U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21031 / May 8, 2009
Securities and Exchange Commission v. Hartmut Theodor Rose and James Patrick Reedy, Civ. Action No. 3:09-cv-00857-G (United States District Court for the Northern District of Texas, Dallas Division)
On May 7, 2009, the Securities and Exchange Commission filed a civil injunctive action in the United States District Court in Dallas against Hartmut T. "Hardy" Rose and James Patrick Reedy for their fraudulent offers and sales of oil and gas interests. The Commission's complaint alleges that, between August 2003 and August 2005, Rose and Reedy, acting through Geo Companies of North America, Inc., Geo Natural Resources, Inc. and Geo Securities, Inc., a broker-dealer registered with the Commission (collectively "Geo"), raised more than $10 million from over 300 investors nationwide. The complaint further alleges that Rose and Reedy made numerous material false and misleading representations and omissions in connection with the offers and sales of the joint venture interests. Among other things, the complaint charges that Reedy touted Geo's successful track record, when, in reality, Geo had very few wells that produced in commercial quantities. Additionally, the Commission alleges that, in several instances, Rose and Reedy solicited investors for funds to complete wells, without disclosing that Geo's geologists advised against completing them. Finally, the complaint alleges that Rose and Reedy solicited investors for additional funds by falsely portraying prior wells as "successful," when the wells were dry holes.
The complaint alleges that Rose and Reedy violated 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. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and civil penalties against Rose and Reedy.
Without admitting or denying the Commission's allegations, Rose has consented to a permanent injunction against future violations of the registration and antifraud provisions. Rose also agreed to pay disgorgement of $58,914, prejudgment interest of $22,749.29 and a $50,000 civil penalty. Litigation continues against Reedy.