Coral Capital Partners was mentioned in the article below, which was originally published in the January 11th, 2012 edition of the PIPE’s Report.
SEC Launches Investigation of Alleged Stock Manipulation by PIPE Issuer Sun River Energy
Allegations Made in Documents Subpoenaed by SEC in Sun River’s Litigation With Nova Leasing
By Dan Lonkevich
January 11, 2012 5:44 AM PST
The Securities and Exchange Commission has opened an investigation of alleged stock manipulation by PIPE issuer Sun River Energy (SNR) in connection with its strategy of suing to take back shares of restricted stock from contractors and at least one PIPE investor.
The probe came to light because the SEC issued a subpoena to Robert Fowler, the chief executive officer of Nova Leasing, a Casper, Wyoming-based oil and gas company embroiled in litigation with Dallas-based Sun River.
Sun River has denied the allegations of stock manipulation.
Fowler said his attorney, Tobin Kern of the law firm Sherman and Howard in Denver, had received the subpoena and was handling it for him. The SEC was asking for “the general paperwork around the litigation between Sun River and Nova Leasing,” he said. Kern couldn’t be reached for comment.
The SEC would neither confirm nor deny the issuance of the subpoena, or the existence of a probe.
On March 10 of last year, Sun River filed a lawsuit in Texas state court against Nova Leasing and Securities Transfer in a dispute involving a series of transactions between Nova and Sun River, in which Nova received 1.2 million shares of Sun River stock.
Sun River was seeking the return of the 1.2 million shares plus damages and attorneys’ fees from Nova Leasing, based on claims of unjust enrichment and breach of contract.
Nova filed a countersuit against Sun River in federal court in Denver, over the company’s refusal to register and transfer the shares.
Nova claims that Sun River filed its lawsuit in retaliation for Nova’s refusal in April of 2010 to accept a lock-up agreement that would have limited its ability to sell the stock and its refusal in September 2010 to agree to Sun River’s demand to “get out of the market” for the company’s stock.
At the time, Sun River and two companies controlled by Harry McMillan, a major shareholder of the company, were trying to “artificially inflate the price of Sun River’s stock for their own pecuniary benefit,” Nova’s countersuit said.
McMillan controls two companies, Cicerone Corporate Development and J.H. Brech, that together hold about 13.8% of Sun River’s stock. Sun River put McMillan in charge of its investor relations, corporate governance and capital-raising efforts in 2009, according to Nova.
In December, Sun River cut ties with McMillan and Cicerone for allegedly disclosing confidential information about Sun River to a third party. Sun River also is suing McMillan to take back $1.7 million in short-swing profits McMillan made when he sold a company he controlled that owned Sun River shares. Sun River CEO Donal Schmidt Jr. also has said the company may file suit to take back shares from McMillan.
Neither Schmidt nor McMillan could be reached for comment.
Nova claimed that in September 2010, McMillan told Fowler that if Nova didn’t immediately “‘get out of the market’ for Sun River shares, McMillan and Sun River would ‘deal with the situation with you’ and ‘God damn make sure’ that Nova’s shares of Sun River stock would not be cleared for sale on the open market ‘for the next two or three years.'”
McMillan allegedly carried out that threat in November 2010 and January 2011, instructing Sun River’s transfer agent not to clear for sale any shares held by Nova or by Fowler’s wife, Sharon K. Fowler.
Sun River filed similar lawsuits against Kevin Paul of LPC Investments, Mirador Consulting, and Erik Nelson, of Coral Capital Partners. The company lost in its effort to force Paul and LPC Investments to give back their Sun River shares; eventually the company found someone to purchase the shares from Paul and LPC. Last month, Sun River settled its litigation with Mirador for undisclosed terms.
Sun River failed to disclose any of this litigation to PIPE funds who invested $10 million in a private placement of preferred convertible stock in December 2010 and January 2011. The PIPE investors included Centaur Value Fund, Sherbrook Partners, Next View Partners,Seaside 88, Warburg Opportunity Trading Fund, Brio Capital, Micro PIPE Fund, Fairfield Investment and Bank of Guttenberg.
Coral Capital Partners was awarded a judgment in its favor against Sun River Energy, Inc. following a trial on October 23rd, 2013. Please see our blog entry “Coral Capital Partners Victorious in Sun Energy Litigation” for a further explanation of the trial, and how Sun River dropped all of its claims prior to trial. It should also be noted that the District Court Judge ruled in our favor in the dispute over the proposed settlement, and our decision to not enter into what was a clearly one-sided agreement.
About Coral Capital Partners
Coral Capital Partners is an independent consulting and advisory firm focused on companies and participants in the lower and middle markets. We partner with our clients to provide cost effective solutions to real world issues and situations. Our experienced team brings a diverse set of skills that allows us to service a wide variety of needs. Our area of services and expertise focuses on bringing services and solutions to our clients that are normally only available to much larger firms. Coral Capital Partners, Inc. provides services to Investment Banks, Private Equity Funds, investors, and both privately held and publicly traded companies, as well as various stakeholders in those organizations. This has included international public companies with operations on three (3) continents to smaller privately held domestic companies. Our experience in the areas of corporate advisory, due diligence reviews, and regulatory compliance allows for a cost effective and efficient solution to the issues at hand. Please feel free to contact our offices to see how we may be of assistance.