Oil and Gas Company and Boiler Room Operator Charged

The Securities and Exchange Commission (SEC) announced on October 1, 2015 fraud charges against an Orange County, Calif. oil and gas company, its CEO, and an Arizona-based boiler room operator. The SEC claims Commodore Financial Corporation, CEO Christopher Schlegel, M&G Cap Services, and Andres Calvo raised approximately $7.5 million from at least 84 investors through their fraudulent offer and sale of fractional interests in oil and gas wells. In the SEC’s complaint, filed on September 30, 2015 in the U.S. District Court for the Central District of California, Commodore and Schlegel allegedly engaged in a scheme to defraud investors by embezzling almost half of investor capital to pay exorbitant commissions to Calvo and his boiler room operation as well as for Schlegel’s own personal use, which included private jet charters and Las Vegas casino expenses.

The complaint alleges Commodore and Schlegel compounded their fraud by falsely telling investors that the vast majority of their money—80% to 90%—would be used to fund oil and gas operations, and that Commodore was an experienced, Texas-based oil and gas company with a proven track record of profitability. The complaint further claims that only about half of investor funds went toward oil and gas operations. In addition, the complaint states that Commodore had no real Texas presence, and neither Commodore nor Schlegel had any actual oil and gas experience, let alone a proven track record of profitability.

Further, Commodore and Schlegel allegedly falsely represented to existing investors that Commodore was almost finished preparing checks to pay returns on their current investment in order to solicit investments for a new project. According the complaint, however, the current investment had not yet generated any revenue. M&G and Calvo also lied about the unreasonably high earnings they actually received.

The SEC alleges that defendants violated Section 5 of the Securities Act of 1933 and the antifraud provisions of the securities laws in Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act. Finally, the complaint alleges that M&G and Calvo violated Section 15(a) of the Exchange Act by acting as unregistered broker-dealers. The SEC’s complaint seeks permanent injunctions, civil penalties, disgorgement plus prejudgment interest, and other relief against all of the defendants.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.    Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855