The 7th Circuit Court of Appeals ruled against an appeal in a protracted case involving the sale of oil and gas leases in efforts to recoup money for victims defrauded by First Choice Management Services. The judges held the company seeking to intervene failed to do so in a timely manner.
The case against First Choice began in 2000 when the Securities and Exchange Commission charged the company and others with fraud in violation of federal securities law. A receiver was appointed to distribute the defendants’ assets to the victims of the $31 million fraud. The receiver found that some assets have been used to acquire oil and gas leases in Texas and Oklahoma.
At issue in the instant case is the sale of a lease in Osage, Oklahoma, in which CRM Energy Partners argues it has an ownership interest. The District Court denied CRM’s motion to intervene and approved the sale in May 2014 of the leases to Wilson Operation Co., an oil company in Tulsa.
CRM moved to intervene in the receivership proceeding in December 2013; the District Court denied it as untimely.
“CRM had known as early as January 2004, almost ten years before it filed its motion, that the receiver was claiming to own (as agent of the defrauded investors) the very leases that CRM claimed to own,” Judge Richard Posner wrote. “Instead it waited for a decade minus two months – waited indeed until the protracted and expensive receivership was finally moving toward an end and the receiver’s assets were dwindling.”
“CRM’s dawdling … imposed costs on the receiver and on Wilson and made added work for the district court.”
The case is Securities and Exchange Commission v. First Choice Management Services Inc., et al; CRM Energy Partners and John W. Hannah v. Joseph D. Bradley, Receiver, 14-1270, 14-2284.