The U.S. Securities and Exchange Commission has charged three interconnected oil and gas companies and its executives with fraudulently scheming to raise $11.7 million for drilling projects allegedly located in Kentucky and using investor money for booze, drugs, strippers and alimony payments to the CEO’s ex-wife.
Lawyers with the SEC’s Fort Worth office say that AmeraTex Energy and Lewis Oil Company, which are based in Plano, and Lewis Oil Corp., which is headquartered in Kentucky, perpetrated a fraud to sell unregistered securities to more than 150 investors in 36 states, made false statements to investors and diverted money raised for personal pleasures.
In a federal complaint filed Wednesday in U.S. District Court in Sherman, the SEC claims that four corporate officials – CEO Thomas Lewis; former President William Fort of Greenville, Texas; former accountant Damon Fox of Rowlett; and former corporate compliance officer Brian “The Bull” Bull – “engaged in a continuous scheme to misappropriate investor monies to enrich themselves.”
The SEC charges that the four executives were at the heart of a three-year scheme to target older and uneducated individuals to invest in oil and gas drilling operations that they falsely claimed were already producing major profits.
Lewis and Fort, the SEC claims, paid $2,500 a month to an Internet search suppression service to hide investor complaints against them and their businesses.
Court records also state that Lewis covered up his felony cocaine possession charges in Collin County and he lied about being a U.S. Marine veteran in order to a former Navy vet to invest.
“Lewis personally misappropriated at least $1.3 million of investor funds in addition to receiving a weekly salary of $2,500,” the SEC states in federal court documents. “Lewis spent this $1.3 million via cash withdrawals and via debit cards linked to nearly all accounts, which he used on lavish personal expenditures, including jewelry, retail spending, dining and entertainment and strip club visits.
“Lewis also withdrew large amounts of cash from investor funds, wrote alimony checks to his ex-wife, and paid his personal credit cards and other personal bills,” the SEC complaint states. “Lewis also engaged in a ‘check-cashing practice’ where he sporadically wrote checks to at least three employees in amounts up to $3,500, but required the employees to cash them and bring him back the cash, which he pocketed for personal use.”
Court officials say that only one of the defendants – Brian Bull, the corporate compliance officer – is represented by counsel. Attempts to reach the defendants or obtain comments about the case from them have been unsuccessful.
“We will hold accountable any gatekeepers who lend their credentials to enhance the legitimacy of otherwise fraudulent offerings,” SEC Fort Worth Regional Director Shamoil T. Shipchandler told The Texas Lawbook. “Particularly in instances where, as we allege, these credentials help bolster companies that have manipulated Internet search results to conceal the nature of their schemes.”
Other charges leveled by the SEC include that accountant Damon Fox and compliance coordinator Brian Bull misleadingly categorized entries in the companies’ books and records, sent fake tax records to investors and filed false records with the SEC.
The SEC’s investigation was conducted by Sarah S. Mallett and supervised by Assistant Director James E. Etri in the Fort Worth Regional Office. The SEC’s litigation will be led by Matthew J. Gulde.