HOUSTON (CN) - Fifteen people claim in a class action that energy company owners took $13.5 million for oil and gas investments, then hid the money through a "game of fund money hot potato," and used some of it to drill a well for one of their "drinking buddies."
Fifteen named investors sued Layton Energy Texas, Platinum Energy Solutions, Layton Corp., and company owners Daniel Layton and Clark Legler, in Harris County Court. Eleven of the class members live in Wisconsin.
The class claims the defendants purchased several wells with $10 million they raised for their "Wharton Fund," and bought another three wells with $3.5 million raised for their "Layton Energy Fund 2."
But, the class says, "Since the existence of the funds, Layton has allowed lease interests to expire, failed to acquire properties as represented and engaged in self-dealing to the detriment of the funds."
The investors claim that "Layton and Legler took monies from the Wharton Fund and the Layton Energy Fund 2 to put in other projects Layton and Leger were running."
They claim Layton has admitted to brokers who helped raise money for the funds "that the properties acquired by the funds were not 'feasible.'"
The class claims that due to "personality differences" Layton had with well operators, the defendants let the lease expire on one well and used investors' money to get a new operator for another.
Defendants also used the funds' oil wells as collateral, the class says, and let liens be placed against them.
"When the general counsel of Layton Energy was approached about this, and how could that be done to the investors' wells, he just shrugged his shoulders. The bottom line is that he is now giving the investors' wells away or letting the leases expire with no concern towards investors," according to the complaint.
The class claims Layton and Legler strung them along with false promises that they would "make the investors in the funds whole" by putting shares of their company Platinum Energy Solutions into the funds.
On page 7 of the 13-page complaint, one paragraph states: "On information and belief, the Saenz well was drilled for one of Layton's 'drinking buddies.' When the geologist was questioned on this prospect, he commented that the well had not been reviewed or approved for drilling. It is believed the Wharton Fund monies that were used to 'drill the Saenz well' were in actuality taken by defendants for other non-Wharton Fund purposes. Additionally, the question remains: Where is the well?"
The class seeks recovery of the $13.5 million, and punitive damages for fraud, conspiracy, and conversion.
They are represented by Kevin Colbert of Houston.