Treaty Energy Corp., a New Orleans-based oil and gas exploration company, has made its way out of the frying pan and into the fire. Five officers and the company lawyer are facing criminal charges after Treaty employed unlawful tactics in a stock scheme that could leave the company in shambles.
According to Jennifer Larino for the Times-Picayune, Treaty used fabricated information in its press releases to drive investor interest leading up to its public offering. The news releases flaunted false declarations of a successful well completion in Belize, a claim which was quickly followed by refutes from the Belize government. However, the company didn’t stop there. Treaty then proceeded to illicitly offer its stock to investors, using legal documents that had been knowingly forged by Samuel E. Whitley, the company’s Houston-based lawyer. The illegitimate operations gained Treaty $3.5 million in profits.
The announcement of its first successful well in Belize came on January 30, 2012. Although the release is available through the San Pedro Sun, it has since been deleted from Treaty’s official website. The company purported that it had completed its San Juan #2 well in the Princess Concession, stating that the payzone could produce as many as five or six billion barrels of oil.
Treaty also failed to reveal “the key fact that [Robert L.] Blackburn, a convicted felon, controlled – and may continue to control – Treaty as a de facto officer and director,” according to a 32-page complaint filed by the U.S. Securities and Exchange Commission (SEC) on Monday. The SEC is pursuing legal recourse against Treaty, naming the company as well as executives Blackburn, Andrew V. Reid, Bruce A. Gwyn, Michael A. Mulshine and Lee C. Schlesinger as the defendants. Whitley was also named as a defendant in the suit.
As the SEC complaint states, this is not the first run-in with the law for Blackburn, the company’s founder. His previous charges include tax evasion and fraudulently transferring money to himself, a case which he agreed to settle for $1.3 million. According to the press release which accompanied the SEC’s complaint on Monday, the government organization “seeks disgorgement of ill-gotten gains with prejudgment interest plus financial penalties as well as penny stock bars, officer-and-director bars, and permanent injunctions” against the named defendants.
Larino also reports that the official contact phone number listed on Treaty’s website was disconnected on Friday. It is still unclear how the company intends to deal with the scandal.