SEC CHARGES OIL COMPANY, FOUNDER WITH SECURITIES FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 23239 / April 10, 2015

Securities and Exchange Commission v. Mieka Energy Corporation, et al., Civil Action No. 3:15-cv-01097-K (N.D. Tex. Dallas Division)

SEC Charges Texas Oil Company and Its Founder with Securities Fraud

On April 10, 2015, the Securities and Exchange Commission charged Mieka Energy Corporation of Flower Mound, Texas, and its founder and president Daro Ray Blankenship, with fraudulently offering oil and gas-related investments. The SEC also charged Mieka's publicly traded parent company, Vadda Energy Corporation, with fraud and reporting violations for deceptively touting the success of Mieka's investments. Two of Mieka's salesmen, Robert William Myers, Jr. and Stephen Romo, were charged with acting as unregistered brokers.

The SEC alleges that, between September 2010 and October 2011, Blankenship and Mieka raised $4.4 million from approximately 60 investors by selling interests in joint ventures that were to drill and complete two gas wells. The SEC further alleges that, in truth, Blankenship immediately spent all of the offering proceeds on unrelated expenses and projects, leaving no money to drill one of the promised wells, or complete the other well. Blankenship then misled investors about these facts through deceptive "investor update" newsletters and misleading public filings by Vadda, which he signed and certified.

Romo and Myers participated in the scheme by marketing and selling the joint venture interests to the public - for which they together received approximately $190,000 in commissions - without being registered as broker-dealers, or associated with any SEC-registered broker-dealer.

The complaint charges Blankenship and Mieka with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Vadda is charged with violating Sections 10(b) and 13(a) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. Blankenship also faces charges under Exchange Act Rule 13a-14, and for aiding and abetting and being a control person of Mieka and Vadda's violations. The SEC accuses Romo and Myers of violating Section 15(a) of the Exchange Act. The SEC seeks permanent injunctions against all defendants, as well as civil penalties, disgorgement of ill-gotten gains with prejudgment interest, and a bar against Blankenship ever serving as an officer and director of a public company.

The SEC's investigation was conducted by Jeffrey Cohen, Keith Hunter and Jessica Magee of the SEC's Fort Worth Regional Office. David Reece will lead the litigation.

TEXAS MAN AND COMPANIES CHARGED BY SEC WITH SELLING FRAUDULENT INVESTMENTS IN OIL AND GAS

FROM:  SECURITIES AND EXCHANGE COMMISSION 

SEC Charges Texas Resident and His Companies for Selling Fraudulent Oil and Gas Investments

On April 25, 2014, the Securities and Exchange Commission ("Commission") filed civil securities fraud charges against Guardian Oil & Gas, Inc. ("Guardian"), Guardian Oil & Natural Gas, Inc. ("GONG") and their principal, Rick D. Mullins. The charges stem from an alleged oil and gas offering fraud.

The Commission's complaint, filed in the U.S. District Court for the Northern District of Texas, alleges that between August 2010 and June 2013, Mullins, Guardian, and GONG raised approximately $6.5 million through the fraudulent offer and sale of securities to investors in the form of limited partnership interests in oil and gas programs.

According to the complaint, Mullins and Guardian failed to disclose to investors Guardian's deteriorating financial condition, including significant amounts owed on pre-existing bank loans. The Commission further alleges that defendants falsely represented to investors that their contributions would be used solely for the specific drilling project in which they had invested but instead, under Mullins's direction, Guardian and GONG redirected investor funds for other unrelated purposes. The complaint also alleges that defendants falsely represented to investors that they would directly receive revenue from the sale of any oil and gas production from the project in which they were invested when, in truth, operators were deducting from production revenue expenses due on other unrelated projects, a process known as "net checking." Moreover, according to the Complaint, Mullins made direct misrepresentations to investors. When, after collecting money from investors for one project and spending that money on unrelated expenses, Guardian was unable to obtain an interest in the oil and gas drilling project that it had purported to sell to investors, Mullins further lied to investors, telling them, among other things, that the well was unproductive and that Defendants had been approached by a possible purchaser of the partnership's interest. The Commission alleges that Defendants never disclosed that the investors' funds had been spent elsewhere and that Defendants had been unable to actually obtain an interest in the drilling project they sold.

The complaint alleges that Mullins, Guardian, and GONG violated Section 17(a) of the Securities Act of 1933 (Securities Act), and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The complaint seeks permanent injunctions and disgorgement of ill-gotten gains plus prejudgment interest against all Defendants, and civil penalties against Mullins.

The SEC's investigation was conducted by Akita Adkins, Ty Martinez, and Jim Etri of the SEC's Fort Worth Office. Matthew Gulde will conduct the Commission's litigation.