The U.S. Securities and Exchange Commission filed civil securities fraud charges Friday against Rick D. Mullins and his companies — Guardian Oil & Gas, Inc. and Guardian Oil & Natural Gas, Inc.
The SEC said in a complaint filed in federal court in Texas that between August 2010 and June 2013, Mullins and his companies raised $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.”
Mullins and Guardian failed to disclose to investors Guardian’s deteriorating financial condition, including significant amounts owed on pre-existing bank loans, the SEC said.
The SEC said Mullins told investors their money would be used solely for the specific drilling project they had invested in.
But instead, the SEC said, the money was used “for other unrelated purposes.”
Mullins also allegedly told investors they would be paid directly from the sale of any oil and gas production.
But “in truth,” the SEC said, æoperators were deducting from production revenue expenses due on other unrelated projects, a process known as net checking.”
The SEC is asking the court for a permanent injunction against Mullins and recovery of any ill-gotten gains, along with civil penalties.