Sunday, September 19, 2010

Swan Energy Inc Another Boiler Room?

Not new news, but as I come across these things it makes me wonder what is going on over at Swan Energy Inc. Sometime earlier this early this year, Heartland Energy Development Corporation was absorbed, merged or taken over by Swan Energy Inc. Swan Energy Inc. according to the Colorado Secretary of State was formed 05/06/2010. If you go to their website at, the site is not even in existence (at least it was taken down the day of this post). In previous posts that I have published on this board, you will see that I have pointed out that Heartland Energy Development Corporation has been accused several times of Boiler Room Sales Tactics with non-registered representatives selling their securities. Granted it has been ruled by a court in Texas that these "joint ventures" that Heartland Energy Development Corporation were selling were not securities but "joint ventures". It is my opinion that Heartland Energy Development Corporation was able to hind behind a description. It is unfortunate that their case was transferred to Texas to begin with. I believe that had Heartland Energy Development Corporation been forced to try their case in Denver, Colorado where they are located, a judge would have found them guilty of selling unregistered securites.

For example, if we take a look at an article about HEI Resources, Inc. a Colorado based oil and gas operation that had similar principals as Heartland Energy Development Corporation, you would see that William Mathers whom was 90 and had "diminished capacity" according to the report, was cold called from HEI Resources Inc. of Colorado Springs in 2004. The representatives of HEI Resources encouraged Mr. Mathers to invest in oil and gas "joint ventures". Of course HEI Resources denied any wrong doing. What is so wrong with sticking a 90 year old man into an investment that does not offer immediate liquidity you might ask? Nothing according to HEI Resources. Oil and Gas investments historically take time to develop, I am certain they were thinking that Mr. Mathers might enjoy the fruits of his investment well into his 100's. Right?

Mr. Mathers who is from Vermont did actually receive some payments totaling $226,950 which were not considered returns on investment but came partly from the original money alleged the suit. According to the report in the Denver Business Journal, “As a result of [the] defendants’ misrepresentations and concealments, the plaintiffs sustained losses in the form of funds that were invested in worthless and non-productive ventures, that were spent on expenses that were unrelated to the oil and gas exploration [the] defendants’ ventures were supposed to be pursuing or that were unreasonably high,” according to the complaint, which was filed in mid-December.

Notice that in this report HEI Resources and Heartland Energy Development Corporation are both named. Seems that they were associated with each other. As a matter of fact the report goes on to state, " Englewood-based Heartland Energy Development Corp. and Heartland Energy of Colorado LLC allegedly are related to HEI, and are also named in the lawsuit. " Heartland Energy Development Corporation was contacted by the Denver Business Journal and tried to obtain some type of comment but was unable to get anything.

According to a response filed from Heartland Energy Development Corporation stated that it did not carry the onus or responsibility of determining "suitability" for potential "joint venture" holders. They were certain to hide behind their description of "joint ventures" and not securities in their response so that they can continue on their merry way selling unregistered investments. You see, should Heartland Energy Development Corporation, HEI Resources or any of their other developments, (Swan Energy Inc.) have to register their securities... ahem investments... I meant joint ventures, it is altogether possible that they could not obtain registration approval. Registration would also require that all of their representatives to get registered with the proper self-regulatory organizations such as the NASD or the SEC. This would mean that their representatives would have to actually pass a test and obtain a license. Once all of this happened, would it be likely that an educated registered representative would want to force these "joint ventures" down the throats of unsuspecting or hesitant seniors in the community?

According to this article Charles Reed Cagle who owned and operated HEI Resources, also owned Heartland Energy Development Corporation according to the Alabama Securites Commission which ordered Heartland Energy Development Corporation to stop selling unregistered securities in the state in 2007. According to the report from the Denver Business Journal, the Colorado Securities Commission has dealt with Mr. Cagle and Heartland Energy Inc. it was in 2002 that the commission had held a hearingto determine whether the "joint ventures" of Heartland Energy Inc. were actually securities are not. Unfortunately the commissioner at the time decided that there was not enough evidence to determine whether or not these "joint ventures" were actually securities or not.

In the early 1990s, there was a similar issue with an organization called Kinlaw Securities. At the time Charles Reed Cagle was employed for Kinlaw Securities. Allegedly, Kinlaw Securities was using boiler room sales tactics to sell $177 million in unprofitable oil and gas securities. Joseph Kinlaw was one of the defendants named at the time as well as Charles Reed Cagle. In 1998 a federal judge in Dallas ruled that the investments were definitely not securities, but indeed they were "joint ventures". Joseph Kinlaw settled the SEC charges and was barred from the industry, the securities industry. Now how does that make any sense? How does the court rule that the "joint ventures" are not securities, yet Joseph Kinlaw was barred from the securities industry. It doesn't make any sense? Why would the court bar Joseph Kinlaw from the "securities" industry if he did not violate or engage in any illegal activities. As a matter of fact why would Joseph Kinlaw ever agree to this sentence if his "joint ventures" were ruled not to be securities?

At the conclusion of the report, there was a pending lawsuit and Arapahoe County. It seemed that Kinlaw and Koegel had moved their main offices from Dallas to Colorado Springs because of what had happened with the SEC in Texas. The lawsuit claimed that law remains associated with Cagle and HEI Resources.

When you dissect this complex animal, it seems that the same names continue to surface over and over again. That being Joseph Kinlaw, Charles Reed Cagle, Brandon Davis and John Schiffner. Now with Swan Energy Inc. taking over Heartland Energy Development Corp., it would only make sense that many of these individuals would be included in the new organization. In a previous post, I actually made a phone call to Swan Energy Inc. and asked for John Schiffner. I of course did not speak with John as I had no reason to. Once I was transferred to John Schiffner's office, I hung up the phone. I received about four or five calls that same day from Swan Energy Inc. I can only assume that it was John Schiffner and he was wanting to know who the hell is given him a phone call.

It is important to note that I have not seen any complaints against Swan Energy Inc. Of course when Heartland Energy Development Corp. was originally formed there were not any complaints or pending litigation either. Of course there was some kind of heavy affiliation with the previous principles of Kinlaw Securities and HEI Resources. It is just logic to me that Swan Energy Inc. a new entity in the state of Colorado, who most recently took over Heartland Energy Development Corp. did so in an effort to get away from the negative history o Heartland Energy Development Corp.

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