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.