Articles Posted in Texas Securities Fraud

San Angeleno Man Goes to Prison Over Investment Scams
Stanley Jonathan Fortenberry of Texas has been sentenced to 78 months behind bars for running two investment scams and bilking investors of about $900K. He pleaded guilty to obstruction of justice and mail fraud in 2016. Now, Fortenberry must pay over $890K in restitution and forfeit more than $311K.

Fortenberry ran Premier Investment Fund and raised money for social media projects operated by another company. According to prosecutors, the Texas man misled investors about that company’s profitability and regarding what their money would be used for. He admitted to diverting about half of investors’ money to himself and to his fundraising operation.

Fortenberry also ran Wattenberg Energy Partners, a company that raised money for oil and glass drilling projects in Colorado. He admitted to establishing the company under his son’s name because the US Securities and Exchange Commission was already investigating him about the way Premier investors’ funds were being used.

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Herschel “Tress” Knippa III, a Dallas, Texas resident, has pleaded guilty to conspiracy to commit securities fraud. The former registered broker, who owned a commodities trading firm, was implicated over fraudulent market rigging involving ForceField Energy Inc. (FNRG), which was a supposed global distributor and provider of LED lighting products and solutions. Investors lost $131M because of the scam. 

According to court filings and facts submitted at the plea hearing, between 1/2009 and 4/2015, Knippa and others worked together to bilk those who invested in ForceField.  The conspirators artificially manipulated the price and volume of ForceField shares by 1) using nominees to buy and sell the stock but without disclosing this to investors and potential investors, 2) manipulating ForceField stock trading to make it seem as if there was real interest and genuine trading volume, and 3) hiding payments made to brokerage firms and stock promoters that marketed and sold the stock.

All the while, Knippa and others claimed that ForceField was an independent company. Also, they used disposable prepaid cell phones, encrypted message applications to communicate, and paid kickbacks in cash.

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The US Securities and Exchange Commission has filed Texas fraud charges against Patrick O. Howard, Optimal Economics Capital Partners, LLC (OE Capital) and Howard Capital Holdings, LLC. Howard controls the two Dallas-based companies., which have raised about $13M from 119 investors. The regulator is alleging that the money went to fraudulent offerings involving private fund investments in three limited liability companies and that Howard falsely presented himself as a registered investment adviser when, in fact, he was not. In addition to offering and selling units through OE Capital, he retained two firms to do the same and paid them a 5% commission.

The SEC is charging Howard and his companies with violating the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The regulator wants permanent injunctions, disgorgement, prejudgment interest, and civil penalties.

According to the Commission, which filed its complaint under seal in Dallas federal court, Howard and his two companies promised investors 12-20% yearly returns, along with minimal risk. They also purportedly claimed that almost all invested money would go toward acquiring interest in revenue streams of the portfolio companies and that promised returns were insured.

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A Financial Industry Regulatory Authority hearing panel has expelled a Plano, Texas-based brokerage firm from the industry, barred its CEO, and ordered both of them to pay customers $24.6M in restitution. Red River Securities LLC and Brian Keith Hardwick are accused of engaging in fraudulent sales involving five oil and gas joint ventures. Of the more than $25M that customers invested in the oil and gas offerings, they were paid distributions of under $500K in total.

According to the Texas securities case, the regulator claims that over a four-year period, Hardwick and the Texas brokerage firm purposely and fraudulently misrepresented and left out material facts related to interests in oil and gas joint ventures that were issued by affiliate Regal Energy LLC issued. Also, contends the SEc;

· The oil and gas ventures failed to properly represent how much income was distributed to investors in other Regal Entity joint ventures.

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Halliburton Co. (HAL.N) has agreed to settle a securities fraud class action case for $100M. The case, brought in Dallas, accuses the oil field services providers of misrepresenting its possible liability in asbestos lawsuits and the benefits it expected from certain construction contracts, as well as a merger from nearly twenty years ago.

Lead plaintiff Erica P. John Fund Inc. filed the complaint in 2002 after the US Securities and Exchange Commission began investigating Halliburton’s accounting for revenue made from certain construction projects. The securities case accused the company of misleading investors when it purportedly understated its liabilities in the asbestos cases, overstated revenue from construction, and inflated the benefits of the Halliburton-Dresser Industries merger.

Former US Vice President Dick Cheney, who was chief executive of the company during the period at issue, settled the regulator’s charges against him for $7.5M in 2004. However, the lawsuit against the company has gone on for years.

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Texas First Financial CEO is Arrested For Fraud

Authorities have arrested Bobby Eugene Guess, an ex-Texas-based registered representative and the CEO and founder of Texas First Financial, for financial fraud. Guess promoted himself as a financial expert through financial seminars and radio promotions in the Dallas-Fort Worth area.

He is accused of running a Ponzi scam online involving two companies—StaMedia Inc., which is a Dallas company, and TenList Inc. According to the Texas State Securities Board, Guess was indicted for money laundering, securities fraud, theft, and taking part in organized criminal activity involving the multi-million-dollar sales of investments in an internet ad company.

Prosecutors contend that Guess and others sold $6M in investment contracts, stock certificates, and notes in Stamedia Inc. Also, he allegedly raised millions of dollars from Stamedia investors from ’14 to ’16 but did not disclose that the company’s net income and revenue were negligible. Investor funds were allegedly used to pay earlier investors the returns they were promised.

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Ex-Financial Adviser Who Worked for Texas-Based Firm is Barred by SEC After Defrauding Pro Athletes 
Ash Narayan, an ex-California financial adviser, has been barred by the US Securities and Exchange Commission. Narayan, who is accused of secretly receiving almost $2M from companies that he invested in on behalf of his professional athlete clients, agreed to no longer associate with advisory or brokerage firms to resolve the regulator’s allegations.

Narayan worked for Dallas firm RGT Wealth Advisors, but he was based in California as the managing director of its Irvine office. He also is accused of misrepresenting himself as a CPA and placing clients in unsuitable private investments. In October, the Certified Financial Planner Board of Standards issued a temporary suspension against him while an investigation was conducted into the allegations. RGT Wealth Advisers fired Narayan early this year.

According to the SEC, Narayan’s alleged fraud occurred between 2010 and 2016, during which time he directed $33M to a company that he was involved in and was in poor financial health. By settling, Narayan is not denying or admitting to the SEC charges.

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The Financial Industry Regulatory Authority is ordering VALIC Financial Advisors Inc. to pay a $1.75M fine for purported conflicts of interest that impacted the way that the firm compensated brokers for selling annuities. According to the self-regulatory organization, from 10/2011 through 10/2014, the Houston-Based financial firm established a conflict of interest when it said registered representatives would receive financial incentives for recommending that clients transfer their money from VALIC variable annuities into a Valic fixed index annuity or onto its fee-based platform. FINRA said that the firm created even more conflict when it told representatives they would not get compensation from moving customer money to a non-Valic product from a Valic variable annuity.

FINRA said that because of these conflicts, a significant amount of assets were moved to the firm’s advisory platform and sales of  VALIC ’s proprietary fixed index annuity increased by over 610% after it was included in the firm’s compensation policy.

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Secretary of State William Galvin is accusing Texas-based brokerage firm Investment Professionals of selling investment products to elderly customers even though the investments were not suitable for them. The San Antonio broker-dealer allegedly ran high-pressure sales contests at several partner community banks in the New England state between 2013 and 2016. Galvin said that the purported “sales gimmicks” were  “unacceptable” and that his office would not tolerate them.

The Texas-based brokerage firm allegedly prioritized sales volume over whether or not the investments they were selling were suitable for the older customers. The customers had accounts at the local Massachusetts banks. For example, one bank customer, who was suffering from terminal cancer, saw so many of her assets placed in a variable annuity that she could not access her savings.

Galvin charged that these sales contests were not in alignment with Investment Professionals’ own procedures and policies and his office accused the firm of inadequate supervision, in particular of the Texas broker-dealer’s representatives who worked out of the Massachusetts banks. He noted that sales contests are “contrary to investor protections.”

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Texas Man and His Energy Company Must Pay Arizona Restitution, Penalties for Oil Well-Related Misrepresentations

Texas resident Kenneth White and his Marchant International Resources Inc. must pay almost $1.4M plus $150K in penalties for misrepresenting its participation in two oil well projects that was backed by 12 Arizona investors. The fine was issued by the Arizona Corporation Commission (ACC), which accused White of failing to disclose the complete facts about his business, the company’s experience with well-drilling, and Merchant’s efforts with two wells. The $150K penalty is because White did not disclose that he was previously convicted for a $4.3M felony theft crime when he was marketing himself and his experience in energy extraction.

 

More than 700 Investors to Get $11.2M in Restitution Over Inadequate Disclosures 

White and his company are not the only ones facing fines brought by the ACC in an energy case. Brian C. Hageman and his Hydrotherm Power Corp. and Deluge Inc. now have to pay $11.2M in resittion to over 700 investors. According to the state, while  marketing a thermal hydraulic engine project, Hageman did not tell investors that the two companies were no longer in valid operation. He also must pay a $55K administrative penalty for bilking shareholders.

 

SEC Accuses Minnesota-Based Energy Company Co-Founder of Stock Price Manipulation

The Securities and Exchange Commission has filed charges against the co-founder of a Minnesota-based energy company. Ryan Gilbertson is accused of rigging Dakota Plains Holdings’ stock price while hiding his control of the company in order make a lot of money.  The SEC claims that Gilbertson enriched himself by over $16M as he and others allegedly bilked shareholders through price rigging. Meantime, his co-founder, Michael Reger, will pay almost $8M to settle the charges brought against him.

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