Litigation Release No. 16485 / March 24, 2000.
Securities and Exchange Commission v. Redbank Petroleum, Inc., et al. #3-99CV1267-T, USDC, NDTX (Dallas Division)
On March 21, 2000, a grand jury in the U.S. District Court for the Northern District of Texas (Dallas Division) returned an indictment against Brent A. Wagman, Warren L. Donohue and Margaret F. Swinney charging the defendants with two counts of securities fraud. The indictment stems from the fund-raising activities of Redbank Petroleum, Inc. and AmeriTech Petroleum, Inc., two Dallas-based companies which sold nine-month promissory notes to the general public from November 1996 through June 1999. The indictment alleged that the defendants made material misrepresentations and omissions to the public to encourage investments in Redbank and AmeriTech.
Mr. Wagman, the former president of Redbank and AmeriTech, is presently in the custody of federal authorities. On March 10, 2000 he was arrested in Panama and brought back to the United States to face criminal charges. He and his family had fled to Panama last summer after he was named in a parallel civil action brought by the Securities and Exchange Commission.
The Commission's complaint alleged that Redbank and Ameritech, at Wagman's direction, offered and sold approximately $30 million in so-called high interest corporate notes to investors in numerous states. The corporate notes were offered to retirees and others as risk-free investments with above market rates of return, and backed by an unconditional guarantee by an independent insurance company. In fact, no such guarantee existed. Rather than using investors' monies for the stated purposes, funds were diverted to fund the operations of several other entities under Wagman's control, and for personal expenses of Wagman. The defendants also used investors' funds as "Ponzi" payments to lull existing investors and to lure new ones.