Oil and Gas Investment Scam
Brandon Davis, named one of the “Top 40 under 40” by the Denver Business Journal, recently lost an eight-year battle representing himself, Heartland Energy Development Corporation (HEDC) and others in a Denver District Court. The Colorado Securities Commissioner plans to ask the court to order Defendants to pay $65 million restitution for an oil and gas investment scam. Davis plans to appeal the injunction against HEI Resources and HEDC.
The 39 page court order, including 18 pages of findings of fact, is available in redacted form. The court held that the Defendants, including HEI, HEDC, Brandon Davis, Charles Reed Cagle, James Pollak, and John Shiffner, were permanently enjoined from selling securities in Colorado. In addition to securities registration and licensing violations, the oil and gas fraud claims impact investors throughout Colorado and across the U.S.
Failure to Disclose a Prior Injunction
One of the key players in the scheme was Joe Kinlaw. Kinlaw was no stranger to the SEC. In 1995, Kinlaw settled a suit with the SEC resulting in an injunction against him for violating anti-fraud and SEC regulations. In the case at hand, Defendants argued multiple defenses, including Kinlaw’s lack of authority. The Court ruled in favor of the investors:
“Having determined that Kinlaw was a control person at HEI and HEDC, the Court finds the Defendants omitted information that a reasonable investor would consider important in making a decision about whether to invest. Specifically the Court finds that Kinlaw’s role and his prior SEC injunction are material information that Defendants intentionally omitted with intent to defraud investors. The materiality of the information related to Kinlaw is apparent through several of the investors’ testimony.”
Risk Disclosure. Failure to Mention 27,000 Dry Holes
Plaintiff convinced the court that Defendants failure to disclose information about dry holes was investor fraud.
“Plaintiff’s oil and gas expert, Timothy Berge, testified according to the State of Texas database there are a total of 27,000 dry holes in the area depicted on HEI and HEDC’s preview maps; Mr. Berge did not distinguish the dry holes based on formation or depth. The Court also notes that Mr. Berge did not narrow the total number of dry holes to the relevant time frame of the Colorado ventures. However, the total number is not as important as the fact that the number of dry holes was available to Defendants and was not disclosed.”
‘’…[T]he Court finds that Plaintiff proved that Defendants materially misled and intentionally omitted material information regarding dry holes with intent to deceive investors…”
Sometimes it’s difficult to determine what’s riskier: working on an oil rig or investing in oil and gas. Workers in the oil patch know how to uncover hidden dangers. Before you invest in an oil and gas venture, consider consulting an oil and gas investment scam lawyer for assistance in minimizing your risk.
Experienced Oil and Gas Investment Scam Attorney
When you need an experienced oil and gas litigation lawyer, we are here to help.
Call or email Mark A. Alexander. P.C. today at (972) 544-6968.
