geo's successful track record, when, in reality, Geo had very few wells that produced in commercial quantities. Additionally, the Commission alleges that, in several instances, Rose and Reedy solicited investors for funds to complete wells, without disclosing that Geo's geologists advised against completing them. Finally, the complaint alleges that Rose and Reedy solicited investors for additional funds by falsely portraying prior wells as "successful," when the wells were dry holes.

The complaint alleges that Rose and Reedy violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) 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 Rose and Reedy.

Without admitting or denying the Commission's allegations, Rose has consented to a permanent injunction against future violations of the registration and antifraud provisions. Rose also agreed to pay disgorgement of $58,914, prejudgment interest of $22,749.29 and a $50,000 civil penalty. Litigation continues against Reedy.

Oil Company Under Payment of Royalties False Claims Act Lawsuit, Oil Company Oil Royalty Accounting Fraud Whistleblower Lawsuit, Oil Company Fraud Accountant Whistleblower Qui Tam Lawsuit, Petroleum Accountant Fraud Whistleblower Lawsuit, Texas Oil Company Production Fraud Lawsuit, and Texas Operator Production Fraud Lawsuit Information by Oil Company Accounting Fraud Lawyer, Petroleum Accountant Whistleblower Lawyer, and Oil Company Accounting Fraud Qui Tam Lawyer Jason S. Coomer

One area of Oil Company Accounting Fraud Whistleblower cases are the Oil Company Fraud Qui Tam Lawsuits, Oil Company Federal False Claims Act Whistleblower Lawsuits, and Oil Company Fraud Lawsuits under State False Claims Act Statutes.  These traditional oil company accounting fraud whistleblower cases have been common over the last twenty years and unusually are based on the Oil Company underpaying royalties and/or violating federal statutes.  Below are some of these lawsuits where the United States Department of Justice has forced oil companies to pay hundreds of millions of dollars based on qui tam whistleblower lawsuits.

PHILLIPS PETROLEUM PAYS $8 MILLION TO RESOLVE OIL ROYALTY CLAIMS MORE THAN $415 MILLION PAID TO DATE BY 15 COMPANIES

WASHINGTON, D.C. - Phillips Petroleum Company has agreed to pay $8 million to resolve claims under the False Claims Act that the company underpaid royalties due for oil produced on federal and Indian leases from January 1, 1988 to December 31, 1998, the Justice Department announced today.

Federal leases are administered by the Minerals Management Service of the Department of the Interior. Each month, oil companies are required to report the amount of oil produced and the value of the oil produced on federal and Indian leases. The companies pay royalties based upon the value of the oil they report.

J. Benjamin Johnson, Jr., and John Martinek filed a complaint in the U.S. District Court in Lufkin, Texas against the Bartlesville, Oklahoma company on behalf of the United States under the qui tam or whistleblower provisions of the False Claims Act. The two will share in the proceeds of the settlement.

Prior to today's agreement with Phillips, the Justice Department had reached settlements of more than $409 million with14 other oil companies to resolve claims of underpayment of royalties. Previously, the Department had reached agreements with Mobil Oil, $45 million;

Oxy USA, Inc., $7.3 million; Chevron, $95 million; Conoco, $26 million; BP Amoco,

$32 million; Texaco, $43 million; Pennzoil, $11.9 million; UPRC, $2.7 million; Sun Oil Company, $200,000; Exxon Mobil for $7 million; Shell Oil, $110 million; Burlington Resources, $8.5 million; Marathon, $7.7 million and Kerr-McGee, $13 million.

The investigation and settlement of the False Claims Act proceedings were jointly handled by the Office of the United States Attorney for the Eastern District of Texas and the Civil Division of the Department of Justice, with the assistance of the Department of the Interior's Office of Inspector General and the Minerals Management Service.

The case is entitled US ex rel. Johnson v. Shell Oil Co., Civil No. 9:96CV66 (E.D. Texas).