© 2016 The Texas Lawbook.
By Mark Curriden
(June 28) – The U.S. Securities and Exchange Commission unveiled securities fraud charges Monday against China-based Longwei Petroleum Investment Holding and its American-based chief financial officer, Michael Toups.
The complaint, which was filed by the SEC’s Fort Worth Regional Office, claims that Longwei falsified multiple public statements in 2013 that substantially overstated potential capacity at the company’s fuel storage depots in Shanxi Province, China.
In a 16-page complaint filed Monday in federal court in Tampa, Fla., the SEC alleges that Longwei and Toups misrepresented and omitted key facts in statements to investors designed to encourage them to exercise warrants and inject money into the company.
Efforts to reach Longwei and Toups or their lawyers were unsuccessful.
“Longwei held itself out as a petroleum storage and sales company whose main competitive advantage was its sizeable storage capacity,” the SEC stated in its lawsuit. “But Longwei routinely overstated its storage capacity, and even after the overstatement was brought to the attention of the company, including its CFO, defendant Michael Toups, nothing was done to correct the misstatement. Instead, the company continued to falsely tout its storage capacity in public filings and press releases drafted by Toups, intentionally ignoring contrary evidence from its own records, auditors, and consultants.
“Longwei and Toups conducted a fraudulent scheme to induce the exercise of warrants to purchase Longwei’s stock when it was desperate for cash,” the federal agency states. “By creating a false sense of urgency that the company was going to let the warrants expire, while an extension of the deadline was imminent and already in process, Longwei and Toups induced investors to exercise their warrants.”
The SEC claims that Longwei and Toups “concocted a plan to have Toups purchase Longwei stock—secretly using funds provided by the company — to give the impression that a high-ranking insider was investing his own money in the company.”
The SEC’s prosecution is being led by senior trial counsel Timothy Evans. The agency’s investigation was led by enforcement lawyers Tom Keltner and Jody Moore.
© 2016 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.
If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.