Energy Company Cases: Arizona Corporation Commission Orders Texas Man to Pay $1.4M, Two Other Companies to Pay $11.2M in Restitution to More than 700 Investors, & SEC Files Stock Manipulation Charges Against Multiple Individuals 

Texas Man and His Energy Company Must Pay Arizona Restitution, Penalties for Oil Well-Related Misrepresentations

Texas resident Kenneth White and his Marchant International Resources Inc. must pay almost $1.4M plus $150K in penalties for misrepresenting its participation in two oil well projects that was backed by 12 Arizona investors. The fine was issued by the Arizona Corporation Commission (ACC), which accused White of failing to disclose the complete facts about his business, the company’s experience with well-drilling, and Merchant’s efforts with two wells. The $150K penalty is because White did not disclose that he was previously convicted for a $4.3M felony theft crime when he was marketing himself and his experience in energy extraction.

 

More than 700 Investors to Get $11.2M in Restitution Over Inadequate Disclosures 

White and his company are not the only ones facing fines brought by the ACC in an energy case. Brian C. Hageman and his Hydrotherm Power Corp. and Deluge Inc. now have to pay $11.2M in resittion to over 700 investors. According to the state, while  marketing a thermal hydraulic engine project, Hageman did not tell investors that the two companies were no longer in valid operation. He also must pay a $55K administrative penalty for bilking shareholders.

 

SEC Accuses Minnesota-Based Energy Company Co-Founder of Stock Price Manipulation

The Securities and Exchange Commission has filed charges against the co-founder of a Minnesota-based energy company. Ryan Gilbertson is accused of rigging Dakota Plains Holdings’ stock price while hiding his control of the company in order make a lot of money.  The SEC claims that Gilbertson enriched himself by over $16M as he and others allegedly bilked shareholders through price rigging. Meantime, his co-founder, Michael Reger, will pay almost $8M to settle the charges brought against him.

According to the SEC’s complaint against Gilbertson, the two men put their fathers in figurehead executive positions so that they could could conceal their control of Dakota Plains Holdings. They also hired a friend to serve as CEO, while getting friends and associates, including Thomas Howells and Douglas Hoskins, to orchestrate purchases and sales of the company’s stock so that the price would go up from 30 cents/share to over $11/share over 20 days.

Meantime, they issued millions of stock shares to themselves, friends, and family. They also set set up an agreement for the company to borrow money from them with terms allowing the two of them and other lenders to make extra bonuses after the 20-day period following a reverse merger into a company with publicly-traded shares. The bonus payments to them totaled $32M. After receiving the bonuses, Gilberston stopped his alleged price rigging efforts, causing Dakota’s stock to fall to mere pennies/share. Dakota recently delisted.

The SEC is seeking monetary sanctions and injunctive relief against Gilbertson, Howells, and Hoskins.

As for Reger, the SEC claims that he received illicit payments, made millions of dollars in bonus payments, and avoided public disclosure requirements by spreading his Dakota Plains shares across 10 accounts under different names to hide that he was in possession of over 1/5th of the energy company’s shares.  Reger is not denying or admitting to the SEC’s findings.

Meantime, broker Nicholas Shermeta, along with his unregistered firm Napa Properties, will pay $75K in disgorgement, $11K in interest, and a $50K penalty. Shermeta is accused to recommending the Dakota Plains stock to clients at the registered broker-dealer where he worked and improperly brokering the transactions through Napa Properties. Shermeta has consented to a securities industry bar, but he will be allowed to apply for reinstatement at a later time. Although he is settling the SEC’s charges, he is not denying or admitting to the regulator’s findings.

Shepherd Smith Edwards and Kantas, LTD LLP is a securities fraud law firm.

ACC nails three for $12.5M in fines and penalties, Phoenix Business Journal, October 28, 2016

Company Co-Founder Charged in Manipulation Scheme, SEC, October 31, 2016