LITIGATION RELEASE NO. 17251 / December 3, 2001.

SECURITIES AND EXCHANGE COMMISSION v. C-TECH, L.L.P. AND ROBERT W. SCHLOTTERBECK (U.S.D.C., Northern District of Texas, Dallas Division, Civil Action No. 3:01-CV-2542-P)

JUDGE ISSUES EMERGENCY ASSET FREEZE, APPOINTS A RECEIVER AND ORDERS INTERIM ACCOUNTING IN $3.9 MILLION SECURITIES FRAUD CASE FILEDD BY COMMISSION

On December 3, 2001, Judge Jorge Solis of the United States District Court for the Northern District of Texas issued an order freezing the assets of C-Tech, L.L.P. ("C-Tech"), a Comanche, Texas oil and gas firm, and Robert W. Schlotterbeck, its managing partner. C-Tech and Schlotterbeck are accused of engaging in a nationwide securities scam in which almost $4 million was raised from more than 100 investors. The court also appointed a receiver to recover and preserve assets for the benefit of the victims of the scam, ordered an interim accounting of investor funds and ordered that all evidence be preserved.

In its action, the Commission accuses C-Tech and Schlotterbeck of securities fraud in connection with the offer and sale of interests in two oil and gas wells near Beeville, Texas. Schlotterbeck diverted more than $500,000 of the $2.8 million raised in the first offering for his personal use, leaving the well unfinished. In the second offering, the well was never started and C-Tech lost the lease when Schlotterbeck misappropriated more than $450,000 of the $1.1 million raised. It appears that, among other personal uses of investor funds, Schlotterbeck used $311,000 for the purchase of a luxury golf course lot in the Austin area. In the course of offering and selling these interests, C-Tech and its sales staff have engaged in other misrepresentations and omissions concerning, among other things, the probability of drilling a successful well, the anticipated returns to investors, and the compensation paid to the C-Tech sales staff.

The Commission has charged the following defendants in its action:

  • Defendant C-Tech is a limited liability partnership organized in Texas with its principal place of business in Comanche, Texas. C-Tech was originally founded in 1988 by Schlotterbeck and two other partners, for the purpose of obtaining production prospects and engaging in exploration, development and drilling activities. The company was reorganized as a limited liability partnership in 2000 for the purpose of pursuing the development of medium depth wells in the Beeville, Texas area.

  • Defendant Robert W. Schlotterbeck is a resident of Round Rock, Texas and a co-founder and Managing Partner for C-Tech. As Managing Partner of C-Tech, Schlotterbeck controls the financial affairs of C-Tech and is a signatory on all bank accounts. In addition, Schlotterbeck established a sole proprietorship known as Millennium Lead Source ("Millennium") to market C-Tech's oil and gas interests through "cold calls" to potential investors.

The Commission's complaint charges C-Tech and Schlotterbeck with violating the antifraud provisions found in Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, as well as the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. The complaint seeks an immediate asset freeze, preliminary and permanent injunctions, an interim accounting, disgorgement with prejudgment interest and a civil money penalty against each defendant, as well as the appointment of a receiver over the assets of the defendants. Finally, the Commission also seeks an order prohibiting the movement, alteration and destruction of books and records, and expedited discovery - all of which were granted by the Court today.

*  SEC Complaint in this matter.