On August 30, 2017, the Securities and Exchange Commission announced that it had filed a civil injunctive action against two Tennessee man and an accomplice in Fort Lauderdale, Florida for defrauding investors. The men are accused of luring investors by promising false promises of high returns from an oil drilling investment. The complaint alleges that David R. Greenlee and David A. Stewart Jr. orchestrated and carried out a $15 million-dollar scheme.
The two men are accused of recruiting and managing a network of salesmen, who were responsible for offering and selling stakes in various companies to investors. The companies were supposedly utilizing enhanced oil recovery techniques, such as fracking, to extract and sell oil from wells in Texas, Oklahoma and Kansas. It is alleged that investors were promised returns of 15 to 50 percent per year for decades.
The commission alleges that Stewart and Greenlee utilized fake names such as “Dave Johnson” when communicating with investors. This was supposedly done in an attempt to hide their criminal records. The men are accused of diverting approximately two-thirds of the funds to pay themselves and their salesmen. Some of the money was also used to invest in new advertisement.
The Securities and Exchange Commission suggests that the defendants only spent a minimal amount on oil production. It is alleged that this was done to create the appearance that oil was being produced by the companies. The defendant’s accomplice, Richard “Ric” P. Underwood, is accused of helping the men create false offering brochures. He was also responsible for overseeing a sales team of telemarketers in Florida.
The two men are accused of operating their scheme using two Tennessee corporations. One firm, Southern Energy Group Inc. was eventually administratively dissolved. The second, Black Gold Resources Inc., later changed its name to Tennstar Energy Inc. At this point in time, the men are innocent until proven guilty.