Rey Salomon, Jr. and Ellen H Development LLC
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20747 / September 25, 2008
Securities and Exchange Commission v. Rey Salomon, Jr. and Ellen H Development LLC, Civil Action No. 3:08-CV-1695 U.S.D.C./Northern District of Texas (Dallas Division)
SEC Settles Securities Fraud Case With Rey Salomon, Jr. and Ellen H Development LLC
Today, the United States Securities and Exchange Commission (Commission) filed a civil action against Rey Salomon, Jr. and Ellen H Development LLC (EHD) alleging that they made material misrepresentations and omitted material facts regarding the use of investor funds in connection with the offer and sale of unregistered securities in an oil and gas drilling program. According to the complaint, the defendants violated the antifraud and registration provisions of the federal securities laws. The Commission also alleges that Salomon acted as an unregistered broker-dealer. Salomon and EHD have agreed to settle the charges against them, without admitting or denying the Commission's allegations.
From at least March through September 2007, EHD, at Salomon's direction, raised $903,195 from 22 investors through offers and sales of fractional interests in a "turnkey" oil and gas drilling program to be conducted in Denton County, Texas. The EHD offering was not registered with the Commission, and was not otherwise exempt from registration. In addition, the EHD offering documents included material misrepresentations and omitted material facts regarding the use of investor funds and the costs of the drilling program. Specifically, the offering documents stated that: (i) all investor funds would be used to drill two oil and gas wells; (ii) investor funds would not be used to pay the debts of EHD or Salomon; and (iii) the cost to drill the two wells was approximately $4.5 million. Contrary to the express terms of the offering documents, Salomon used at least $220,000 of investor money for his personal benefit, including the repayment of a loan made to EHD and Salomon to help capitalize EHD. EHD and Salomon also knew that the actual cost to drill the wells was more than $1 million less than the offering documents represented.
Specifically, the Commission alleges that Salomon and EHD violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. The Commission further alleges that Salomon violated Section 15(a) of the Exchange Act. Salomon and EHD consented to judgments that permanently enjoin them from future violations of these provisions and hold them liable, jointly and severally, for disgorgement of $903,195 plus $81,809 of prejudgment interest, for a total of $985,004. Based on the defendants' sworn financial statements and supporting documents, the judgments do not order Salomon and EHD to pay civil penalties and payment of $382,069 of disgorgement and pre-judgment interest was waived.
Last Reviewed or Updated: June 27, 2023