D. TREATY AND THE TREATY DEFENDANTS ANNOUNCE AND TOUT A FICTIONAL OIL STRIKE IN BELIZE IN ORDER TO ARTIFICIALLY INFLATE TREATY’S STOCK PRICE AND TRADING VOLUME.
33.
Through a joint venture agreement with another company, Treaty obtained drilling rights for the Belize Program in April 2010. As part of the agreement, Treaty contributed $100,000 to the joint venture in exchange for the right to drill exploratory wells and share in any potential profits. Treaty’s $100,000 came from Blackburn’s sale of 20 million of his own Treaty shares to a private investor, which fact was not disclosed to investors.
34.
Rather, Treaty’s 2010, 2011, and 2012 Forms 10-K, which Reid signed and certified, stated only that: “On April 20, 2010, we entered into a 50/50 Joint Venture agreement with Princess Petroleum Limited, a company organized under the laws of Belize to explore for oil and gas on approximately 2 million acres in Belize . . . A major shareholder of the Company paid $100,000 cash as required under the agreement.”
35.
The truth was, Blackburn was the major shareholder to whom Treaty’s Forms 10-K referred, though an actual or prospective investor had no way of knowing that fact. Thus, once again, investors could not know that Blackburn was the “major shareholder” to which the company referred, nor could they have known about his control over the company or his criminal history.
36.
As part of the Belize Program joint venture, Treaty was subject to oversight by the Department of Geology and Petroleum for the Government of Belize (“GOB”), the agency responsible for administration of Belize’s petroleum sector.
37.
In April 2011, Treaty, Blackburn, Reid, and Mulshine each began making statements about the Belize Program that they knew, or were reckless in not knowing, were false.
38. In July 18, 2011 and July 29, 2011 press releases published by Mulshine for
Treaty, and for which Blackburn supplied the content, Treaty touted the Belize Program as a potential “magnificent life changer for all Treaty stakeholders and the people of Belize.” The company also claimed to know where the Belize hydrocarbons were located and that Treaty was preparing to implement a “drilling program to extract commercial grade quantities of oil in Belize.”
39.
In the Fall of 2011, Treaty hired a stock promoter to post misleading or untrue information on internet message boards, such as investorshub and investorshangout.com regarding operations in the Belize Program, including false statements such as “I’ll be there when she blows” and claiming that the company was on the verge of striking oil. Such promotional efforts had the desired effect of inflating Treaty’s stock price and volume between April 2011 and January 2012 by over 450% and 930 %, respectively.
40.
The hype surrounding the Belize Program culminated in a January 30, 2012 press release announcing that Treaty struck oil. On January 31, 2012, Treaty filed the press release as an exhibit to a Form 8-K that Mulshine signed and filed as Treaty’s Assistant Secretary (“Belize Announcement”). In it, Reid is quoted as stating that the supposed oil-striking well Treaty had drilled in Belize – named the San Juan Well # 2 – contained an estimated “5,000,000 to 6,000,000 arrels of recoverable oil.” The Belize Announcement also stated that Treaty’s claimed oil strike was “similar to some of the great oil producing zones in Texas . . . [that] have produced hundreds of millions of barrels of oil.”
41.
In response to the Belize Announcement, Treaty’s stock price and volume increased dramatically by 79.3% and 1,992%, respectively, in a single day.
42. Unfortunately for investors and the markets, Treaty’s Belize Announcement was completely false – the company did not find oil.
43.
On January 31, 2012 – the day Treaty publicly filed the Belize Announcement as an attachment to its Form 8-K – the GOB published its own press release in Belize refuting the company’s Belize Announcement and describing the statements in it as “false and misleading” and “irresponsible.” The GOB went on to state that it observed “no live oil” at the San Juan Well #2. The same day, the GOB informed Reid of its findings and demanded that Treaty make no further false statements. Treaty’s stock price and trading volume declined in response to the GOB’s press release disavowing the patently false Belize Announcement.
44.
Despite the GOB’s admonitions, and knowing Treaty had not struck oil in Belize, Blackburn and the Treaty Officers willfully, or at the very least recklessly, continued to mislead investors and prospective investors by assuring them that the claimed oil strike was real. Specifically, they told investors that while the GOB privately agreed that Treaty struck oil at the San Juan Well #2, it had issued the press release denying the strike as punishment for not obtaining GOB approval before publishing the Belize Announcement
45.
Treaty published a second press release about the Belize Program on February 1, 2012 (“Second Belize Announcement”). Astonishingly, the Second Belize Announcement, signed by Mulshine acting once again at Blackburn’s direction, confirmed Treaty’s claim of a “first successful oil well strike.” This announcement had the intended effect of halting declines in Treaty’s stock price and trading volume following the GOB’s press release disclaiming the original Belize Announcement. Consequently, Treaty’s stock price and volume did not return to pre-Belize Announcement levels until late April 2012.
46.
Blackburn, Reid, and Mulshine knew, or were severely reckless in failing to know, that the statements contained in Treaty’s Belize Announcement, Second Belize Announcement, and other press releases and investor solicitations were false.
47.
Treaty ultimately failed to produce any oil in Belize and, in July 2013, the GOB ordered the company to plug and abandon the San Juan Well #2 along with two other dry-hole wells Treaty had also drilled at or around the same time. Neither Treaty nor the Treaty Defendants have ever disclosed these facts to the public or to Treaty’s shareholders.
http://www.sec.gov/litigation/complaints/2014...14-281.pdf
33.
Through a joint venture agreement with another company, Treaty obtained drilling rights for the Belize Program in April 2010. As part of the agreement, Treaty contributed $100,000 to the joint venture in exchange for the right to drill exploratory wells and share in any potential profits. Treaty’s $100,000 came from Blackburn’s sale of 20 million of his own Treaty shares to a private investor, which fact was not disclosed to investors.
34.
Rather, Treaty’s 2010, 2011, and 2012 Forms 10-K, which Reid signed and certified, stated only that: “On April 20, 2010, we entered into a 50/50 Joint Venture agreement with Princess Petroleum Limited, a company organized under the laws of Belize to explore for oil and gas on approximately 2 million acres in Belize . . . A major shareholder of the Company paid $100,000 cash as required under the agreement.”
35.
The truth was, Blackburn was the major shareholder to whom Treaty’s Forms 10-K referred, though an actual or prospective investor had no way of knowing that fact. Thus, once again, investors could not know that Blackburn was the “major shareholder” to which the company referred, nor could they have known about his control over the company or his criminal history.
36.
As part of the Belize Program joint venture, Treaty was subject to oversight by the Department of Geology and Petroleum for the Government of Belize (“GOB”), the agency responsible for administration of Belize’s petroleum sector.
37.
In April 2011, Treaty, Blackburn, Reid, and Mulshine each began making statements about the Belize Program that they knew, or were reckless in not knowing, were false.
38. In July 18, 2011 and July 29, 2011 press releases published by Mulshine for
Treaty, and for which Blackburn supplied the content, Treaty touted the Belize Program as a potential “magnificent life changer for all Treaty stakeholders and the people of Belize.” The company also claimed to know where the Belize hydrocarbons were located and that Treaty was preparing to implement a “drilling program to extract commercial grade quantities of oil in Belize.”
39.
In the Fall of 2011, Treaty hired a stock promoter to post misleading or untrue information on internet message boards, such as investorshub and investorshangout.com regarding operations in the Belize Program, including false statements such as “I’ll be there when she blows” and claiming that the company was on the verge of striking oil. Such promotional efforts had the desired effect of inflating Treaty’s stock price and volume between April 2011 and January 2012 by over 450% and 930 %, respectively.
40.
The hype surrounding the Belize Program culminated in a January 30, 2012 press release announcing that Treaty struck oil. On January 31, 2012, Treaty filed the press release as an exhibit to a Form 8-K that Mulshine signed and filed as Treaty’s Assistant Secretary (“Belize Announcement”). In it, Reid is quoted as stating that the supposed oil-striking well Treaty had drilled in Belize – named the San Juan Well # 2 – contained an estimated “5,000,000 to 6,000,000 arrels of recoverable oil.” The Belize Announcement also stated that Treaty’s claimed oil strike was “similar to some of the great oil producing zones in Texas . . . [that] have produced hundreds of millions of barrels of oil.”
41.
In response to the Belize Announcement, Treaty’s stock price and volume increased dramatically by 79.3% and 1,992%, respectively, in a single day.
42. Unfortunately for investors and the markets, Treaty’s Belize Announcement was completely false – the company did not find oil.
43.
On January 31, 2012 – the day Treaty publicly filed the Belize Announcement as an attachment to its Form 8-K – the GOB published its own press release in Belize refuting the company’s Belize Announcement and describing the statements in it as “false and misleading” and “irresponsible.” The GOB went on to state that it observed “no live oil” at the San Juan Well #2. The same day, the GOB informed Reid of its findings and demanded that Treaty make no further false statements. Treaty’s stock price and trading volume declined in response to the GOB’s press release disavowing the patently false Belize Announcement.
44.
Despite the GOB’s admonitions, and knowing Treaty had not struck oil in Belize, Blackburn and the Treaty Officers willfully, or at the very least recklessly, continued to mislead investors and prospective investors by assuring them that the claimed oil strike was real. Specifically, they told investors that while the GOB privately agreed that Treaty struck oil at the San Juan Well #2, it had issued the press release denying the strike as punishment for not obtaining GOB approval before publishing the Belize Announcement
45.
Treaty published a second press release about the Belize Program on February 1, 2012 (“Second Belize Announcement”). Astonishingly, the Second Belize Announcement, signed by Mulshine acting once again at Blackburn’s direction, confirmed Treaty’s claim of a “first successful oil well strike.” This announcement had the intended effect of halting declines in Treaty’s stock price and trading volume following the GOB’s press release disclaiming the original Belize Announcement. Consequently, Treaty’s stock price and volume did not return to pre-Belize Announcement levels until late April 2012.
46.
Blackburn, Reid, and Mulshine knew, or were severely reckless in failing to know, that the statements contained in Treaty’s Belize Announcement, Second Belize Announcement, and other press releases and investor solicitations were false.
47.
Treaty ultimately failed to produce any oil in Belize and, in July 2013, the GOB ordered the company to plug and abandon the San Juan Well #2 along with two other dry-hole wells Treaty had also drilled at or around the same time. Neither Treaty nor the Treaty Defendants have ever disclosed these facts to the public or to Treaty’s shareholders.
http://www.sec.gov/litigation/complaints/2014...14-281.pdf
