United States Securities and Exchange Commission
Litigation Release No. 16402/ January 7, 2000
Securities and Exchange Commission v. Petro Resources Corp. et al., Civil Action No. SA CV 00-17 AHS (EEX) (USDC CD Cal.)
The Commission announced the filing of a civil action charging five entities and five individuals with securities fraud for engaging in deceitful practices to raise $8 million from investors nationwide for oil and gas drilling programs through "cold calls" made though telemarketing "boiler rooms". The Commission's complaint alleges that the named defendants misrepresented several material facts to investors, including the amount of sales commissions paid to the defendants and to salespeople under their control, the risks and potential profits of the programs, the results of prior programs sold by the defendants, and tax benefits purportedly available to investors in the programs. According to the complaint, a majority of the investors' funds were used to pay sales commission and the drilling programs never produced oil in quantities sufficient to make promised royalty payments to investors.
Named as defendants in the action are Petro Resources Corp. of Scottsdale, Arizona, its president Samuel McClintock, Austral Oil & Exploration Corp. of Sulphur, Louisiana, and its president Myron J. Palermo. Also named are three boiler rooms, ITS Consulting, Inc., Integrity Financial Group and Tritech Investment Group, Ltd., as well as three officers or control persons of ITS Consulting: Alan B. Baiocchi, David E. Morris and James Silver, of Laguna Beach, California.
According to the complaint, from January 1996 through July 1997, the defendants fraudulently raised at least $8 million from over 400 investors nationwide for purported oil and gas drilling programs in Texas and Oklahoma. The complaint charges Petro Resources, McClintock, Austral, and Palermo with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. ITS Consulting, Baiocchi, Integrity Financial Group, Ltd. and Tritech Investment Group, Ltd. are charged with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. Morris and Silver are charged with violations of Section 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5. The complaint seeks injunctive relief, an accounting and disgorgement and the imposition of civil penalties.