The U.S. Securities and Exchange Commission has accused a musician and composer who designed sound systems at the ballparks for the Houston Astros and Texas Rangers with misleading financial investors and misusing $3.3 million for luxury Las Vegas hotels, designer clothing and large cash withdrawals at casino ATMs.
In federal court documents filed Monday in Dallas, the SEC’s Fort Worth Regional Office charges Paul Gilman, also known in music circles as the “Whale Whisperer,” with violating the antifraud provisions of federal securities law.
SEC lawyers claim that Gilman and two of his businesses – Dallas-based Oil Migration Group (also known as OMG) and Delaware-based WaveTech – were developing new sound wave technology that would revolutionize oil and gas extraction, storage and transportation applications.
“[Gilman] claimed OMG and WaveTech would revolutionize the industry by using soundwave technology to lower the viscosity of oil and enhance water separation and purification processes involved in oil and gas exploration and production,” the SEC states in its complaint. “In truth, OMG and WaveTech were sham enterprises that operated as fraudulent vehicles for Gilman to solicit, receive, and misappropriate investor funds.”
Dallas lawyer and former federal prosecutor John Teakell is representing Gilman.
“We believe the evidence will show that Mr. Gilman was developing a sound technology product that is and can be used for the purpose the companies intended,” Teakell said in an interview with The Texas Lawbook. “There was no intent to commit fraud.”
Gilman, who is 65 and lives in Las Vegas, developed a computer software program that reshaped sound waves and redistributed them more evenly in large arenas and stadiums. The Houston Astros and Texas Rangers hired him to redo their sound systems.
A classically trained pianist, Gilman has played with Paul McCartney and Leon Russell.
But the SEC lawsuit states that Gilman faced financial troubles and brought more troubles on himself when he moved outside the sound and music industry and raised money from investors for his two oil and gas ventures.
“Gilman claimed that he had developed a revolutionary technology based on ‘sonication’ that would transform the oil and gas industry by using soundwaves to cheaply and effectively lower the viscosity of oil,” the SEC complaint states. “Gilman represented that this technology would make oil flow through pipelines more efficiently and could be used in fracking, secondary oil recovery, oil storage, oil transportation, as well as for water separation and purification, among other applications.
“Gilman told investors in OMG and WaveTech that he would use their funds to test, analyze, independently verify, further develop, and license the soundwave technology for oil and gas industry applications,” the SEC lawsuit states. “As Gilman knew, this was false.”
The SEC states that victims of Gilman’s fraud include a Dallas nurse who invested $540,000 in 2014 and 2015; a Houston businessman who provided $195,000 for equity interests, and a church minister in Franklin, Tennessee who invested $100,000 in 2013.
“As a final example, Gilman convinced a psychology professor residing in Parker, Texas to make multiple investments, including at least $60,000 for equity interests in WaveTech in May 2014, by representing to him, among other things, that Gilman needed investment funds for engineering, equipment, testing, and sales costs,” the SEC lawsuit states.
The SEC claims that Gilman formed OMG and WaveTech to “create the facade of legitimate businesses” that allowed him to recruit investors.
“We allege that Gilman and his companies created the false impression that he was using investor funds to transform industries with his purported revolutionary sound technology,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “But if it sounds too good to be true, it probably is.”