U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17683 / August 15, 2002
SECURITIES AND EXCHANGE COMMISSION v. TEXON ENERGY CORPORATION, LONESTAR PETROLEUM CORPORATION, JAMES E. HAMMONDS aka JAKE HAMMONDS aka JAKE DAVIS and BARRY V. REED (Case No. CV-01-09706-LGB(MANx) (C.D.Cal.)
The Securities and Exchange Commission today announced that on August 7, 2002, the United States District Court in Los Angeles entered a final judgment against a recidivist securities violator and the former president of a company that sold fraudulent oil and gas investments.
The repeat violator, James E. Hammonds, 61, formerly of Inglewood, California, and Barry V. Reed, 57, of Las Vegas, Nevada, failed to answer the Commission's complaint filed in November 2001. The final judgment permanently enjoins Hammonds and Reed from future violations of the securities registration and antifraud provisions of the federal securities laws. The judgment orders Hammonds and Reed to pay civil penalties of $110,000 each and to disgorge $1,254,100, the amount they fraudulently raised from investors, plus prejudgment interest.
Hammonds and Reed, along with two Nevada corporations, Texon Energy Corp. and Lonestar Petroleum Corp., were charged with violating Sections 5(a) and 5(c) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Reed was Texon's president and Hammonds was Texon's vice-president. According to the complaint, the defendants raised $1.25 million from the sale of Texon stock to about 65 investors nationwide. Investors were promised a dividend of 12% per year on their investment. The Commission's complaint also charged that Hammonds and Reed, through Texon and Lonestar, operated a Ponzi-like investment scheme in which they paid dividends to existing investors with money raised from new investors.
Hammonds and Reed were indicted in Missouri on July 26, 2002, on nine felony counts of securities fraud and other charges arising from their involvement in Texon. They were charged by the Prosecuting Attorney of Boone County, Missouri, Kevin Crane, and the Missouri Commissioner of Securities with fraudulently offering and selling unregistered securities in Missouri and employing a sales agent without registration.
The judgment against Hammonds and Reed concludes the Commission's action. The Commission's case against Texon and Lonestar was previously settled. Through a court-appointed receiver, Texon and Lonestar, without admitting or denying the Commission's allegations, consented to the entry of a judgment, entered on July 8, 2002, by the U.S. District Court in Los Angeles, permanently enjoining them from future violations of the antifraud and securities registration provisions of the federal securities laws.
In 1994, Hammonds was enjoined by the Commission for his part in a similar oil and gas fraud in which investors were also falsely promised a 12% return. In 1996, Hammonds was barred by the Commission from the securities industry.
For further information, see Litigation Release No. 17231 (November 14, 2001).