Oil well operators for each of Faulkner’s prospects would create a written estimate of costs to drill a well in the form of an “authority for expenditure” (“AFE”). Faulkner allegedly would receive all of the information, but, unfortunately for the investors, the estimates would not be in the offering materials. Further, the investigation of Faulkner reveals that he purposely created AFEs in the name of the oil well operator, but grossly inflated the estimated costs.
Furthermore, investigators say Faulkner made fraudulent misrepresentations to investors by overselling the various offerings and used overblown reports and production estimates from a third-party geologist, his close affiliate.
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Upon receipt of the investor money, Faulkner allegedly transferred money from segregated accounts into general and operating bank accounts. Shortly thereafter, he would divert significant amounts of investor funds for his own benefit. Meanwhile, investors received minimal returns on their investment.
