DALLAS (CN) - The court-appointed receiver for Striker Petroleum was awarded $749,000 in professional fees and expenses, from the $5 million recovered in what the SEC called a $57 million collateralized oil and gas debenture scam.
Chief U.S. District Judge Sidney A. Fitzwater found that receiver Dennis Roossien, of Munsch Hardt Kopf & Harr of Dallas, "has acted reasonably and diligently and that the requested fees and expenses are reasonable given all the circumstances surrounding the receivership."
The SEC did not object to the fee awards; some investors did.
Fitzwater rejected investors' objections that the receiver's billing statements were vague. The judge found that "a billing statement that contains 'the date, the number of hours spent (calculated to a tenth of an hour), and a short but thorough description of the services rendered' is sufficient to overcome a vagueness challenge, even in the context of a fee-shifting statute." (Parentheses in opinion.)
He also rejected arguments that the receiver failed to segregate his fees. Fitzwater found that Roossien "has operated for the benefit of the entire receivership estate, and the objecting investors point to no authority that requires fee segregation within the receivership estate."
The SEC in 2009 suedStriker Petroleum, Mark Roberts, 58, and Christopher Pippin, 35, both of Frisco, Texas, claimed they rolled investors for more than $57 million.
The SEC claimed that offering materials "included material misrepresentations and omissions concerning Striker's earnings and asset valuations, use of investor proceeds and the existence of a third party independent trustee for the debenture collateral" and that the company inflated its assets by more than $178 million.
The SEC claimed that though the first of Striker's three tax-advantaged oil and gas offerings initially achieved projected returns, production soon fell off and the two later offerings never achieved projected returns, and declined in the months after their offering dates.
Reichmann Petroleum Corp., the operator of most of the legacy properties, was forced into bankruptcy in December 2006, further disrupting production, the SEC said. Striker was paying only negligible returns by early 2007.
"As a result of among other things, the losses from the RPC bankruptcy, Striker's inability to acquire and successfully develop additional oil and gas properties, and the low production from the legacy properties necessitating Striker's use of debenture proceeds to pay the Legacy fixed returns and debenture interest payments, Striker could no longer meet many of its financial obligations," according to the SEC complaint. "Consequently, just four months after completing the $12.5 million Series B-4 offering, Striker defaulted on its obligation to pay the interest due to the debenture holders. ...
"In truth, Striker should not have included these amounts as assets on its financial statements because it had merely contracted with the Legacy LLCs to participate in the drilling of any additional wells on the PUD sites in exchange for 85 percent of the working interests held by the LLCs in each successful well," according to the complaint. "Striker did not own any mineral interest until a well was successfully completed - it only had a contractual right to participate in the drilling of any PUD wells."Follow @davejourno
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