The US Securities and Exchange Commission filed a civil action on Sept. 25 charging that a North Texas man and his company violated federal securities laws by offering and selling unregistered shares of an oil and gas drilling program.
Rey Salomon and Ellen H Development LLC (EHD) raised $903,315 from 22 investors through offers and sales of fractional interests in a turnkey drilling program to be conducted in Denton County, Tex., from March through September 2007, the SEC said in a complaint filed in US District Court for the Northern District of Texas. It also alleged that Salomon acted as an unregistered broker-dealer.
It said that offering documents stated that all investor funds would be used to drill two oil and gas wells, that the money would not be used to pay the debts of EHD or Salomon, and that the wells would cost approximately $4.5 million to drill.
In fact, said the SEC, Salomon used at least $220,000 of the investors' money for his personal benefit, including repayment of a loan made to help capitalize EHD. Salomon and EHD also knew that drilling the wells actually would cost $1 million less than the offering documents represented, the complaint said.
Salomon and EHD agreed to settle the charges without admitting or denying the allegations. They also agreed to be liable for disgorgement of $903,195, plus $81,809 of prejudgment interest, or a total of $875,004. Based on the defendants' sworn statements and supporting financial documents, the judgments do not order Salomon and EHD to pay civil penalties, and payment of $382,069 of disgorgement and prejudgment interest was waived, the SEC said.
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