Investor Lawyers Blog
On August 11, 2017, the Securities and Exchange Commission (“SEC”) filed a Complaint against Defendants David R. Greenlee, David A. Stewart, Jr., and Richard “Ric” P. Underwood, in connection with various oil limited partnerships and joint ventures. Specifically, the SEC has alleged that the Defendants engaged in a fraudulent scheme whereby at least $15 million in limited partnership and joint venture interests were sold to more than 150 investors.
According to the SEC Complaint, Defendants Greenlee and Stewart operated the alleged scheme through two Tennessee corporations, Southern Energy Group, Inc. (“SEG”) and Black Gold Resources, Inc. (“BGR”), which later changed its name to Tennstar Energy, Inc. (“Tennstar”). Further, the SEC Complaint alleges that Defendant Underwood substantially assisted in facilitating and perpetuating the scheme by acting as principal salesman, assisting in drafting false offering materials given to potential investors, and overseeing the operations of a ‘boiler room’ sales team that solicited the oil investments.
In soliciting funds from prospective investors, the SEC has alleged that the Defendants represented that the limited partnerships and joint ventures would use investor funds in order to acquire “working interests” in various oil wells, as well as employ enhanced oil recovery techniques, such as fracking, to develop and recover oil from the wells. Moreover, the SEC has alleged that the Defendants represented to investors that the entities would sell enough oil to earn investors returns ranging from 15-55%, or more, per year “for decades.”
Essentially, the SEC has alleged that these representations were all false. Specifically, the Complaint alleges that although Defendants Greenlee and Stewart used a portion of investor money to produce oil from several wells that they controlled, they used nearly two-thirds of the roughly $15 million raised for their own benefit, including for such uses as paying salesmen (including Underwood) and advertising for new investors to participate in the scheme. As alleged in the SEC Complaint, on at least one occasion the working interests sold by Defendants in an oil well exceeded 100% of that particular well.
According to Walter Jospin, Director of the SEC’s Atlanta Regional Office: “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 these investors, most of their money was allegedly being used for other purposes.” In a parallel action, the U.S. Attorney’s Office for the Southern District of Georgia has initiated criminal proceedings against Greenlee, Stewart, and Underwood.
The attorneys at Law Office of Christopher J. Gray, P.C. have signficant experience in representing investors who have suffered losses due to misconduct by unscrupulous brokers, financial advisors, as well as unlicensed individuals selling securities and investment products. Depending on the facts and circumstances, investors may be able to recover their losses in FINRA arbitration, and in some instances, litigation. Investors who believe they may have a claim may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.