(HedgeCo.Net) The Securities and Exchange Commission today charged two Tennessee men and an accomplice in Fort Lauderdale with allegedly defrauding investors they lured by false promises of high returns from an oil drilling investment opportunity.
According to the SEC’s complaint filed in federal court in Savannah, Georgia, David R. Greenlee and David A. Stewart Jr. orchestrated the $15 million scheme by recruiting and controlling a network of salesmen who offered and sold investors a stake in various companies purportedly using enhanced oil recovery techniques like fracking to extract and sell oil from wells in Kansas, Oklahoma, and Texas. Investors were allegedly promised profits of 15 to 55 percent per year for decades.
The SEC alleges that Greenlee and Stewart weren’t registered to sell investments and used fake names like “Dave Johnson” when speaking to investors in order to hide their past criminal records, and they diverted nearly two-thirds of the money raised from investors to pay themselves and their salesmen as well as advertise for new investors. According to the SEC’s complaint, minimal funds were used for oil production at just a few of the wells in order to create the appearance of oil production and dupe investors who wanted to see activity in-person.
The SEC’s complaint further alleges that Richard “Ric” P. Underwood helped Greenlee and Stewart draft false offering brochures, and he oversaw a boiler room sales team of telemarketers in Florida as they solicited investors nationwide.
“As alleged in our complaint, misleading brochures and radio advertisements lured investors into believing they could strike it rich by investing in these oil drilling opportunities. Unbeknownst to the investors, most of their money was being used for other purposes,” said Walter Jospin, Director of the SEC’s Atlanta Regional Office.
The SEC has previously alerted investors about the risks and possible fraudulent activity involved in private offerings of securities for oil-and-gas ventures. The SEC also encourages investors to check the backgrounds of people selling investments by using the SEC’s investor.gov website to quickly identify whether they are registered professionals and confirm their identity.
In a parallel action, the U.S. Attorney’s Office for the Southern District of Georgia today announced criminal charges against Greenlee, Stewart, and Underwood.
The SEC’s complaint charges Greenlee, Stewart, and Underwood with violations of the antifraud provisions of the federal securities laws. The SEC seeks the disgorgement of ill-gotten gains plus interest and penalties as well as injunctions.