U.S. Securities and Exchange Commission
Litigation Release No. 21624 / August 12, 2010
Securities and Exchange Commission v. Jon C. Ginder, Northamerican Energy Group, Inc., and Northamerican Energy Group, Corp. Civil Action No. 4:10-cv-02867 (U.S.D.C Texas, Houston Division)
SEC Seeks Receiver in Alleged Houston Oil and Gas Fraud
On August 11, 2010, the U.S. Securities and Exchange Commission filed a complaint in the United States District Court for the Southern District of Texas, Houston Division seeking emergency relief including the appointment of a receiver, against Houston resident Jon C. Ginder ("Ginder") and two related oil and gas companies, Northamerican Energy Group, Inc. ("NEG") and Northamerican Energy Group Corp. (NEGC). The complaint alleges that from February 2008 to May 2010, trhe defendants fraudulently raised approximately $3.5 million from over 50 investors nationwide through unregistered oil and gas limited partnership offerings. Investors were solicited through television advertisements touting annual returns as high as 40% from low risk producing wells. The estimated returns were purportedly based upon historical oil and gas data. In fact, the complaint alleges that historical oil and gas production from the leases in the first two partnership offerings was very poor, and many of the wells had no recent production history.
In connection with the first, and largest offering that raised in excess of $2.4 million, investors were told that funds would be used only for partnership purposes, specifically to purchase leases and renovate existing wells to "further enhance monthly production." Contrary to these representations, the complaint alleges that $800,000 of investor funds were utilized to purchase leases from a private company Ginder controlled for an undisclosed profit of approximately $700,000 in cash plus an additional ten partnership units worth $60,000 per unit — in essence an undisclosed profit of $1.3 million. Further, without the partners' approval, it is alleged that Ginder withdrew $300,000 from the partnership's operating account to make an unsecured and non-interest bearing "loan" to a penny stock company operated by a personal friend and in which Ginder owned stock. The general partner has also borrowed over $478,000 from the partnership. None of these funds were repaid to the partnership. Ginder also paid at least $210,000 of investor funds for the television advertising campaign that generated investor leads.. None of the above expenditures, which total approximately 70% of the offering proceeds, were approved by investors.
In connection with another offering that raised approximately $900,000, it is alleged that the defendants made material misstatements and omissions concerning the identity of the general partner, and the defendants' prior oil and gas activities.
The complaint alleges that the defendants violated the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and the anti-fraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief, the complaint seeks preliminary and permanent injunctions, disgorgement plus prejudgment interest and civil monetary penalties.
See Also: SEC Complaint