Jury Convicts Chairman of Oil and Gas Well Promotions Company of Conspiracy and Securities Fraud
Always Consulting Inc. Located in Richardson, Texas
|U.S. Attorney’s Office September 04, 2013|
DALLAS—The chairman and director of field operations of Always Consulting Inc. (ACI), an oil and gas well promotions company with offices in Richardson, Texas, was convicted this morning by a federal jury on one count of conspiracy to commit securities fraud and 23 substantive counts of securities fraud. David Kevin Lewis, aka “David Shane Lewis” and “DW,” 52, of Albany, Kentucky, faces a maximum statutory penalty of five years in prison and a $250,000 fine per count. A forfeiture of $2,538,642 will be ordered at the defendant’s sentencing; restitution may also be ordered. Chief U.S. District Judge Sidney A. Fitzwater, who presided over the week-long trial, set a sentencing date of December 20, 2013. Today’s announcement was made by U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
Lewis’s co-defendants in the case, Bruce Kyle Griffith, 59, of Dallas, and Thomas Alden Markham, Jr., 63, of Plano, Texas, have each pleaded guilty to their roles and are scheduled to be sentenced on December 6, 2013. Griffith, who was the president and CEO of ACI, pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. Markham, ACI’s chief geologist, pleaded guilty to one count of misprision of a felony.
Lewis, Griffith, and Markham conspired together to scheme to obtain money and property by making untrue statements and omitting material facts to defraud investors, located throughout the United States, who purchased interests in well program units, representing fractional, undivided interests in oil, gas, or other mineral rights and investment contracts.
They sent investment documents and monthly investment newsletters from ACI to induce investors to invest money and purchase interests in the Rattlesnake Springs Drilling Program or other oil and gas drilling programs. Rattlesnake, one of several investment programs offered and sold by ACI to investors, was to be located in Osage County, Oklahoma.
They also used ACI sales employee “fronters” to contact prospective investors and referred interested and financially-able investors to ACI employee “closers,” including Lewis and Griffith, who contacted the interested investors to convince them to invest. The “fronters” were equipped with scripts, pitches, and talking points all touting the investment and designed to make prospective investors believe that ACI’s programs were potentially profitable investments.
They also provided the ACI sales employees with a “do not call” list, entitled “Undercover Regulators,” which listed contact information of individuals the defendants suspected of being state or federal regulators posing as potential investors.
The defendants misapplied and converted the Rattlesnake Springs Drilling Program investor funds to their own use and benefit, and the use and benefit of others, including the purchase of real and personal property and to pay for expenses of other ACI programs.
The defendants falsely stated that ACI would perform all necessary services to complete the Rattlesnake Springs Drilling Program; ACI would use investor funds to begin site preparation, drilling, testing, and completion of the Rattlesnake Springs Drilling Program wells; ACI would pay all costs necessary to get the wells into production for approximately $3.5 million; ACI had influence inside the Osage Nation in Oklahoma and could acquire oil and gas leases on terms unavailable to others; pipelines had been laid; and Griffith began in the oil and gas business in 1985 as a private pilot flying oil executives and equipment to foreign countries.
The defendants concealed from investors that Rattlesnake investor funds were being comingled with funds from other ACI projects and were being used to pay operating expenses of other ACI projects; most of Rattlesnake’s investor funds had been misapplied and diverted and no longer available to drill the promised 20 wells; funds invested in Rattlesnake had been diverted, for the use and benefit of the defendants; and ACI relied on investor funds to operate and upon production revenue from oil and gas wells.
ACI’s offering memorandum identified “DW” and “Griffith” as registered operators in Texas and Oklahoma but omitted that “DW” was Lewis and that Lewis and Griffith were not registered to sell securities in Texas. ACI represented that “DW” (Lewis) had 25 years' experience in finance, investing, and management in the oil and gas industry but omitted facts including: Lewis was a convicted felon, having been convicted in 2000 of securities fraud and conspiracy to commit mail fraud, in connection with oil and gas offerings; Lewis was under federal court orders to pay approximately $2.2 million in restitution to previously defrauded oil and gas investors; and Lewis was under an injunction barring him from violating federal securities laws in connection with oil and gas offerings.
ACI’s offering memorandum also noted that Griffith had 20 years' experience in the oil and gas industry, having started out as a private pilot with a twin engine rating and instrument rating. Griffith, however, was never a pilot, had little experience in the industry and, in fact, was a convicted felon, having been specifically convicted in federal court of bank robbery in 1994 and conspiracy to possess and utter counterfeit federal reserve notes in 1989.
ACI’s offering stated that Markham had more than 30 years in the oil and gas industry as a geologist, supervisor, and manager but failed to disclose he was a convicted felon, having been convicted of mail fraud in 2000 in connection with an oil and gas offering, and that as part of his sentence, he was under court order to pay nearly $400,000 in restitution to defrauded investors.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys' offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including mo
The case is being investigated by the FBI and the Texas State Securities Board (TSSB). Assistant U.S. Attorney Joseph Revesz and TSSB Enforcement Attorney Suzanne Steinmetz are in charge of the prosecution.