The SEC filed a complaint recently in District court against Breitling Energy Corporation in Dallas accusing the energy investment for Texas-sized $80 million investment scam.
In pitches to investors, CEO Christopher Faulkner bragged about expertise in the oil and gas industries. According to the complaint, he had the nerve to appear in the media as a “fracking expert”. The SEC says he had zero experience in the energy business industry, and decorated his resume with fake college degrees.
The investments relied on junk geology, as well. Unsurprisingly, the story includes Faulkner’s using investor money to finance his very comfortable lifestyle.
From the Dallas Morning News:
As the SEC recounts it, the plot is intricate and includes interlocking companies, bad science, fake financials and an [sic] massively effective public relations campaign that turned a tech entrepreneur with a shaky record into the “Frack Master” whose “expertise” was on display on radio and cable TV news shows from coast to coast.
This former tech entrepreneur is Breitling’s CEO, Christopher Faulkner. The SEC claims that Faulkner and seven other associates at the company, among other things, sold unregistered oil and gas prospects to investors in 2011. According to the SEC, Breitling proceeded to make grossly inflated estimated costs for drilling, testing, and project completion, which landed the company $43 million in investment money in two years.
From the Dallas Morning News:
In the investment pitches, the company told potential customers exactly what the estimated costs of drilling and completion would be for each project and charged accordingly. For a $5 million project, Breitling would sell one percent for $50,000.
But wait, there was more. No management fees.
[…]
The bottom line, the SEC says: The company “raised exponentially more money than it needed to drill and complete the prospects.”
Which might have been OK if the wells produced what Breitling had claimed. But those claims, the SEC said, were based on bogus geology produced by “Simo Energy, LLC and its principal, Mr. Joe Simo.”
Investors were told they were getting independent assessments. But Simo, as it turns out, was Brietling’s vice president for exploration. The SEC says he puffed up the production estimates by basing his numbers on the best producing wells in the area and assuming the new wells would do as well. (Even that wasn’t good enough for Faulkner, who doubled some of the production estimates on his own, the SEC says.)
The claims did not deliver, the SEC says: “Simo’s projections were consistently, and abysmally, overstated; actual production on the wells was often less than 10 percent of Simo’s projections.”
At the time of the filing of the complaint, Faulkner’s lawyer tagged the SEC complaint as a vendetta and claimed that Faulkner did nothing wrong. Since then, an ex-employee who was also named in the complaint has said that Breitling only owned small percentages in wells it claimed to have been drilling and completing.
Last week, the SEC has also charged Breitling’s general counsel in the complaint.
