U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17253 / December 3, 2001
SECURITIES AND EXCHANGE COMMISSION v. TEXON ENERGY CORPORATION, LONESTAR PETROLEUM CORPORATION, JAMES E. HAMMONDS aka JAKE HAMMONDS aka JAKE DAVIS and BARRY V. REED (Case No. CV-01-09706-LGB(MANx) (C.D.Cal.)
The United States Securities and Exchange Commission ("Commission") announced that on November 30, 2001, the Honorable Lourdes G. Baird, United States District Judge for the Central District of California, issued an order of preliminary injunction involving a $1 million securities fraud by Barry V. Reed ("Reed"), age 56, of Las Vegas, Nevada, the president of Texon Energy Corporation ("Texon"). The Court: (1) granted the Commission's application for a preliminary injunction; (2) froze the assets of the defendant; (3) prohibited the destruction of documents by the defendant; and (4) ordered an accounting from the defendant.
The Commission's complaint, filed November 13, 2001, alleges that since 1998, Reed, along with Texon, Lonestar Petroleum Corporation ("Lonestar"), and James E. Hammonds ("Hammonds"), raised over $1 million from investors, purportedly for investments in oil and gas wells, and promising investors a monthly dividend equal to 12% per year. In fact, the defendants are operating a Ponzi-like scheme in which they are making payments to existing investors with the money that they raise from new investors. As part of the defendants' sales pitch in September and October 2001, the defendants have tried to capitalize on the September 11th tragedy by telling elderly investors, that because of "the War," the demand and price of oil would increase and Texon is in a "good position" to benefit from all of this because it purchases domestic oil and gas wells.
The Commission obtained an order preliminarily restraining Reed from committing securities fraud in violation of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Court's order also preliminarily restrains the defendants from committing violations of the securities registration provisions of Sections 5(a) and 5(c) of the Securities Act.
The Commission obtained an order of preliminary injunction against Texon, Lonestar, and Hammonds on November 21, 2001.
In addition to the interim relief granted on November 30, 2001, the Commission seeks a final judgment against all the defendants enjoining them from future violations of the foregoing securities registration and antifraud provisions, and ordering the defendants to disgorge all ill-gotten gains, and assessing civil penalties against them.