A Dallas, Texas oil and gas exploration company co-owned by former 5th District Congressman Vance McAllister was charged by the Securities and Exchange Commission last week with defrauding at least 80 investors out of more than $8 million.
The SEC alleged that Texas Coastal Energy Co. LLC and its chief executive officer, Jefferey A. Gordon, 37, of Dallas, defrauded the investors through a scheme involving various unregistered securities offerings tied to purported oil and gas well drilling projects.
In its 15-page complaint filed June 19, the SEC claimed Gordon and Texas Coastal cold-called investors across the country, soliciting their interest in financing the drilling and completion of oil-and-gas prospects in Kansas and Texas in exchange for a share of future oil-and-gas production revenue.
According to the SEC’s complaint, Gordon and Texas Coastal used a combination of false and misleading offering materials and sales pitches to deceive investors. In one instance, Gordon altered a geologist’s structure map to make projects look more desirable on two projects, the SEC claimed.
Among other things, Gordon and TCEC lied to investors about Texas Coastal’s experience and track record, the advice and success rate of its geologists, the potential reserves on its prospects, the potential return on investments therein, and the manner in which Texas Coastal would use investor funds, according to the SEC complaint.
“TCEC’s salespeople, using information provided by Gordon, told potential investors that TCEC’s most recent project was returning $4,000 to $5,000 per month on a $50,000 investment. In reality, none of TCEC’s projects provided this amount of return on a $50,000 investment,” stated the SEC’s complaint.
Though investors lost almost every dollar invested, Texas Coastal and Gordon misappropriated over $2.6 million of investor funds for their own use, according to the SEC’s complaint.
at Texas Coastal
McAllister claimed an income of some $100,001 to $1 million from Texas Coastal Energy Co. in 2014, according to a financial disclosure report. At that time, McAllister had a 50-percent ownership interest in the company along with Jeff Gordon, CEO at Texas Coastal. McAllister has told local media outlets he was a “silent partner” at Texas Coastal.
McAllister’s political career fizzled after The Ouachita Citizen published a news report and video in early 2014 showing the then-congressman kissing member of his congressional staff, who was married.
In 2014, McAllister touted himself as a wealthy businessman, though The Ouachita Citizen published a handful of news reports revealing McAllister’s questionable finances and debt. As reported by this newspaper in February 2016, Texas Coastal came under investigation by a government regulatory agency resulting from unspecified activities by Gordon and McAllister, according to a lawsuit filed by Andrew Gautreaux at Dallas County Civil Court in November 2015.
In late 2014, the state of Texas revoked Texas Coastal’s charter in light of the company’s delinquent filings including unpaid franchise taxes.
After Texas Coastal’s charter was revoked, one of the company’s former employees, Taylor Stilovich, filed a legal complaint against Texas Coastal and Gordon, alleging misuse of investor funds, illegal drug use and “reckless and vulgar sexual misbehavior with company employees.”
As reported by National Review Online in October 2014, Stilovich accused the company of acting in a “Wolf-of-Wall-Street-type environment replete with illegal drugs, high-stakes gambling, prostitutes, extramarital interoffice affairs, and ubiquitous sexual innuendo.”
Stilovich claimed Texas Coastal’s “company culture...revolved around partying, gambling, illegal drug use, alcohol abuse, and the sexual exploits of its CEO Jeff Gordon.”
Stilovich later reached an “amicable resolution” with Texas Coastal and claimed his allegations did not concern McAllister, personally or professionally.
Meanwhile, The Dallas Morning News reported last week that in addition to the SEC complaint, Texas Coastal and Gordon were sued last year for failing to pay the lease on a Tesla Model S car. A default judgment was entered against Texas Coastal, Gordon and McAllister in that case, The Dallas Morning News reported.
SEC reaches settlement
According to its news release last week, the SEC also reached a settlement with Gordon and Texas Coastal in Securities and Exchange Commission v. Texas Coastal Energy Company LLC and others.
Under the settlement, Texas Coastal and Gordon neither admitted or denied the SEC’s allegations, though each party consented to the entry of a final judgment that permanently restrains and enjoins them from violating these provisions.
Texas Coastal and Gordon also agreed to be restrained and enjoined from certain activities in connection with the purchase, offer and sale of securities in the future.
Additionally, Texas Coastal and Gordon will be ordered to pay disgorgement, prejudgment interest and civil penalties totaling $7.2 million.
The SEC’s investigation was conducted by Christopher Reynolds and Melvin Warren, with assistance from Joseph Dugan and Janie Frank, and supervised by Scott F. Mascianica, David Reece and Eric R. Werner.