Southlake Oil and Gas Flim-Flam Man Has a Really, Really Bad Month
Twitter user @JHalek73
There was a time for Jason Halek when life was all luxury suites at Cowboys Stadium and showroom-fresh Hummers. Investors were pumping millions into his oil-and-gas start-up. Then everything, as it so often does when your business model revolves around misleading investors, sort of fell apart. The last few years have been bad for Halek.
This month, however, has been positively brutal. The 5th U.S. Circuit Court of Appeals ruled that he does in fact owe some $26 million for the disgorgement of ill-gotten gains (with interest). Meanwhile, North Dakota regulators are getting ready to slap his Southlake company with one of the biggest fines against an oil and gas producer in the state's history, for putting groundwater in great jeopardy.
It might be time for him to get out of fossil fuels.
The story starts in 2010, when the U.S. Securities and Exchange Commission filed suit against Halek for raising $22 million from investors he cold-called with some pie-in-the-sky projections for the rate of return on their money. That investment was a collection of drilled and yet-to-be-drilled wildcat wells that were speculative at best. Wells previously drilled in the area didn't produce the kind of volumes that would earn investors remotely the kind of double or triple return Halek promised. Nor did any of the wells they'd already sunk. They were, as it turned out, spun from whole cloth by a couple of guys with no experience in geology or the oil and gas business.
According to the complaint, the company and its affiliates regularly inflated costs, padding their own profits. They spun tales of lucrative gas wells, only the gas wells weren't anywhere near a pipeline.
A federal judge ordered Halek and the SEC to enter into mediation to settle what he owed in disgorgement and civil penalties. After a whole bunch of not settling, the district court entered a finding of fact, accusing Halek of fraudulently enriching himself to the tune of more than $21 million, plus interest and $50,000 in civil penalties. Halek appealed and, last week, he lost. He's on the hook for $26 million.
But, apparently, as all of this transpired, he was getting into a whole other different kind of trouble up in North Dakota's booming Bakken Shale. In 2011, one of his frack water pits overflowed into drainage because of snow-melt, according to EnergyWire. Halek paid a small fine and carried on. The well that pit served wasn't good for much more than producing water, so Halek applied to have it converted to a waste-water injection well.
According to state officials, he didn't wait for the green light and proceeded with lucrative disposal operations before installing the mandated three layers of steel casing to protect surrounding groundwater. Halek, for his part, claims the well was properly cased, EnergyWire reports.
Said a North Dakota regulators: "The violations admitted by Halek are among the most egregious violations ever pursued by the commission."
The state hasn't found evidence of contamination yet, but said that the risk is high. If the waste water does find its way into aquifers, they fear clean-up might be impossible.
Halek, ever the wily one, says he'd actually transferred control over that well to someone else by that point. The state says he can't simply transfer wells at his convenience, which would kind of defeat the purpose of regulation. The North Dakota Bureau of Criminal Investigations has filed charges against the former associate Halek transferred control of the well to. And the State Department of Mineral Resources wants Halek to pay a $1.5 million fine.
Halek, as we mentioned earlier, is having a really, really bad month.