NASHVILLE – Tennessee officials have have fined and permanently barred a Colorado man from selling securities for a Chattanooga-based natural gas and oil firm, described in a state order as a "scheme."
State Commerce and Insurance Commissioner Julie Mix McPeak says Steve S. Boulter of Central City, Colorado was fined $12,277.75 for his role in finding investors who gave money to Hixson businessman Harry F. Thompson and his Chattaco Inc. between 2012 through 2014.
Thompson allegedly told Boulter and other investors the money was going to purchase new leases on natural gas wells in Magoffin County, Kentucky.
The Department is also seeking sanctions against Thompson and Chattaco. A hearing was held Friday in that case. After taking the case under advisement, an administrative judge is expected to issue an initial order in furtherance of a fall hearing.
According to the Commerce and Insurance Department, Chattaco's investors were promised "large profits" in exchange for their financial backing.
"However," according to the department's release, "investors never received the rate of return were they promised nor any repayment for their principal investment."
Although representing Chattaco, Boulter was never registered with the department's Securities Division, a violation of state requirements, according to officials.
"In Tennessee, it is unlawful for any person to transact business from or in this state as a broker-dealer, agent, investment advisor or investment advisor representative unless that person is properly registered as such," McPeak said in a statement Monday.
Boulter, who is brew pub owner and Little League coach, was introduced by phone to Thompson through Jeff Capen, a friend with whom he had previously invested, according to the departmental consent order.
The order says Capen told Boulter "about a new investment opportunity" with Chattaco.
Based on their phone conversations, Boulter "believed that Harry Thompson had a good local knowledge of the Magoffin County, Kentucky area, and that Harry Thompson had good local contacts with several people involved in the oil and gas industry," according to the Boulter consent order.
The order says Boulter told investigators he was "fooled by Harry Thompson into believing that the Magoffin County, Kentucky wells which Chattaco claimed to have leasehold interests in, were producing, or would very soon produce sizable quantities of natural gas that would bring large profits to investors."
Thompson allegedly told Boulter he needed additional funds to buy more leases.
Boulter himself invested $2,500 in the operation in late 2011 or early 2012. After Thompson asked Boulter if he knew anyone "who wanted to make money" by investing in Chattaco, the Colorado businessman introduced six potential new investors he knew to Thompson by telephone and later several others, according to the order.
Boulter also acknowledged Chattaco paid him $11,500 in commissions in 2013 and 2014 although he was not a registered agent in Tennessee, as well as royalty checks of $1,277.75, according to order.
Boulter said he didn't consider himself to be an express agent of either Chattaco or Thompson having signed no agreements. But he acknowledged his actions in soliciting investors could "from an objective perspective" justify the state's assertions that he had acted as an "agent."
One of those who Boulter convinced to invest in Chattaco, Troy J. Grice, says in a facebook post that Boulter used "a soft-sell and having known Steve for several years, I had no reason to question his integrity." After talking with Harry Thompson in Chattanooga, Grice said he invested $27,500 in the project five years ago but so far has received only $168.36 in royalties.
"I can't believe I fell for this!" Grice says in his warning to other potential investors.
Tennessee officials are using the case to once again urge consumers to be wary and come to them when they suspect that they are the victim of a securities or insurance fraud.
McPeak urged consumers to look carefully before making such investments and to contact the Securities Division team "first and verify that their broker or adviser is registered."
Consumers can contact the Tennessee Securities Division's Financial Services Investigations Unit at (615) 741-5900. To file a complaint online, visit https://tn.gov/commerce/article/securities-file-a-complaint.