Texas and Kentucky securities regulators entered emergency orders on Sept. 16 to stop the offering of unregistered investments in an oil-drilling program in Southern Illinois that promises to produce oil wells with a minimum return of 100% within two years and monthly income for 20 years.
According to the orders, Kelcas Corp. of Owensboro, Ky., and CEO Wilhelm Lilliehöök are using sales agents to solicit Texas investors for an oil drilling project in the Illinois Basin, a geological formation underlying much of Illinois and parts of Kentucky and Indiana.
The Texas order alleges widespread registration and disclosure violations of the Texas Securities Act, including Kelcas and its salespeople telling potential investors that the drilling will be handled by a separate company. Kelcas is representing that this energy company is a top producer in the Illinois Basin and has won numerous industry awards.
In fact, the order alleges, the company is not the operator of the drilling program. Kelcas Well Services Ltd., owned by Lilliehöök, is the operator, a connection not being disclosed to investors.
The Texas State Securities Board previously investigated Kelcas and Lilliehöök in connection with the offering of unregistered securities to Texas residents. The investment was tied to the drilling of an oil well in the Illinois Basin.
The Enforcement Division in 2013 determined that Kelcas and Lilliehöök offered, but did not sell to Texas residents, the Illinois Basin securities, and warned them of the need to comply with state registration and disclosure requirements.
The current Texas order alleges that Kelcas and Lilliehöök are paying a sales agent named Hok-Lam Chan to sell the oil-drilling investment. Hok-Lam Chan, a director of HOK Global Consulting, is soliciting Texas investors through LinkedIn, a global online networking platform.
According to the order, Kelcas is soliciting $975,0000 to complete one in a series of wells in the Illinois Basin. The minimum investment is $25,000.
Hok-Lam Chan and HOK Global are telling potential investors that an investment of $100,000 should generate a return of $72,200 after one year, $113,266 after two years, and continuing toward a cumulative return of $166,841 after five years.
At a minimum, HOK Global is telling investors, the working interests will provide a guaranteed return of 10% per year over a period of at least three years.
According to the Kentucky order, Hok-Lam Chan told one potential investor that this “minimum revenue guarantee” is included in the company’s sales documents to “give the investor more comfort when investing.”
Hok-Lam Chan told one potential investor in Texas that the guarantee “has never been used in the company history.”
Neither Kelcas nor HOK Global are providing any financial information or operating history about Kelcas Well Services that would allow investors to evaluate the investment.
None of the parties named in the order are registered to sell securities in Texas or Kentucky and the working interests have not been registered for sale or qualify for an exemption.