The principals of a Denver oil and gas exploration company accused in a federal lawsuit of running a “Ponzi-like” scheme say the government’s case against them has so little substance and is so poorly put together that it should be dismissed.
Attorneys for St. Anselm Exploration Co. and its principals — Michael Zakroff, Anna Wells and Mark Palmer — say in papers filed this week in U.S. District Court that the Securities and Exchange Commission’s lawsuit against them is littered with inaccuracies, misquotes and innuendo.
The SEC alleges in its complaint that St. Anselm, its principals and a New Mexico employee, Steven Etkind, managed to sell nearly $50 million in promissory notes to about 180 investors at huge returns, but were actually using much of the money to pay interest on earlier notes.
The group says the SEC conveniently misquotes communications it made with investors and, in some cases, takes other conversations out of context.
In the end, the group said it is a private company and “the investors were merely creditors and St. Anselm owed them no fiduciary duty to disclose any particular type of information.”
In separate papers filed this week, Etkind asked that the case against him be dismissed because the SEC never actually accuses him of any wrongdoing. Although the SEC alleges Etkind misrepresented the notes he sold for St. Anselm over several years, the agency never says how he did that or that it was fraud, court records show.
The SEC “impermissibly lumps all defendants together without specifying which defendant made which representation,” Etkind’s attorney, David Zisser, wrote in his motion.
Similarly, attorneys for St. Anselm and its management say in court papers that the SEC “improperly lumps all three individuals together as if they made exactly the same statement at the same time to the same group of persons.”
A hearing on the motions will not be scheduled until the SEC files a response.
As the notes matured, the company tumbled into debt that neared $62.3 million as of Sept. 30, the SEC complaint said.
The company created a debt-restructuring plan devised to repay investors. Despite the money it had raised, the company had just $8,600 in cash by October.
David Migoya: 303-954-1506 or dmigoya@denverpost.com
