A former Bedford tech entrepreneur who moved into the oil and gas business and became a vocal advocate of fracking in the past decade was accused of defrauding investors out of $80 million over the past five years, according to a Securities and Exchange Commission lawsuit filed on Friday.
Christopher A. Faulkner, who is president of Breitling Energy Corp and oversaw three related companies, allegedly took money from hundreds of investors nationwide through several energy companies he owns or controls, according to the lawsuit filed in U.S. District Court in Dallas, and he spent millions on lavish meals, private jets, cars, jewelry, gentlemen’s clubs, and personal escorts.
Faulkner, who appeared on radio and television and branded himself as the “Frack Master,” also misrepresented his education, experience and background to sway investors, according to the lawsuit. He was frequently quoted in the media as an expert on fracking and the oil industry, in publications including The New York Times.
“He claimed to have earned master’s and doctorate degrees from universities, which he had not,” the lawsuit states. “He represented that he had extensive and diverse experience ‘in all aspects of oil and gas operations,’ when he had no such experience. In fact, his only exposure to the oil-and-gas industry was through website data hosting work he and his prior company, CI Host, performed for oil-and-gas companies.”
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Faulkner’s lawyer, Larry Friedman of Dallas, said the charges are baseless.
“Breitling is a good company. It was very successful when times were good in the energy business,” Friedman said. “As far as I know there are no investor complaints. A number of oil and gas companies are competing for a limited amount of investment from individuals. There have been complaints made by competitors, but I look at that as competitive envy.”
Faulkner … has misappropriated at least $30 million in investor funds to maintain a lifestyle of decadence and debauchery.
Prior to founding the oil and gas businesses, Faulkner was founder of the Bedford web-hosting firm CI Host. The firm grew rapidly as an early Internet hosting company but became mired in dozens of lawsuits and shut down in 2009.
The SEC lawsuit said Faulkner made media appearances to further build his brand and used money he raised from investors to support an extravagant lifestyle.
“Faulkner — who has appeared on CNBC, CNN International, Fox Business News, and the BBC to discuss oil-and-gas topics, and who hosted a weekly radio talk show in Dallas — has misappropriated at least $30 million in investor funds to maintain a lifestyle of decadence and debauchery,” the lawsuit states.
The lawsuit alleges that Faulkner, through his companies, would sell interests in oil and gas prospects in several states, but over-estimate the costs of drilling and completing the wells then pocket the difference.
In addition to the publicly-traded Breitling Energy Corp., Faulkner also is identified as the main operator of Breitling Oil and Gas Corp., Crude Energy LLC and Patriot Energy Inc.
Friedman defended his client, saying he was simply using the expenditures to woo investors, which is standard practice.
“You have to spend money to make money,” Friedman said. “You can order a plate of spaghetti, but the guy you’re trying to raise money from, you have no influence over what he orders. He’s going to order Kobe steak.”
Friedman added that the wording in the SEC complaint “reads more like fiction, more like a Grisham novel than a customary SEC enforcement complaint.”
Others named in the lawsuit include: Jeremy S. Wagers of Dallas, Breitling Energy’s general counsel and chief operating officer; Judson F. “Rick” Hoover of Highland Village, Breitling Energy’s chief financial officer; Parker R. Hallam of Dallas, co-founder of Breitling Oil and Gas; Joseph Simo of Plano, who provided geology services to the companies; Dustin Michael Miller Rodriguez of Dallas, president of Patriot Energy and chief investment officer of Crude Energy; Beth C. Handkins of Waxahachie, who is alleged to control bank accounts for all four companies; and Gilbert Steedley of Bronxville, N.Y., Breitling Energy’s vice president of capital markets.
The lawsuit further alleges that Tamra M. Freedman of Sherman Oaks, Calif., Faulkner’s ex-wife, received $1.8 million in funds from Breitling Energy and Breitling Oil and Gas, and that Jetmir Ahmedi, a close friend of Faulkner’s, received more than $487,000.
Those defendants couldn’t be reached Friday for comment, and it was unclear if they had lawyers.
Friedman said Breitling Energy Corp. is still operating, although calls to the company’s main numbers on its website were answered by a recorded message saying they were nonworking numbers.