SEC v. Wellco Energy L.L.C., et al.
Case No. 09-cv-01114-MSK-KLM (D. Colo.)
On May 14, 2009, the SEC filed a complaint against Wellco Energy L.L.C. (“Wellco”), Justin William Rifkin (“Rifkin”), Patrick V. Looper (“Looper”), Richard G. Pacheco (“Pacheco”), and Dustin D. White (“White”) (collectively, the “Defendants’). The complaint alleged that the Defendants defrauded investors by misrepresenting Wellco’s role as the operator of the oil and gas projects, Rifkin’s experience in the oil and gas production, and Wellco’s intended use of investors’ funds. Among other things, Wellco's offering materials misrepresented that offering proceeds would be used to fund the drilling and completion operations of wells, when in fact less than half of investors' funds were used for that purpose. The complaint further alleged that, from approximately May 2007 through the filing of the complaint, the Defendants raised more than $1 million from investors in four Wellco offerings. Rifkin, Looper, Pacheco, and White solicited sales by cold-calling prospective investors nationwide, while not being registered with the Commission or associated with a registered broker-dealer. See Complaint.
On March 25, 2010, pursuant to his consent and without admitting or denying the allegations against him, the Court entered a final judgment as to Looper. The final judgment permanently enjoined Looper from violating Sections 5 and 17(a) of the Securities Act of 1933 (“Securities Act”), Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder, and found him liable for a total of $111,333.82 in disgorgement and prejudgment interest. Based on sworn representations in Looper’s Statement of Financial Condition and other documents and information submitted to the SEC, the Court did not order Looper to pay a civil penalty and payment of the $111,333.82 in disgorgement and prejudgment interest was waived. See Looper’s Final Judgment.
Also, on March 25, 2010, pursuant to his consent and without admitting or denying the allegations against him, the Court entered a final judgment as to Pacheco. The final judgment permanently enjoined Pacheco from violating Sections 5 and 17(a) of the Securities Act, Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, and found him liable for $71,194.44 in disgorgement and prejudgment interest. Based on sworn representations in Pacheco’s Statement of Financial Condition and other documents and information submitted to the SEC, the Court did not order Pacheco to pay a civil penalty and payment of the $71,194.44 in disgorgement and prejudgment interest was waived. See Pacheco’s Final Judgment.
On August 31, 2011, the Court granted the SEC’s motion for summary judgment against the remaining defendants and entered a final judgment as to Wellco, Rifkin, and White. The final judgment permanently enjoined them from violating Sections 5 and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. The final judgment found that Wellco and Rifkin were jointly and severally liable to pay a total of $1,612,377.00 in disgorgement, prejudgment interest, and civil penalties, and the assets frozen pursuant to the Court’s order entered on May 14, 2009 in the amount of $40,123.88 were ordered to be paid into the registry of the Court to be distributed upon later motion by the SEC. White was required to pay a total of $132,532.00 in disgorgement, prejudgment interest, and a civil penalty. See Wellco, Rifkin, and White’s Final Judgment.
The only funds received so far from any of the Defendants is $39,927.51 of the $40,123.88 in frozen assets ordered to be transferred from Wellco and Rifkin’s accounts to the Court’s registry. Of those funds, $175.84 was post-judgment interest and must be sent to the U.S. Treasury, leaving $39,751.67 of disgorgement in the distribution fund (“Distribution Fund”).
On February 5, 2016, the Court appointed Damasco & Associates LLP as the Tax Administrator to fulfill the tax obligations of the Distribution Fund.
On May 23, 2016, the SEC filed a motion to appoint a plan administrator and approve a plan of distribution, together with the plan of distribution. See the SEC’s Motion.
A hearing was held on August 23, 2016 regarding the SEC’s motion to appoint a plan administrator and approve a plan of distribution. Thereafter, on September 8, 2016, the Court entered an order appointing Michael S. Lim, a SEC employee, as the Plan Administrator to oversee the distribution of the Distribution Fund to injured investors and approved the plan of distribution, as revised therein (“Distribution Plan”). See Order Approving Distribution Plan and Distribution Plan.
The Distribution Plan is based on the Distribution Fund of the $37,751.67 paid to the Court registry, as it is not anticipated that any additional funds will be collected from the Defendants. The Distribution Plan provides for the distribution of the Distribution Fund to the Eligible Recipients who were harmed by the Defendants on a pro rata basis. The Plan Administrator has determined the Eligible Recipients and sent them a notice notifying them as such (“Notice”). Eligible Recipients had 30 days from the date of service of the Notice to notify the Plan Administrator of any objections to the Notice. The Distribution Plan requires the Plan Administrator to file a report as to whether objections were received to the Court within 60 days of the objections deadline. No objections were received. The Plan Administrator filed a report with the Court on October 25, 2016.
On January 18, 2017, the Court granted the SEC’s motion and adopted the SEC’s proposed order to disburse $35,057.91 from the Fair Fund for distribution to the 47 Eligible Recipients.
For more information, please contact the Plan Administrator:
Michael S. Lim, Senior Counsel, SEC, Office of Distributions
Telephone Number: 202-551-4659