(CN) – The founder of Energytec lost his bid to have a federal judge in Dallas throw out a securities fraud lawsuit accusing Energytec, Frank W. Cole Engineering and others of running a nearly decade-long Ponzi scheme that bilked millions of investors.
U.S. District Judge Sam A. Lindsay consolidated the complaints of more than 50 investors from across the country, including companies with names like Hi Ho Ho Oil Flow LLC, Oil Come We Have Fun LLC and Our Oil Does Bring the Karaoke We Sing LLC.
Lead plaintiff Jomar Oil said Energytec’s “Income Program 225” used unregistered brokers to sell securities in violation of the Securities Exchange Act and the Connecticut Uniform Securities Act. To carry out the scheme, Energytec and CEO Frank Cole allegedly filed misleading reports with the Securities and Exchange Commission and lied to investors.
Investors said Energytec’s reports hid several material facts, including the criminal conviction of a former Energytec bigwig, the resignation of a corporate officer’s law license in lieu of disciplinary action, and the fact that Energytec intended to recoup its monthly investment returns as “advance payments.”
In his motion to dismiss, Cole argued that the plaintiffs failed to pin down “when and where” he made the allegedly false statements, whether he had even made the statements, and which of his statements were purportedly false. He also claimed that he was being blamed for wrongdoing that occurred after he was kicked out of Energytec.
Judge Lindsay denied Cole’s motion to dismiss, concluding that investors had filed specific enough pleadings to proceed with their claims.