The Texas securities commissioner has issued an emergency cease-and-desist order against Insignia Energy Group Inc., its affiliate IEG Permian Basin LLC, Martin D. Lewis, president of both firms, and salesman Jarvis Wayne Willis, arising out of findings of fact by the commissioner that they made misrepresentations and omissions of material facts about an oil and gas limited partnership called the Sabine Partnership that was sold to teachers and school employees, according to an InvestmentNews article by Darla Mercado entitled “Hot Air? Oil and gas company allegedly misled teachers.”
Teachers were told that they should use the money in their 401(k) and 402(c) accounts to purchase the investment, which would purportedly allow them to “replace much-needed income” in light of “looming layoffs.” Teachers were also lured in with a “1,000% guarantee” that they would receive a certain monthly return over 10 years and that they could get their money back if the oil and gas wells were not productive, according to the order. As an example, an investment of $165,000 would supposedly produce at least $45,000 per month, the teachers were told.
The limited partnership interests were not registered as securities in Texas, and the companies and individuals involved were not registered to sell securities in Texas, as they were required by law to be, according to the article, citing the order. Generally, such registration violations give investors a right to rescind the investment and get their money back.
The Sabine Partnership was purportedly formed to develop two well prospects in Sabine Parish, La., and the marketing and production of oil and gas from those wells, according to the article, citing the order.
Insignia and the other named parties have 30 days to challenge the cease-and-desist order. Failing that, it becomes permanent. The cease and desist order could lead to a civil action or criminal prosecution, according to the article.
Teachers and school employees should be wary of investment promoters, even though the school may give them access and impliedly endorse the promoters. School systems should be aware that they expose themselves and the system to potential legal liability by facilitating unlawful sales of securities and unsuitable investments to teachers and school employees.
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