SEC Brings Charges Over Unregistered Offerings of Conservation Easement Investments
Litigation Release No. 25464 / August 10, 2022
Securities and Exchange Commission v. GreneCo, LLC, Gene D. Larson, Gregory K. Womack, and Womack Investment Advisers, Inc., No. 5:22-cv-00673-F (W.D. Okla. filed August 8, 2022)
The Securities and Exchange Commission today charged an Oklahoma company and its owners, as well as an affiliated investment adviser, with securities law violations relating to unregistered offerings of interests in conservation easement investments.
The SEC's complaint, filed in the U.S. District Court for the Western District of Oklahoma, alleges that GreneCo, LLC and its owners, Gene D. Larson and Gregory K. Womack, raised approximately $23 million from more than 250 investors in 2017 and 2018 through four unregistered securities offerings involving conservation easements. The offerings provided investors with multiple investment options, including an election to take charitable tax deductions if the real estate acquired with their investment funds was donated to a land trust for purposes of a conservation easement. Under the Internal Revenue Code, conservation easements allow real property to be donated to qualified organizations, which may generate federal and state tax deductions for the investor.
The SEC's complaint further alleges that Womack and his investment adviser, Womack Investment Advisers, Inc. (WIA), failed to disclose compensation received from WIA clients who invested in GreneCo's offerings. According to the SEC, Womack received approximately $6 million in management fees from the GreneCo offerings, a fact not disclosed to the eight WIA clients who invested in the offerings. The complaint also alleges that WIA's annual disclosures falsely stated that it did not receive any compensation from GreneCo when, in fact, it had received $160,000 in such compensation, partly attributable to investments by WIA clients. As alleged, these fees and compensation created conflicts of interest that Womack and WIA, as fiduciaries, were required to disclose to their clients.
The SEC's complaint charges GreneCo, Larson, and Womack with violating the securities registration provisions of Section 5 of the Securities Act of 1933, and Womack and WIA with violating the antifraud provisions of Section 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the SEC's allegations, GreneCo, Larson, and Womack agreed to be permanently enjoined from violating these statutory provisions and to pay civil penalties of $414,364, $41,440, and $186,471, respectively. Womack also agreed to pay disgorgement of $236,349 plus prejudgment interest. And WIA agreed to pay disgorgement of $160,000 plus prejudgment interest and a civil penalty of $517,955. The settlement is subject to Court approval.
The SEC's investigation was conducted by Derek Kleinmann, Carol Hahn, and Jamie Haussecker and supervised by Sarah S. Mallett, Jim Etri, and Eric R. Werner of the SEC's Fort Worth Regional Office. The SEC's litigation is being conducted by David B. Reece and supervised by B. David Fraser. The SEC acknowledges the assistance and cooperation of the Oklahoma Department of Securities.