On Friday, August 11, 2017, the Securities and Exchange Commission announced that it had charged three men in an alleged attempt to defraud investors by luring them with false promises of high returns. Two Tennessee men and an accomplice in Fort Lauderdale were charged for allegedly promising high returns from an oil drilling investment opportunity.
The SEC’s complaint was filed in a Savannah, Georgia federal court. David A. Stewart Jr. and David R. Greenlee are accused of orchestrating the $15 million scheme by recruiting and managing a network of salesman responsible for offering and selling a stake in several companies. The companies were supposedly using an enhanced oil recovery technique similar to fracking to extract oil from wells in Oklahoma, Texas and Kansas.
It is alleged that investors were promised profits of 15 to 55 percent per year for decades. The SEC alleges that the two men were not registered to sell investments and used false names when speaking with investors in an attempt to conceal their prior criminal records. The two men are accused of diverting nearly two-thirds of the money to pay themselves and to advertise in an attempt to attract new investors.
The SEC’s complaint claims that minimal investment was used for oil production in hopes of creating the appearance of oil production and to dupe investors that wanted to see the operation in person. Simultaneously, a Fort Lauderdale man, Richard “Ric” P. Underwood has been accused of helping the pair by drafting false offering brochures. He allegedly ran a sales team of telemarketers out of Florida trying to solicit investors from across the nation.
The team was alleged to have used misleading brochures and radio advertisements to lure in new investors. The U.S. Attorney’s Office for the Southern District of Georgia has also filed criminal charges against the three men. The SEC complaint charges the men with violations of antifraud provisions of the federal securities laws. The SEC will attempt to seek disgorgement of ill-gotten gains, as well as interest and penalties.