SEC sues St. George company for selling shares in dry oil wells
Federal regulators have sued a St. George company and its owner, alleging he defrauded investors when he sold shares for only a $25,000 investment in oil wells in a field supposedly the size of those in the Middle East with a promised return of $20 million.
Rodney Scott Ratheal, 51, of Henderson, Nev., raised more than $4.2 million and used some of that money to drill two wells that never produced any oil or gas. But most of investor funds went for his own personal expenses, according to the lawsuit filed by the Securities and Exchange Commission in federal court in Salt Lake City.
Ratheal already has consented to a final judgment in which he neither admitted nor denied the allegations in the lawsuit. The judgement prohibits him from further violations of federal securities laws. He was not required to pay back more than $4 million in investor funds and interest because he showed that he did not have the means to do so, according to court documents.
Ratheal could not be reached for comment. The telephone was disconnected at his St. George company, Premco Western Inc., and a message on another number he uses said it was not accepting calls.
According to a lawsuit filed Monday, Ratheal bought Premco in June of 2001 and leased land from the Bureau of Land Management along the Utah-Arizona border to drill for oil and gas.
He then began marketing investments in two wells called the Dutchman 18-1 and Ft. Pierce 10-1 through seminars in the homes of investors, the company's website and phone calls.
Ratheal told investors that a U.S. Geological Service geologist had confirmed an in-house geologist's discovery that a "Super Giant" oil and gas field existed under Premco's leases that was "similar in size, if not bigger than, the oil and gas fields found in Kuwait and Saudi Arabia," according to the lawsuit.
Ratheal pitched the sale of 1 percent interest in the wells for $25,000, telling investors "for every 1% interest they purchased in the wells, they should expect to receive net income of at least $20 million," the complaint said.
Although Ratheal promised to only use up to 10 percent of investor monies for personal expenses, instead he diverted about $2.9 million into his own pocket, or about 70 percent.
He also failed to tell investors that both wells turned out to be dry holes and that one was plugged up when a drill bit broke and the company did not have the money to retrieve it. The BLM terminated one of the leases in 2002 because it was inactive and another company hired to drill at the other site pulled out in December of 2008 because the well was dry.
Still, Ratheal sold $4.2 million in interests in the two wells to about 100 investors from June 2011 to April 2012 without telling them operations had ceased at both sites, the lawsuit says.
In 1991, Ratheal received a cease-and-desist order from the securities commissioner of North Dakota for selling unregistered investments in oil and gas leases. He also has been the subject of at least 35 court actions in Washington County, including for cohabitant abuse, driving under the influence, assault and unlawful detention.