Risk Free Private Placement Offerings to Texas Teachers Gets the Attention of Texas Regulators
Texas securities regulators have filed a cease and desist order against Insignia Energy Group, Inc. over allegations that it misled the public when offering “risk free” investments in oil and gas partnerships, according to an article in Investment News. Insignia Energy and its affiliate IEG Permian Basin LLC, marketed partnership interests in oil and gas projects to teachers and other employees of Texas school districts by telling them the investment would provide them with needed income during the impending layoffs.
The teachers and other employees of the school districts were offered interests in the Sabine Partnership, which was going to develop two wells in Sabine Parish, Louisiana. The investors were to get limited partnership interests equal to 10% of the underlying working interest and 7.3% of the underlying net revenue interest in the Sabine Partnership. According to regulators, investors were told to use their 401(k) and 402(k) proceeds to invest and they were provided with a “1,000% guarantee” that they would get a certain monthly return over 10 years, in addition to being able to get their money back if the wells were not sufficiently productive. An example given to investors was that an investment of $165,000 would entitle the investor to $45,000 per month in income.
The cease and desist order is not a criminal charge however, if Insignia violates the order it could lead to civil and/or criminal proceedings. The Texas Securities Board also discovered that the Sabine Partnership had never been registered as securities and that Insignia, IEG and their owners were not registered to sell securities in Texas.