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i s 13 SERVER A Journal of Free Voices 500 A Window to the South Dec. 12, 1975 THE TEXA How not to buy an oil well BIG D SCAM By Earl Golz and John Cranfill Dallas Dallas has oil slicks, but not the ecological-disaster kind. These slicks are smooth-talking salesmen who lure the investor into parting with about $2,000 per oil or gas well and then beat him out of every cent they can get. It works so well that many victims don’t even realize they’ve been taken. This multi-million dollar scam has grown to the point of being a national scandal. A federal loophole, a curious lethargy on the part of the Securities and Exchange Commission, and zilch action by the State of Texas combined to make Dallas a con capitol. No way exists for an investor to find out if an oil firm is legitimate until after his money is lost. “You can’t tell,” says Fred Young, chief attorney for the Texas Railroad Commission. “There is no way of checking out the quality of the person seeking to be an oil operator.” The name of the newest confidence game to call Texas home is Schedule D, which is a reference to an exemption in federal securities laws. It permits oil and gas operators to solicit investments in Earl Golz and John Cranfill are investigative reporters with The Dallas Morning News. They did a five-part series on Schedule D operators last July that spurred both the state and the SEC to start legal action. Schedule D operators have since received considerable national publicity, and Golz and Cranfill have followed the legal and bureaucratic skirmishing that ensued. drilling ventures with almost no regulation by the U.S. Securities and Exchange Commission. Schedule D promoters don’t have to disclose to the SEC their drilling track record, their financial status, or their personal reputation in the business world. Robert F. Watson, formerly head of the SEC regional office in Fort Worth, has termed Sche’dule D “a license to steal” for professional confidence men who are defrauding the investing public. He has called for the repeal of the exemption because “there are a number of alternate ways legitimate drillers of oil and gas could finance their operations.” Watson’s successor, Richard Hewitt, says the SEC regional office gets “a lot of complaints. The problem is it takes people a year after they get into one of these Schedule D things before they realize they’ve been had.” DESIGNED to help the small independent oil operator register with the SEC without filing lengthy and arduous reports, Schedule D was an obscure amend ment to the 1933 U.S. Securities Act pushed by House Leader Sam Rayburn. It gathered dust for almost 30 years. About three years ago, however, unscrupulous promoters discovered Schedule D’s poten tial as a vehicle to make money fast with little capital investment and virtually no government regulation. The result has been an explosion of Schedule D companies, most of them operating out of Texas with fo…..weruWetadrroistotorworAittr.Nto.,,ertmimikmarga…..