Can you forecast the ending to a story that starts with an attorney and a partnership named Vendetta Royalty Partners (VRP)? Unfortunately, Vendetta was an all too real oil and gas investment scam resulting in major losses for more than 100 investors. Former Austin attorney, Robert Allen Helms, and partner Janniece Kaelin recently pled guilty to multiple counts of fraud.
Helms and Kaelin’s oil and gas Ponzi scheme bilked investors across the U.S. out of tens of millions of dollars. Thanks to Fort Worth SEC investigators, prosecutors from the U.S. Attorney’s Office, the FBI, Secret Service and the Texas State Securities Board, two more scam artists are behind bars.
The Vendetta oil and gas investment scam numbers are frightening.
100 oil and gas investors in 12 states
$30 million invested supposedly to purchase oil and gas royalty interests
$29 million ordered in restitution (not yet collected)
78 months in jail to the two primary wrong doers
More than six years from oil and gas investment to justice
While oil and gas investment fraud is nothing new, the attorney’s involvement is unconscionable. You should be able to rely on oil and gas litigation lawyers to salvage your investment, not to steal your money. Since Helms and Kaelin spent at least $9 million of investor money on themselves, family and friends, and Vendetta Royalty Partners is in receivership, only time will tell if they can make good on the restitution.
Before investing in oil and gas partnerships, consider the following:
Don’t rely exclusively on personal relationships. We’ve all heard, “I’ve got a friend who’s turned me on to a great investment. You can’t believe what they’re making.” Sometimes these deals are legitimate, but no matter the relationship of the parties, do not skip your due diligence. At least one Vendetta investor fell for the childhood friend relationship trick.
If it sounds too good, investigate further. Marketing documents promised to use 99% of $50 million raised to purchase royalty interests. Vendetta investors were told to expect a 150-200% return within several months. Vesta Partners’ investors, were promised regular quarterly distributions with a gross annual target of 15 to 20%. In addition, Vesta’s investor presentation outlined an expected 300 to 500% return in five to seven years. See SEC’s petition.
Check credentials of the major players. Helms and Kaelin, and related companies, had been sued, and Helms did not have the 10 years of oil and gas experience he touted. See SEC press release. At any time during your transaction, you can call upon an oil and gas fraud lawyer to help sort out fact from fiction, and to protect your assets.
Verify credentials of seller. Deven Sellers and Roland Barrera were charged with selling investments without an SEC registration. You can verify brokerage companies’ and individual’s SEC registration through SEC’s Broker Check program.
The Sales Pitch-
Whenever an investor in an oil and gas company contacts us with concerns about his/her lack of return from their investment, nearly every time we hear emotion and embarrassment. Most times the first thing the investors say to us is, “I’m so am upset with myself for believing them, and investing my money (at times their whole retirement savings) in a project which I now know is a scam.” We explain that the salesmen and closers for these companies are very good at convincing people that their investment will result in very high returns, along with significant tax deductions. For example, we have met with an extremely successful Chicago banker who invested $21 million in what turned out to be a fraudulent oil and gas scam. If this banker could be deceived, anyone could be a victim.
In addition, we ask the investor if the salesman or closer made any of the following representations to entice them to invest:
“Exxon is drilling wells right next to our wells.”
“This project is so good that even I invested in it.”
“This investment is a no-brainer.”
“There is only one unit left, and a doctor in Florida just backed out because he is going through a divorce, and I wanted to offer you his unit.”
“These wells are guaranteed to pay you at least a 60% return on your money.”
“Our geologists are very excited with the amount of oil in these wells.”
Perhaps one of the most outrageous sales pitches was made to two of our clients who were former NFL players, when the salesman represented, “That you have a man in the press box.”
These are actual representations made to some of our clients enticing them to invest their money.
PAY BACK TIME…NO, IN A GOOD WAY-
On October 25, 2016 the Securities and Exchange Commission (“SEC”) said that two Fort Worth, Texas men and their company, Southlake Resources scammed oil and gas investors for four years.
The SEC says Southlake Resources, CEO Cody Winters and company vice president Nicholas Hamilton agreed to give back approximately $5.6 million, plus pay $210,000.00 in fines, subject to court approval.
As is typical with these scams the SEC said the company sold investors oil and gas programs falsely stated the amount of production. Investors were told that they would be “partners” with some control of the operations, yet the contracts did not offer any such control. Furthermore, Southlake Resources web sites touts Mr. Winters as having considerable experience in this area and has successfully funded oil and gas programs in several dates.
The SEC tells a different story. The company is only 6 years old; Mr. Winters hired a “phone bank” of cold callers who received commissions on their sales. The commissions were outrageous! Not to our surprise the SEC stated that the company never mentioned to the investors the 30% of funds the company would keep as profit. The company’s production estimates were significantly inflated. This too is the norm with these types of companies.
Perhaps the company’s most powerful hook to get people’s money is stated on their web site: “By developing proven areas with a conservative approach and utilizing today’s highly advanced drilling technologies, risk is minimized.” Not so much for their investors.
If you have any questions on oil and gas scams, please call Mark Alexander, P.C. at (972) 544-06968.
We are here to help.
EXPOSING INVESTMENT FRAUD WITHOUT A TRIAL
There appears to be no end to the frauds committed on the public, whether they involve oil and gas fraud or other investments.
As reported in several media outlets, one of our clients, Sunthenoil, LLC sued Robert Dunlap (“Dunlap”) in Harris County, Texas. Our client had invested a substantial amount of money with Mr. Dunlap. After Sunthenoil hired our firm, we reviewed the controlling documents and quickly realized that this investment was a scam.
Background. In 2012, Dunlap approached the plaintiff and represented that he [Dunlap] was raising funds with the objective of investing them in several businesses which would result in substantial returns for his investors.
During several communications, Dunlap represented that upon receipt of plaintiff’s money – $600,000.00 – he would take action which would lead to a significant return on its investment for the plaintiff. The parties executed a contract to that end. Later, Dunlap represented to plaintiff that additional funds were needed to finalize this transaction. As a result, these parties executed an amendment to their contract. Our client never received a penny from Dunlap.
Result. We won.
Specifically, on May 19, 2017, the Court granted our client’s motion for a summary judgment, and awarded Sunthenoil, LLC $719, 156.27. In other words, we argued that as a result of our pre-trial efforts the Court should award a judgment in favor of our client without the need for an expensive trial. The Court agreed.