A working interest in an oil and gas prospect that provides “annuity-like” payments? It’s a deceptive securities offering, according to an emergency cease and desist order entered by Securities Commissioner Travis J. Iles.
Energy Investment Partners LLC, a Dallas company, and John Robert “Bob” Flournoy, its principal, are accused of offering unregistered working interests in a well in the Maple Grove 2 Prospect in Manistee County, Michigan. Although oil and gas investments carry considerable risks, they are allegedly touting the profitability of the working interests by comparing them to annuities. According to the order, Energy Investment Partners and Flournoy are telling potential investors the working interests are “innovative oil & gas investment[s]” that provide “an ‘annuity-like’ distribution of payments.”
These purported payments are lucrative, and according to the order, Energy Investment Partners and Flournoy are telling potential investors they can “expect a 90% chance of returning the investment in 15 months.” It actually gets better, as they are also allegedly telling potential investors they can “expect a 90% chance of return on investment in 12 months.”
The comparison to annuities is misleading, according to the order. Annuities are contracts between purchasers and insurance companies often designed to protect retirees from the risk of outliving income, and their payments are not impacted by negative fluctuations in the price of oil. Purchasers of annuities are also not subject to the considerable risks associated with oil and gas investments.
According to the order, Energy Investment Partners and Flournoy are fraudulently concealing these considerable risks.
Energy Investment Partners and Flournoy have allegedly been advertising the working interests to the public through the company’s internet website. They are also allegedly advertising through DealStream, an online marketplace with more than 500,000 members that facilitates the offer and sale of real estate, oil and gas properties, investment opportunities, and other business-related goods and services.
Energy Investment Partners and Flournoy are not registered to sell securities in Texas, and their working interests are not registered or permitted for sale in Texas, according to the order. This isn’t the first incident of unregistered activity, according to the order, as they have previously been cited for operating without a securities license. The Pennsylvania Securities Commissioner previously entered a Summary Order to Cease and Desist against Energy Investment Partners and Flournoy.
The parties have 30 days to challenge the allegations in the order.
Please direct inquiries to Joe Rotunda, Enforcement Director, at email@example.com or 512-305-8392.