SEC Charges Two Oil and Gas Executives with Defrauding Retail Investors
Litigation Release No. 24538 / July 18, 2019
Securities and Exchange Commission v. William J. Milles, Jr. and Donald J. Lutzko, No. 1:19-cv-00714 (W.D. Tex., filed July 17, 2019)
On July 17, 2019, the Securities and Exchange Commission charged Pennsylvania resident William Milles and Canadian resident Donald Lutzko with running an oil and gas offering fraud and related Ponzi scheme targeting retail investors.
According to the SEC's complaint, from July 2014 to July 2016, Milles and Lutzko raised at least $3.9 million from approximately 70 investors by offering and selling interests in five oil and gas projects managed by Capital Energy Group, LLC, a company they founded and controlled. The complaint alleges that Milles and Lutzko guaranteed investors returns of 227% to 363% and grossly overstated each project's past and current oil and gas production. In reality, most of the wells failed to produce any oil or gas and none ever produced any revenue. The complaint further alleges that Milles and Lutzko used investor funds to make Ponzi-style payments to investors, pay personal credit card bills and rent, and transfer funds to family members and related companies.
The SEC's complaint, filed in the United States District Court for the Western District of Texas, Austin Division, charges Milles and Lutzko with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act. The complaint seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties.
The SEC's investigation was conducted by Sarah Mallett and supervised by Jim Etri of the Fort Worth Regional Office. The SEC's litigation is being led by Jason Reinsch, Ms. Mallett, and Mr. Etri, and supervised by B. David Fraser.