Brandon Davis, named one of the “Top 40 under 40” by the Denver Business Journal, recently lost an eight-year battle representing himself, Heartland Energy Development Corporation (HEDC) and others in a Denver District Court. The Colorado Securities Commissioner plans to ask the court to order Defendants to pay $65 million restitution for an oil and gas investment scam. Davis plans to appeal the injunction against HEI Resources and HEDC.

The 39 page court order, including 18 pages of findings of fact, is available in redacted form. The court held that the Defendants, including HEI, HEDC, Brandon Davis, Charles Reed Cagle, James Pollak, and John Shiffner, were permanently enjoined from selling securities in Colorado. In addition to securities registration and licensing violations, the oil and gas fraud claims impact investors throughout Colorado and across the U.S.

Failure to Disclose a Prior Injunction.
One of the key players in the scheme was Joe Kinlaw. Kinlaw was no stranger to the SEC. In 1995, Kinlaw settled a suit with the SEC resulting in an injunction against him for violating anti-fraud and SEC regulations. In the case at hand, Defendants argued multiple defenses, including Kinlaw’s lack of authority. The Court ruled in favor of the investors:

“Having determined that Kinlaw was a control person at HEI and HEDC, the Court finds the Defendants omitted information that a reasonable investor would consider important in making a decision about whether to invest. Specifically the Court finds that Kinlaw’s role and his prior SEC injunction are material information that Defendants intentionally omitted with intent to defraud investors. The materiality of the information related to Kinlaw is apparent through several of the investors’ testimony.”

Risk Disclosure. Failure to Mention 27,000 Dry Holes.
Plaintiff convinced the court that Defendants failure to disclose information about dry holes was investor fraud.

“Plaintiff’s oil and gas expert, Timothy Berge, testified according to the State of Texas database there are a total of 27,000 dry holes in the area depicted on HEI and HEDC’s preview maps; Mr. Berge did not distinguish the dry holes based on formation or depth. The Court also notes that Mr. Berge did not narrow the total number of dry holes to the relevant time frame of the Colorado ventures. However, the total number is not as important as the fact that the number of dry holes was available to Defendants and was not disclosed.”

‘’…[T]he Court finds that Plaintiff proved that Defendants materially misled and intentionally omitted material information regarding dry holes with intent to deceive investors…”

Sometimes it’s difficult to determine what’s riskier: working on an oil rig or investing in oil and gas. Workers in the oil patch know how to uncover hidden dangers. Before you invest in an oil and gas venture, consider consulting an oil and gas fraud lawyer for assistance in minimizing your risk.

When you need an experienced oil and gas litigation lawyer, we are here to help.

Mark Alexander
5080 Spectrum, Suite 850E
Addison, Texas  75001
Ph: 972.544.6968
Fax: 972. 421.1500

E-Mail: mark@markalexanderlaw.com
www.oilandgasfraudlawyer.com
www.commerciallitigationtexas.com

 

 

 

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Photo of Mark Alexander Mark Alexander

Mark Alexander is the principal of the Firm. In 1979, he earned his undergraduate degree at Wayne State University in Detroit, Michigan, and his law degree at Thomas M. Cooley, Lansing, Michigan, in 1985 (Academic Dean’s List).

Mr. Alexander is licensed to practice law by the Supreme Courts of the States of Texas (1985) and Michigan (1988), and holds licenses before the following courts: Supreme Court of Texas; Supreme Court of Michigan; United States Court of Appeals for the Fifth and Sixth Circuits; United States District Courts for the Northern, Southern, and Western Districts of Texas; and the Eastern and Western Districts of Michigan. In addition he has been admitted in several other Federal and State Courts to represent Texas clients, who have been engaged in significant litigation in those jurisdictions.

Courts have appointed Mr. Alexander to serve as a receiver, and facilitator in complex litigation lawsuits. Additionally he has been a frequent lecturer for organizations on a variety of business law matters.  Mr. Alexander has also served as an Adjunct Professor of Business Law at Henry Ford College in Dearborn, Michigan. Significantly, Mr. Alexander is AV-rated by Martindale-Hubbell, the highest rating an attorney can receive.

Additionally, due to the complex nature of its practice, the Firm has an on-going relationship with a legal group that provides litigation support services. This group is comprised of a team of attorneys, whose combined capabilities allow the group to provide nearly 24-hour coverage at crucial times for any case. This arrangement is but one example of the innovative, cutting-edge approach that the Firm provides to its clients in order to improve representation at reduced legal fees.