SEC Sues Head of Pipeline Firm for Stock Fraud
The Securities and Exchange Commission has accused a Long Beach man of committing stock fraud while raising about $2 million for a long-projected oil pipeline from Southern California to Texas.
A suit filed last week in U.S. District Court here named as defendants Cecil R. Owens and Pacific & Texas Pipeline & Construction Co., which he founded and which he heads. Both Owens and the company consented to entry of permanent injunctions without admitting or denying the allegations in the complaint.
Between 1981 and 1985, Owens and the company allegedly raised the money from at least 160 investors by selling unregistered stock.
Defendants represented that investors of at least $5,000 would get a 500% return on their money beginning as early as March, 1985, the suit said, adding that the investors haven’t seen a single dollar of return.
Some investors also were promised construction jobs on the pipeline, but those too failed to materialize, according to the complaint.
No Details on Financing
The court ordered the company, among other things, to give investors a full accounting of its business activities within 90 days. It forbade Owens or the company to sell unregistered stock or to use any scheme to defraud securities purchasers. Owens also agreed to waive $413,000 in back salary due him from the firm as of March 31 for services from 1982 through 1986.
In December, 1982, the company claimed to be in the “final stages” of securing financing for a 1,026-mile pipeline to carry crude oil from Long Beach to Midland, Tex. Owens, who declined to give a reporter details of the financing, said that the company hoped to begin construction in early 1984 and complete it as soon as 14 months later.
Gerald Boltz, former SEC regional commissioner here, who represented Owens in the lawsuit, said Tuesday that since the period covered by the complaint, Owens has obtained many permits and clearances for the pipeline. Boltz said the firm has financing prospects that make the pipeline “much more likely.”
The suit, which said Owens maintains residences in Phoenix as well as in Long Beach, said he and the company failed to disclose to investors that Pacific Texas paid out about $469,000 on his behalf for “among other things, travel, living expenses, lobbying and entertainment, political contributions and various business expenses.”
The suit said a letter signed by Owens and mailed to investors in December, 1984, represented that Owens “had supported” Pacific Texas for four years with “no salary.”
Pipeline Promoted
Shortly after that letter went out, the defendants offered investors an opportunity to rescind their investments, the suit said.
However, it added, they “continued to promote the pipeline project” in two memoranda on that subject sent to investors in December, 1984, and June, 1985. Among other things, the suit said, the defendants distributed a purported audit report. In fact, the suit said, the report was prepared by the company, Owens and others, not by any independent auditor.
As of last June 1, the complaint said, investors had not received any audited financial statements for any period of Pacific Texas’ existence. Under the injunction, the company is to disclose to stockholders such things as a description of any transactions involving $60,000 or more since Jan. 1, 1986, in which the company or any officers or directors have a direct or indirect interest.
