Opinion ID: 11538
Heading Depth: 2
Heading Rank: 1

Heading: great southwest energy

Text: 4 In the latter part of 1989, Sam Hooper, who had been involved in the oil and gas business, met with Cushman, Holloman, and Rob Overstreet (Overstreet), 1 to discuss the development of two oil and gas wells, the Strickland and Parkman wells. Thereafter, Great Southwest Energy was incorporated, and the articles of incorporation listed Hooper as the initial director and incorporator. Neither Cushman's nor Holloman's name was listed in the articles of incorporation or in the company's mailings to potential investors. Cushman and Holloman represented that they were outside consultants for Great Southwest Energy. 5 Great Southwest Energy marketed the Parkman and Strickland wells. This project, known as the Twin Elephant, was offered to investors in a prospectus. Cushman, Holloman, and Hooper agreed to divide the profits among themselves. Richard Hewitt, an attorney, prepared the Twin Elephant prospectus, which disclosed the participation of Cushman and Holloman and their criminal records. Pursuant to Cushman's instructions, Daphne Bostick, a secretary, removed pages from the prospectus indicating that the company was the subject of an investigation by the State Securities Board. 6 Hooper resigned on December 31, 1989, because the investors' money was not being spent as represented in the prospectus. Despite his resignation, Great Southwest Energy continued to list Hooper as president on company mailings until April of 1990. After Hooper's name was removed, Overstreet was listed as president of Great Southwest Energy. 7 Meanwhile, Grant Ottesen (Ottesen) owned and operated Oil Consortium of Texas, Inc. 2 Because Ottesen's business was experiencing financial difficulties, he merged it with Great Southwest Energy in late 1989. Names of prospective investors were obtained primarily from lead lists. Using these lists, the brokers for Great Southwest Energy made telephone contact with prospective investors. For a short period of time, Ottesen recruited sales brokers for Cushman. Ottesen left the newly merged company in April of 1990 but returned in September of 1990. 8 Ottesen testified that the following misrepresentations were made to investors: Hooper was president of the company during the Twin Elephant program; projects were already producing oil; almost all units had been sold; and the return on the investment was nearly immediate. Ottesen heard Cushman admit that he knew the Twin Elephant would not have any production and that he did not intend to spend any more money than had already been spent. Ottesen also testified that in-house references were given to investors, false drilling reports were given to salesmen, drilling costs were inflated, 3 investor funds were used to pay salaries and expenses of the office, and that completion funds 4 were called early and used for purposes other than drilling. Ottesen also testified that Zeigler, Hanks, Holloman, Cushman, and Don Cronn (also known as Tom Green) were all part of conversations in which this conduct was discussed. 9 Tom Grace began working as a sales broker for Great Southwest Energy in December 1989. Grace advised the investors that the wells were going to be horizontally drilled. In fact, the wells were never horizontally drilled. According to Holloman, they attempted to horizontally drill the Strickland well but could not reach the bottom of the hole because the well had been sitting dormant for seven or eight years. Grace testified that he resigned in May 1990 because the company did not procure a management license for the oil and gas brokerage and also because he learned about the backgrounds of Mr. Cushman and Holloman. 10 Jo Beth Smith (Smith) performed accounting work for Great Southwest Energy in the early part of 1990. Holloman had Smith cash $5,000-$6,000 checks for expenses or to go on a trip. Neither Cushman nor Holloman received salaries or paychecks. The evidence revealed that, instead of receiving salaries or being on the company payroll, the company paid the expenses of Cushman and Holloman. 11 Lisa Holdge (Holdge) began working as a receptionist for Great Southwest Energy in February 1990. Cushman subsequently asked her to become secretary-treasurer of the company, and she agreed. The position was in name only. Cushman instructed Holdge to create false invoices for oil field services. After the Securities Board investigated the company, Cushman directed Holdge to place rescission letters in all the investor files. The recision letter explained to the investors that they could obtain a return of the money they invested. Cushman, however, told her to send the recision letter to certain selected investors, and she complied. Holdge resigned after discovering that her name had been listed as a reference in one prospectus.