SEC sues Denver oil and gas firm, alleging Ponzi scheme
According to the Denver Post, Federal regulators have filed suit against a Denver-based oil and gas exploration company and four of its officials, accusing them of a "Ponzi-like" scheme that may have left roughly 200 investors out a total of more than $62 million.
The U.S. Securities and Exchange Commission sought injunctions to stop St. Anselm Exploration Co. and four of its officials from selling high-interest promissory notes that it alleged were being used to finance payments to earlier investors.
In numerous cases since 2007, federal regulators alleged, St. Anselm's employees represented that the company's oil and gas investments would generate "sufficient cash to service debt and provide a return on investment."
But in reality, the company was instead funneling cash from new sales into payments owed to previous investors as its debt expanded dramatically — a scheme that collapsed in July, according to filings in federal court.
As of Sept. 30, the company owed $62,270,390 to investors, according to the Securities and Exchange Commission.
Several high-profile Ponzi schemes have emerged in Colorado over the past two years. Sean Mueller is serving a 40-year sentence for bilking investors, including former Denver Bronco John Elway, and Shawn Merriman is serving 12 1/2 years for luring friends and church acquaintances into an investment scheme.
The civil lawsuit filed in federal court in Denver against St. Anselm also named four officials:
• Michael A. Zakroff, 64, the founder of St. Anselm who was its secretary, treasurer and business manager.
• Anna M.R. Wells, 54, a professional geologist who was St. Anselm's president.
• Mark S. Palmer, 60, a professional geologist who was the company's vice president.
• Steven S. Etkind, 64, a company employee who was responsible for selling promissory notes.
Messages left Friday afternoon with Zakroff and with an attorney who represents the company in another case were not returned.
Zakroff and Wells are married but in the midst of a divorce, according to Colorado court records.
According to court records, company officials exchanged e-mails acknowledging that they needed to continue attracting new investors or they would not be able to make payments due to old ones.
At the same time, federal regulators alleged that Wells and Palmer were paid "substantial" shareholder distributions between 2007 and 2010 — $12.4 million for Wells and $6.9 million for Palmer. No criminal charges have been filed. However, other cases that have resulted in criminal charges began with civil suits similar to the one filed against St. Anselm and its officials.
Colorado court records show that Zakroff and Wells have each been the subject of multiple civil suits in Colorado, some alleging breach of contract.
The company and Wells and Palmer are the subjects of a separate civil suit filed in federal court in New Mexico.
In that case, an investor named Jimmie Davis alleged that the company failed to pay back $250,000 owed to him as well as interest he is due.
"It's a pretty straightforward case," said Richard H. Cravens, an Albuquerque attorney who represents Davis. "My client loaned them money, and they won't pay."
Source: Denver Post