UNITED STATES OF AMERICA
In the Matter of
MICHAEL D. YOUNG
|ORDER MAKING FINDINGS AND
IMPOSING REMEDIAL SANCTIONS,
AND ORDER TO CEASE AND DESIST
In these proceedings instituted pursuant to Section 8A of the Securities Act of 1933 ("Securities Act"), and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), Respondent Michael D. Young ("Young") has submitted an Offer of Settlement ("Offer"), pursuant to Rule 240 of the Rules of Practice of the Securities and Exchange Commission ("Commission"), which the Commission has determined to accept.1 Solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the Commission or in which the Commission is a party, prior to a hearing, and without admitting or denying the findings contained herein, except those contained in Sections II A. and B. below, and the jurisdiction of the Commission over himself and over the subject matter of these proceedings, which are admitted, Young consents to the issuance of this Order Making Findings and Imposing Remedial Sanctions, and Order to Cease and Desist ("Order").
On the basis of this Order and the Offer submitted by Young, the Commission finds that:2
A. Chief Exploration & Development Corporation and Chief Marketing LLC (collectively "Chief"), were two Texas corporations organized in April 1996, to offer and sell securities in the form of fractional undivided interests in oil and gas leases. From April through September 1996, Chief offered and sold interests in a two (2) well program identified as the Rollins-Church Prospect on an oil and gas lease in Louisiana. During this period Chief sold $854,000 in interests in the Rollins-Church Prospect to 75 investors.
B. Young, age 30, is currently a resident of Las Vegas, Nevada, and was employed by Chief as a telephone salesperson during the period from June through September 1996. Neither Young nor Chief was registered with the Commission as a broker or dealer during the period from June to September 1996, or at any other time.
C. From June through September 1996, Young willfully violated Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in that, in the offer or sale, or in connection with the purchase or sale, of securities, specifically, interests in the Rollins-Church Prospect, by use of the means or instrumentalities of interstate commerce or by use of the mails, he directly or indirectly: employed devices, schemes or artifices to defraud; obtained money or property by means of, or made, untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and/or engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon the purchaser, as more fully described herein.
D. Young knew that oil and gas investments were risky and speculative and that Chief's petroleum engineer had projected that Rollins-Church Prospect had a "maximum" potential annual return on investment of twenty (20%) percent and a total return on investment of three hundred (300%) percent over seven (7) to ten (10) years. Young nevertheless made material misrepresentations about the risks associated with and the expected return from this investment to prospective investors by telling them that Rollins-Church Prospect:
E. Young also knew that Chief would profit regardless of whether the two wells ever produced. Specifically, Young stated that he knew that representations in the offering materials that estimated the two wells in the Rollins-Church Prospect would cost $900,000 to drill, test and complete, were false; in fact, he knew cost estimates to drill, test and complete each well totaled $450,000. Not only did he fail to disclose this fact to prospective investors, he also told them that Chief would not make any money until the investors had recouped their entire investment.
F. Young earned commissions of $11,500 from the sale of 12.5 units ($112,500) to 14 investors. His only responsibilities with Chief were to offer and sell its securities, as a telephone sales person.
G. From June through September 1996, Young willfully violated Section 15(a)(1) of the Exchange Act, in that, he used the telephone or mails to effect securities transactions without being registered with the Commission as a broker, as defined in Section 3(4) of the Exchange Act to include any person, other than a bank, that is engaged in the business of effecting transactions in securities for the accounts of others, as more fully described herein.
Young has submitted a sworn financial statement and other evidence and has asserted his financial inability to pay full disgorgement of $11,500, prejudgment interest, or a civil money penalty, in this matter. The Commission has reviewed the sworn financial statement and other evidence provided by Young, and has determined that he has the financial ability to pay only the sum of $5,000.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the sanctions that are set forth in the Offer submitted by Young.
Accordingly, IT IS ORDERED that:
A. Young is barred from association with any broker or dealer, with the right to reapply for association after 36 months to the appropriate self-regulatory organization or, if there is none, to the Commission.
B. Young shall cease and desist from committing or causing any violation or any future violation of Section 17(a) of the Securities Act, or Sections 10(b) or 15(a)(1) of the Exchange Act, or Rule 10b-5 thereunder.
C. Young shall pay disgorgement in the amount of $11,500, with prejudgment interest thereon, but payment of all but $5,000 of such amount is waived, and no civil money penalty shall be imposed, due to his financial inability to pay. Young shall, within 90 days of the entry of this Order, pay $5,000 to the United States Treasury. Such payment shall be: (1) made by United States postal money order, certified check, bank cashier's check or bank money order; (2) made payable to the Securities and Exchange Commission; (3) hand-delivered, mailed or couriered to the Comptroller, Securities and Exchange Commission, Operations Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312; and (3) submitted under cover letter that identifies Young as a Respondent in these proceedings, the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Harold F. Degenhardt, District Administrator, Fort Worth District Office, Securities and Exchange Commission, 801 Cherry St., 19th Fl., Fort Worth, TX 76102.
D. The Division may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Young provided accurate and complete financial information at the time such representations were made; (2) determine the amount of the civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Young's Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information Young provided was fraudulent, misleading, inaccurate or incomplete in any material respect. Young may not, by way of defense to any such petition, contest the findings in this Order or the Commission's authority to impose any additional remedies that were available in the original proceeding.
By the Commission.
Jonathan G. Katz
|1||The Commission issued an Order Instituting Proceedings against Young on May 25, 1999.|
|2||The findings herein are made pursuant to Young's Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.|
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