Press releases from the U.S. Securities and Exchange Commission (SEC) don’t usually mean good news. More often than not, the SEC is alerting the public about charges it has filed against companies and individuals accused of wrongdoing.
Not even halfway through the month of August, the SEC has announced charges in connection to two investigations involving Houston-based oil and gas companies. The U.S. Commodity Futures Trading Commission also announced a court order concerning price rigging and a $13 million settlement reached with oil logistics firm Parnon Energy and London-based oil trader Arcadia Petroleum.
All should serve as a reminder for investors to complete their due diligence checklists and gather all of the information they can before making financial decisions.
The most recent SEC charges were brought against a Houston-based company called Chimera Energy and four individuals the SEC said were “behind an alleged pump-and-dump scheme that misled investors to believe the company was on the brink of developing revolutionary technology to enable environmentally friendly oil and gas production.”
Chances are you heard about the company’s claims to have found a technology that extracts shale oil without hydraulic fracturing. The SEC said the company issued about three dozen press releases within a two-month period about the technology.
“However, Chimera Energy did not actually license or even possess the technology it touted and had not achieved the claimed results in commercially developing it,” the SEC said in its press release. “While the stock was being pumped by the false claims, entities controlled by [Andrew I.] Farmer dumped more than 6 million shares on the public markets for illicit proceeds of more than $4.5 million.”
The feds also allege that the misleading press releases were approved by Charles E. Grob Jr. and Baldemar Rios, who operated the company at “the minimum level necessary to lend the company a veneer of legitimacy while concealing Farmer’s involvement altogether.” Carolyn Austin also was accused of dumping shares of the Chimera stock, boosting profits for Farmer. All four were charged with securities fraud, registration violations and reporting violations.
“Farmer and his accomplices secretly rigged the market for Chimera Energy stock and illegally profited by exaggerating the company’s capabilities and technology,” David Woodcock, director of the SEC’s Fort Worth regional office, said in the Aug. 15 news release. “They seized on fracking as a topic of public discourse and aggressively touted an entirely fictitious business to attract unwitting investors.”
Interesting side note: Courthouse News Service pointed out that “chimera,” according to the Merriam-Webster dictionary, means “something that exists only in the imagination and is not possible in reality.”
On Aug. 4, the SEC announced charges against Houston American Energy Corp. and John F. Terwilliger. Accusations are that the company and Terwilliger “fraudulently claimed that a Colombian exploration concession, in which Houston American only owned a fractional interest, held between 1 billion and 4 billion barrels of oil reserves and that the reserves were worth more than $100 per share to Houston American’s investors. The estimates lacked any reasonable basis and were falsely attributed to the concession’s operator, whose actual estimates were much lower.”
The oil and gas industry is inherently subject to risks. But doing research and asking questions can help in protecting investments and minimizing those risks.
Contact the author, Velda Addison, at email@example.com.