SEC: Dallas energy firm puffed up assets LITIGATION
Sep 13, 2007 (Fort Worth Star-Telegram - McClatchy-Tribune Information Services via COMTEX) -- Terax Energy, a small Dallas energy company that boasted of its Barnett Shale production, is at the center of a lawsuit filed by the Securities and Exchange Commission against the company, two Los Angeles residents and the Beverly Hills oil company they control.
Early Wednesday, the SEC temporarily suspended trading in Terax shares, which are traded over the counter, saying "questions have been raised about the accuracy and adequacy" of the company's disclosures of its operations, financing, pending transactions and "the identity of the persons in control of the operations and management of Terax."
The agency later sued in Dallas federal district court, claiming fraud and seeking to freeze the defendants' assets.
According to the SEC's complaint, Mark Roy Anderson, 53, a felon and disbarred lawyer, in late 2006 solicited a Dallas resident in an effort to raise $5 million for Westar Oil of California. The offering promised a "huge play" in Nye County, Nev., that would increase Westar's value tenfold.
By March, 30 of the Dallas resident's friends and relatives, most of them Texans, had invested just over $1 million in Westar. Five later sought and received refunds totaling $170,000, the suit says.
On May 1, the suit alleges, Linda Contreras, an Anderson associate and the new chief executive of Terax, filed an SEC report announcing that Westar had agreed to buy 55 percent of Terax's shares. On June 8, Terax issued a news release announcing that it was extending its leases in Erath County, southwest of Fort Worth, and expected six wells to generate more than $750,000 per month in oil and gas within 30 days.
But the SEC said that on June 1 the owner of Erath County mineral rights had told Terax that he was terminating the leases for failure to pay royalties and had locked the company out of the well sites, and on June 6 the leases were put into receivership. Texas Railroad Commission records, the agency charged, showed that the wells operated only a few months in mid-2006 and produced only about $100,000 worth of petroleum before being shut in.
A phone call to Westar's offices was not returned. Terax officials also could not be reached.
In its previous disclosures, Terax claimed to hold 27,500 gross acres in Erath and Comanche counties, which are on the western edge of the Barnett Shale. Of the nearly 200 drilling rigs working in the Barnett Shale as of Sept. 7, four are in Erath County and none are in Comanche County, according to RigData.
Terax's shares were at $2.65 when trading was suspended. In the past year they have traded as high as $15, one year ago, and as low as 13 cents, in April.
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Jim Fuquay, 817-390-7552
jfuquay@star-telegram.com
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Jim Fuquay
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