The Securities and Exchange Commission has charged three Texas residents who allegedly used deceptive offering materials and promotional videos to sell $2.7 million in fraudulent oil and gas investments.
The SEC’s complaint, filed in federal district court in San Antonio, alleges that defendants Paul Russell Montgomery Jr., Michael David Fisher, and James Hurst Willingham Jr. promised investors that they would drill and recomplete oil and gas wells in South Texas to generate returns of 32 percent or more.
The SEC alleges that the trio disseminated promotional videos that purportedly showed the wells they had drilled and included interviews with purported investors who were invested or interested in the projects.
The defendants also allegedly distributed written offering materials in which they promised to use investor funds only for specified purposes, with the vast majority going to drilling and recompletion activities.
The SEC further alleges that the trio touted Montgomery’s credentials and prior success as an oil and gas operator. However, according to the complaint, the defendants had never drilled or recompleted any wells, and instead misappropriated investor funds, spending hundreds of thousands of dollars for a number of uses not permitted in the offering documents, such as undisclosed commissions and payments to Montgomery and Willingham.
The complaint indicated that some of the purported “investors” identified in the promotional videos never invested, and that Montgomery’s purported credentials and prior successes were fabrications.
Willingham, Montgomery, and Fisher were charged with violating the registration and antifraud provisions of various securities laws, and Montgomery and Fisher were charged with aiding and abetting Willingham’s violations of the charged antifraud provisions. The SEC seeks disgorgement of ill-gotten gains plus interest, civil penalties, and injunctive relief.
Willingham has agreed to be enjoined against future violations of the charged provisions, and to pay disgorgement, prejudgment interest, and a civil penalty, the amounts of which will be determined by the court once a motion is filed by the SEC.