Energy Exploration International Inc. has raised more than $12 million from foreign investors, through sales agents who say — or imply– that they’re working from the oil and gas company’s Dallas headquarters.
But when Sharesleuth paid a surprise visit to EEI, a manager struggled to explain why the offices were virtually empty. It was the middle of the morning, and the entire sales team was missing. So was the company’s president, Curtis A. Best. The man responsible for EEI’s well operations, Robert H. Hucklebridge, wasn’t there either.
That was the very scene we expected, though. A Sharesleuth investigation found that the people selling partnership interests in EEI’s drilling ventures were actually calling from telemarketing “boiler rooms” overseas, and that many were operating under false names.
Among Sharesleuth’s other findings:
- EEI was secretly controlled by Mark S. Hutcherson, a former Atlanta-based commodities broker whose firm was shut down by regulators in 2000, and Jack F. Prather, who’d been a principal of that same firm. Both men have since been implicated in other global boiler-room schemes.
- EEI’s vice president of sales, known to investors as Richard Wright, is really a convicted felon named Richard Ayoub.
- EEI outsourced its investment marketing in 2006 to a Singapore company called Pace Global Business Services Pte Ltd., which also has ties to Hutcherson and Prather. That deal is not mentioned in any material given to investors.
- EEI investors say the company’s representatives told them that its drilling projects were virtually assured of success, and provided them with financial projections and payback schedules that were wildly optimistic.
Through August, EEI and its partners had drilled eight wells using the money from foreign investors. At least six were busts, yielding little or no production, according to reports filed with the Texas Railroad Commission, which oversees oil and gas activity in the state. A group of British investors is now pushing for an accounting of the $2.5 million that EEI raised for one of the projects. They say the well, in Colorado County, Texas, was declared a dry hole and abandoned before all of the tests for oil or gas were performed.
They are demanding to know why EEI made the decision to seal the well, and why money that should have been set aside for completing the well wasn’t refunded to them.
Sharesleuth’s investigation also found that EEI sold partnerhip interests in three wells that were never drilled. Marketing packets sent to potential investors showed that each was a $1.75 million project. Instead of returning the money to investors, EEI switched them into other projects, without seeking their consent.
In two of those deals, investors were supposed to own 85 percent of the original well. Instead, they wound up with less than 40 percent of a different well that EEI drilled in partnership with other oil and gas companies.
People familiar with EEI told Sharesleuth that it was highly unlikely that the company used all of the money it raised for the undrilled wells to buy the minority stakes in the replacement wells.
EEI did not respond to questions submitted by Sharesleuth.