SEC accuses Austin residents of $18 million Ponzi scheme

Federal regulators on Friday said they have filed charges against two Austin residents for allegedly masterminding an almost $18 million Ponzi scheme.

In a complaint filed Tuesday, the Securities and Exchange Commission claimed that Robert A. Helms and Janniece S. Kaelin “misled investors about their experience in the oil and gas industry while raising nearly $18 million for supposed purchases of oil and gas royalty interests.”

According to the complaint, Helms and Kaelin had attracted at least 80 investors in 13 states, touting outsized returns on their investments, misappropriating funds for their own use and, ultimately, paying early investors with subsequent investors’ money.

“They lied to investors about the use of offering proceeds, spent investor funds on personal expenses and made Ponzi payments to give investors the false impression that they were earning returns in a profitable venture,” David Woodcock, director of the SEC’s Forth Worth Regional Office, said in a release.

Calls placed to Helms, Kaelin and the offices of their firm, Vendetta Royalty Partners, were not returned Friday. A message left for Katherine Lunsford, Vendetta’s attorney, also was not returned.

The SEC’s complaint follows on the heels of at least three lawsuits previously filed against Helms, Kaelin and their affiliated firms.

“(My) client felt for a while there might be a Ponzi scheme going on and spent a lot of money paying us to pursue and investigate the case at a time when other investors weren’t convinced,” said Austin attorney Clay Butler, who represented Lacova Capital Group in a Travis County District Court civil case against Vendetta. “He appears to be vindicated in his efforts.”

Other companies that have filed civil cases against Helms, Kaelin and their affiliated firms include Taurus Royalty and Applied Quantitative Solutions LLC.

According to Lacova’s complaint, the California real estate investment firm filed a lawsuit after receiving smaller-than-expected returns on its partnership stake. Vendetta eventually claimed that Lacova no longer held any stake in the partnership, the lawsuit said.

That suit expanded this year after a former Vendetta employee, Emmanuel Salter, came forward and shared details about the alleged fraud at the company, according to the complaint.

Many of the details included in the Lacova lawsuit were echoed in the complaint filed Wednesday by the SEC.

According to the SEC’s complaint, the alleged missteps at Vendetta accelerated in August 2011, when Helms filed paperwork with regulators to raise $50 million by selling partnerships in the firm.

That filing included several fraudulent statements, the SEC contends, including misstatements about previous securities sales and Helms’ experience in the oil and gas industry.

It also claimed there were no “material pending lawsuits” against Vendetta and its affiliates at the time, when in fact it was facing a $1.2 million civil suit and separate complaints from Illinois environmental regulators and the Internal Revenue Service, the SEC complaint said.

According to the SEC, Helms and Kaelin compounded those fraudulent claims by misappropriating the $17.9 million they eventually raised from investors.

In one example, the complaint said, the two defendants transferred about $4.4 million from Vendetta Royalty Partners to a separate firm called Vendetta Management. At least $3 million of that money was misappropriated from investors, the complaint said, including a $1.4 million transfer to Helms himself.

Helms and Kaelin also used $5.9 million to distribute what they called “partnership income,” the complaint claims, using money from later investors to pay earlier investors.

All told, the complaint names almost 20 individuals and corporate entities as defendants, including another Austin resident, William Barlow.

According to the complaint, Helms and Kaelin engaged in a series of round-trip transactions to make it look like there was royalty flowing from outside oil-and-gas entities. Barlow aided at least one of those transactions, according to the SEC.

On Nov. 17, 2011, Helms and Kaelin transferre $2.2 million to Barlow, who then sent it to Haley Oil, an entity that Helms controlled. That money was eventually returned to Vendetta Royalty for disbursement to investors.

“Helms orchestrated these transactions … to create fictitious income to support the fraudulent partnership-income distributions,” the complaint said.

The SEC also claimed that Helms and Kaelin tried to extend the scheme earlier this year through two new affiliates that pledged potential returns of 300 to 500 percent in just five to seven years. One of those offerings aimed to raise $300 million by April 2014 and touted Vendetta’s “industry reputation of honesty and trustworthiness,” according to the SEC.

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