Star Receiver Goes For Brokers Over Commissions

In an effort to recover commissions for investors, the receiver for defunct oil and gas company Star Exploration Inc. is suing brokers who allegedly offered unregistered shares of Star and related entities. Receiver Kelly M. Crawford filed a complaint Sept. 16 in the U.S. District Court for the Northern District of Texas against 15 broker defendants for nearly $1.3 million in commissions they allegedly made off of fraudulent transactions. Crawford also is seeking prejudgment and postjudgment interest, attorneys' fees, expenses and court costsThe suit names brokers David Conoley, Benjamin Carlo, Jeff Chester, Tina Daniels, William G. Darsey, William Allen Gray, William S. George, Bradley G. Hawthorne, Shawn K. Jantzen, Sims Kemp, John R. Lopez, Gary G. Martin, Scott Riggs, Sean Sutro and Howard Tyler. The brokers disseminated false information regarding the risks of the investments, expected returns, the status of oil and gas leases, and other matters, the receiver said. They did this with knowledge of the information's falsity or with severe recklessness or disregard, failing to exercise ordinary care in evaluating the information, the receiver added. “Such information was disseminated by each of the broker defendants with the specific intent and desired result of defrauding the investors,” according to the complaint. From 2005 to 2008 Star and related entities transferred at least $1.28 million to the brokers, the receiver said. Each of these transfers allegedly was fraudulent and malicious. The payments brokers usually were calculated as a percentage of the gross amount invested, and those payments came out of investors' principal, according to the complaint. Star founder James Gurgainers allegedly used the brokers to induce more than 100 investors to place money with Star and related companies by promising high returns. In reality Gurgainers used much of the money for personal and unauthorized uses, according to an earlier complaint by the Securities and Exchange Commission. Star ultimately raised more than $12 million, the SEC said. Gurgainers allegedly used some of that money to Star Receiver Goes For Brokers Over Commissions – fund trips to casinos, gambling expenses and meals at fine restaurants. Gurgainers later was indicted in Texas for issuing $250,000 in nonsufficient funds checks, and Star was forced to vacate its offices in Dallas for failure to pay rent, the SEC said. The receiver already has moved to seize a number of Gurgainers' assets, including his Alexandra, La., home, Dallas condominium and Hummer H2 truck, all allegedly bought with investor funds. Gurgainers also allegedly used investor funds to contribute more than $27,000 to his church. The receiver has said he will attempt to recover that money as well. A court appointed Crawford as receiver for Star in December. He is an attorney with Scheef & Stone LLP. Counsel information for the defendants was not immediately available. The suit is Crawford v. Conoley et al., case number 09-cv-01718, in the U.S. District Court for the Northern District of Texas. The underlying suit is Securities and Exchange Commission v. Star Exploration Inc. et al., case number 08-cv-02248, in the U.S. District Court for the Northern District of Texas.