The Securities and Exchange Commission (SEC) filed a civil action charging Matthew Griffin and William Griffin with fraudulently offering two Texas oil and gas partnerships – Payson Petroleum 3 Well 2014. The SEC alleges that between November 2013 and July 2014 the Griffins conducted a fraudulent offering of interests raising $23 million from approximately 150 investors for the purpose of developing three oil and gas wells. The SEC claims that the Griffins misled investors about Payson’s promised participation in the program and other aspects of Payson’s compensation as the program’s sponsor and operator.
According to the SEC, the Griffins authorized offering materials containing numerous misrepresentations and omissions including: i) that Payson would contribute an up-front 20% of the offering amount in the amount of $5.4 million and that this capital infusion would cover 20% of the cost of the wells; ii) that Payson’s consideration as program sponsor/operator/co-investor would be limited to 20% of any petroleum revenue generated by the wells; and iii) that Payson would cover any cost overages beyond the estimated $24 million.
The SEC found these representations to be false because Payson contributed no money to the offering and paid nothing toward the well costs and moreover Payson lacked the financial means to pay even the smallest cost overage. The program later declared bankruptcy.