Texas securities regulators have slapped Insignia Energy Group Inc. with an emergency cease-and-desist order over allegations that the firm misled the public when marketing investments in oil and gas partnerships.
The regulator claims Insignia Energy Group, along with its affiliate IEG Permian Basin LLC, marketed partnership interests in oil and gas projects to current and former teachers, along with other employees in Texas school districts. Martin D. Lewis, president of both firms, and salesman Jarvis Wayne Willis, were also named in the order.
Insignia and the other named parties have 30 days to challenge the cease-and-desist order or it becomes permanent, said Bob Elder, spokesman for the Texas state securities board. Should Insignia decide to fight the order, the matter can go to administrative law court.
Though the order itself isn't a criminal charge, violating it can be a precursor to civil or criminal prosecution, Mr. Elder said.
The allegations within the order are findings of fact that have been signed off by securities commissioner Benette L. Zivley, he added.
The firms and Mr. Willis allegedly told teachers that the investment will allow them to “replace much-needed income” in light of “looming layoffs.”
Teachers and other school employees were offered interests in the Sabine Partnership, which was meant to develop two well prospects in Sabine Parish, La., and the marketing and production of oil and gas from those wells, according to the cease-and-desist order.
According to the Texas regulator, customers were offered limited partnership interests equal to 10% of the underlying working interest and 7.3% of the underlying net revenue interest in the Sabine Partnership.
Insignia, IEG and Mr. Willis touted the investment to school employees who were preparing for retirement, claiming to provide investors with a “1,000% guarantee” that they will receive a certain monthly return over 10 years and that they can get their money back if the wells aren't sufficiently productive, according to the order. For example: An investment of $165,000 would entitle an investor to at least $45,000 per month.
School workers were encouraged to use the money in their 401(k) and 402(c) accounts.
The interests in the Sabine Partnership haven't been registered as securities, nor are Insignia, IEG, Mr. Willis and Mr. Lewis registered to sell securities in Texas, according to the order.
Further, the state securities board also found that the firms and Mr. Lewis failed to disclose material facts on the performance of wells they've worked in the same region. For instance, a 2008 offering for a two-well drilling project in Sabine Parish, La., is still incomplete. As of the beginning of 2011, drilling hasn't been completed for this project and at least one investor has demanded the return of his or her money, according to the state's complaint. Those funds still haven't been returned, the regulator found.
A call to Insignia Energy Group was not immediately returned.
