SEC files lawsuit against Chris Faulkner and his companies

According to the charges filed by the SEC, Faulkner’s inflated projections drew in large investors. He used the money for personal gratification, including visit to strip clubs and private escort services. His companies have inflated their revenues and have little to show for actual production.

According to the U.S. Securities and Exchange Commission, Chris Faulkner, the Texas based oil magnet who is known for his high-profile public persona, has cheated investors to the tune of $80 million to fund his “debauched” jet-setting lifestyle.

The Securities and Exchange Commission filed a lawsuit last week alleging Faulkner’s companies of stunning failure of corporate governance. It has alleged that his companies have grossly inflated oil and gas revenues and in the process have lured hundreds of investors to back his ventures. Their investments have however used only to fund his personal expenses and those of his associates, friends and family.

Earlier in early 2000s, Faulkner had faced a spate of lawsuits in connection with his web hosting venture. The boom of the U.S. shale oil drew his attention and his companies boasted of holding prime drilling real estate in regions including North Dakota, Texas and Oklahoma.

As per the SEC, although investors poured in funds, Faulkner did hardly any drilling; instead he racked up millions in credit card charges.

The SEC has now charged Breitling CEO Faulkner, three related companies along with seven other people for activities he started in 2011.

Earlier Faulkner had projected himself as a “Frack Master,” and hogged the limelight with the media offering rosy projections about shale drilling and the rosy projections of his own companies’ prospects.

According to charges filed by the SEC, Faulkner used investors’ funds to charter planes, lavish meals, strip clubs and even escort services. In the process, as per the SEC, Faulkner, his friends and associates violated numerous securities laws. His firms, including Breitling sold investments in more than 20 oil and gas prospects in several states. The companies not only exaggerated their earning potentials but also booked ghost drilling expenses.

According to the SEC, the solicitations of his companies to investors were “replete with material misrepresentations and omissions,”

However, Larry Friedman, Breitling and Faulkner’s lawyer has refuted the charges saying they “inaccurate and untrue,”

According to Friedman, Faulkner’s companies have raised hundreds of millions of dollars for legitimate ventures and yet no investor has ever lodged a complaint.

None of Faulkner’s companies named in the SEC charges have responded to requests for comments. Faulkner has also not responded to requests for comments.

Faulkner and his companies came in the SEC’s radar in 2014, when its former auditor quit and Breitling Energy failed to file its detailed quarterly and annual financial statements with the agency. The SEC has been investigating Faulkner and his activities since then.

Although Breitling has continued to tout of his drilling plans, his actual productions are not clearly stated.

As per the SEC charge Faulkner has personally misappropriated $30 million. Additionally, executives and his board members in his companies did not sufficiently question his expenses, which, incidentally, were not disclosed to investors, as per the SEC.

According to the suit, Faulkner had dubbed one of his corporate credit cards as a “whore card,” the SEC has alleged. In 2014, within a span of two months Faulkner had charged more than $1 million on travel expenses and entertainment including visits to strip clubs.

As per the SEC, Faulkner has also spent almost a million dollars with the Status Luxury Group, a New York-based private concierge service.

Incidentally, the Status Luxury Group had sued Faulkner last year over unpaid bills for around $240,000.

Although Friedman has responded to these charges by saying “Nobody can spend $30 million on steak and travel.” He however attempted to justify the expenses saying, “But this is a competitive business and you spend money to make money. There’s entertainment, there’s international travel.”

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Categories: HR & Organization, Regulations & Legal, Strategy

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