U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23732 / January 27, 2017
Securities and Exchange Commission v. Brian S. Hudnall, et al., Civil Action No. 17-cv-0059 (W.D. Mo. January 27, 2017)
SEC Charges Missouri Company and Its President in Oil-And-Gas Scheme
A Kansas City, Missouri company and its president have agreed to pay over $11 million to settle charges by the Securities and Exchange Commission that they orchestrated an oil-and-gas fraud.
According to the SEC's complaint, filed in the U.S. District Court for the Western District of Missouri, JBH Consulting Group, LLC and its president and CEO, Brian Hudnall, raised over $14 million in at least 18 fraudulent oil-and-gas joint ventures. The SEC alleges that JBH and Hudnall provided investors with offering documents that contained untrue and misleading statements about the investments. For example, according to the complaint, the documents misrepresented who held title to the working interests, overstated expected well costs, misrepresented the use of the offering proceeds, and failed to disclose preferential treatment given to certain investors. In addition, the complaint alleges that Hudnall acted as an unregistered broker-dealer.
The SEC's complaint charges JBH and Hudnall with violations of 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 also charges Hudnall with violating Section 15(a) of the Exchange Act. Without admitting or denying the allegations in the SEC's complaint, JBH and Hudnall have each consented to the entry of a final judgment permanently enjoining them from violating those provisions of the federal securities laws. Hudnall has consented to an industry bar in a related administrative proceeding. JBH and Hudnall also agreed to pay disgorgement totaling $10,701,811.92 plus prejudgment interest of $1,218,628.19. JBH and Hudnall also agreed to pay civil penalties of $160,000 each. The settlements are subject to court approval.