UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
ADMINISTRATIVE PROCEEDING
File No. 3-19419
RECEIVED
OCT 25 2019
In the Matter of
ERHC Energy, Inc., etal
Respondents.
MOTION FOR LEAVE TO FILE MOTION
FOR RULING ON THE PLEADINGS AND
MOTION FOR RULING ON THE PLEADINGS
AGAINST ERHC ENERGY, INC.
Motions
I. Motion for Leave to File Motion for Ruling on the Pleadings
The Division of Enforcement ("Division"), by undersigned counsel, pursuant to
Securities and Exchange Commission ("Commission") Rule of Practice ("Rules of
Practice') 154, respectfully moves for leave to file a Motion for Ruling on the Pleadings
against ERHC Energy, Inc. (CIK No. 799235) ("ERHE") pursuant to Rule of Practice
250(a), because the Division was not served with a copy of ERHE's Answer, and was not
aware of the Answer until on or about October 17, 2019.
II. Motion for Ruling on the Pleadings
Assuming leave is granted, the Division hereby moves, pursuant to Rule of
Practice 250(a), for a ruling on the pleadings against ERHE and entry of an order
revoking the Securities Exchange Act ("Exchange Act") Section l 2(g) registration of
each class of ERHE's registered securities because there is no genuine issue of material
fact, and the Division is entitled to a ruling as a matter oflaw.
Brief in Support
I. Motion for Leave to File Motion for Ruling on the Pleadings
On September 5, 2019, the Commission issued an Order Instituting
Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the
Securities Exchange Act of 1934 ("Exchange Act") ("OIP") against Respondents ERHE
Energy, Inc. (CIK 799235) ("ERHE") and IDdriven, Inc. (CIK No. 1605024) ("IDDR")
alleging that both respondents are delinquent in their required periodic filings with the
Commission. As shown in the Declaration of Gina Joyce, filed on September 11, 2019,
the Secretary served ERHE by Priority Mail Express on September 7, 2019. Therefore,
under the OIP, ERHE's answer was due on September 20, 2019. 1 On September 26,
2019, ERHE filed an Answer in this proceeding. That answer contains no address, phone
number, or email address for the company. It also did not include a Certificate of Service
indicating service on the Division, nor was the Division ever served with the Answer. On
October 3, 2019, the Division checked the Commission's website for this proceeding, and
ERHE's answer was not on the website. On October 17, 2019, the Division again
checked the Commission's website and the answer was present on the website. In light
of the fact that the Division was not served and was not aware of the Answer until
October 17, 2019, the Division asks for leave to file its Motion for Ruling on the
Pleadings notwithstanding the fact that it is more than fourteen days since the Answer
was filed.
1 Pursuant to Rule of Practice 160(b ), we have added three days to the response time because
service was made by mail.
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II. Motion for Ruling on the Pleadings as to ERHE
A. Statement of Facts
ERHE (CIK No. 799235) is a Colorado corporation located in Houston, Texas,
with a class of securities registered with the Commission pursuant to Exchange Act
Section 12(g). ERHE is delinquent in its periodic filings with the Commission, having
not filed a periodic report since the period ended June 30, 2017. As of August 16, 2019,
ERHE 's common stock was quoted on OTC Link, had six market makers, and was
eligible for the "piggyback" exception of Exchange Act Rule _15c2-1 l{f)(3). ERHE has
failed to file its periodic reports for over a year.
ERHE's Answer concedes that its last periodic filing was for the period ended
June 30, 2017, which it refers to as its "Last 10-Q," and further states that it had
previously filed timely periodic reports for ten years. Answer at 2. It attributes its
current delinquency to "debilitating, convoluted and resource-draining litigation by a
U.S. based company group," which prevented ERHE from exploiting the rights to oil and
gas exploration areas in Sao Tome & Principe. ERHE alleges that this litigation was
dismissed in July 2019 and that it is now working with the government of Sao Tome &
Principe to -~monetize" the oil and gas production rights, which were tied up in the
lawsuit. ERHE asks for a "reasonable time within which to resume its periodic filings
and bring up-to-date, the arrears of filing." Answer at 4. ·
B. Argument
This administrative proceeding was instituted under Section l 2(j) of the Exchange
Act. Section l 2(j) empowers the Commission to either suspend (for a period not
exceeding twelve months) or permanently revoke the registration of a class of securities
if the respondent has failed to comply with any provision of the Exchange Act or the
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rules and regulations thereunder. As discussed below, ERHE's registration should be
revoked.
1. The Division is Entitled to a Ruling on the Pleadings Against
ERBE for Violations of Exchange Act Section
13(a) and Rules 13a-1 and 13a-13 Thereunder
Section 13(a) of the Exchange Act and the rules promulgated thereunder require
issuers of securities registered pursuant to Section 12 of the Exchange Act to file periodic
and other reports with the Commission. Exchange Act Section I 3(a) is the cornerstone of
the Exchange Act, establishing a system of periodically reporting core information about
issuers of securities.. The Commission has stated:
Failure to file periodic reports violates a central provision of the
Exchange Act. The purpose of the periodic filing requirements is to
supply investors with current and accurate financial information
about an issuer so that they may make sound decisions. Those
requirements are "the primary tool[ s] which Congress has fashioned
for the protection of investors from negligent, careless, and
deliberate misrepresentations in the sale of stock and securities."
Proceedings initiated under Exchange Act Section I 2(j) are an
important remedy to address the problem of publicly traded
companies that are delinquent in the filing of their Exchange Act
reports, and thereby deprive investors of accurate, complete, and
timely information upon which to make informed investment
decisions.
Gateway International Holdings, Inc., Securities Exchange Act Rel. No. 53907, 2006
SRC LEXIS 1288 at *26 (May 31, 2006) ( quoting SEC v. Reisinger Indus. Corp., 552
F.2d 15, 18 (1st Cir. 1977)). As explained in the initial decision in the St. George Metals,
Inc. administrative proceeding:
Section 13(a) of the Exchange Act and the rules promulgated
thereunder require issuers of securities registered pursuant to
Section 12 of the Exchange Act to file periodic and other reports
with the Commission. Exchange Act Rule 13a-1 requires issuers to
submit annual reports, and Exchange Act Rule 13a-13 requires
issuers to submit quarterly reports. No showing of scienter is
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necessary to establish a violation of Section 13(a) or the rules
thereunder.
St. George Metals, Inc., Initial Decision Rel. No. 298, 2005 SECT .F.XIS 2465, at *26
(Sept. 29, 2005); accord Gateway, 2006 SEC LEXIS 1288 at *18, *22 n.28; Stansbury
Holdings Corp., Initial Decision Rel. No. 232, 2003 SEC LEXIS 1639, at *15 (July 14,
2003); and WSF Corp., Initial Decision Rel. No. 204, 2002 SEC LEXIS 1242 at *14
(May 8, 2002).
ERHE concedes that it is delinquent in its filings. Answer at 2, Indeed, it had
failed to file eight periodic reports at the institution of this proceeding. OIP at I. ERHE
has engaged in serial and serious violations of Exchange Act Sections I 3( a)( I) and Rules
13a-l and 13a-13 thereunder, and those violations warrant revocation.
2. Revocation is the Appropriate Sanction for ERHE's Violations of
Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 Thereunder
Exchange Act Section 12(j) provides that the Commission may revoke or suspend
a registration of a class of an issuer's securities where it is "necessary or appropriate for
the protection of investors." The Commission's determination of which sanction is
appropriate "turns on the effect on the investing public, including both current and
prospective investors, of the issuer's violations, on the one hand, and the Section 12(j)
sanctions on the other hand." Gateway, 2006 SEC LpXIS 1288, at * 19-*20. In making
this determination, the Commission has said it will consider, among other things: (1) the
serio~sness of the issuer's violations; (2) the isolated or recurrent nature of the violations;
(3) the degree of culpability involved; (4) the extent of the issuer's efforts to remedy its
past violations and ensure future compliance; and (5) the credibility of the issuer's
assurances against future violations. Id.; see also Steadman v. SEC, 603 F.2d 1126, 1140
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(5th Cir. 1979) (setting forth the public interest factors that informed the Commission's
Gateway decision).
Although no one factor is controlling, in Stansbury, 2003 SEC LEXIS 1639, at
*14-*15; and in WSF Corp., 2002 SEC LEXIS 1242 at *5, *18, the Commission has
stated that it views the "recurrent failure to file periodic reports as so serious that only a
strongly compelling showing with respect to the other factors we consider would justify a
lesser sanction than revocation." Jmpax Laboratories, Inc., Exchange Act Rel. No.
57864, 2008 SEC LEXIS 1197 at *27 (May 23, 2008). An analysis of the factors above
confirms that revocation ofERHE's securities is appropriate.
a. ERHE's violations are serious and egregious
ERHE's failure to file two years' worth of periodic reports is serious and
egregious. Given the central importance of the reporting requirements imposed by
Section I 3(a) and the rules thereunder, Administrative Law Judges have found violations
of these provisions of the same and ofless duration to be egregious, and ERHE's
violations support an order of revocation for each class of its securities. See Freedom
Golf Corp., Initial Decision Release No. 227, 2003 SEC LEXIS 1178, at *5 (May 15,
2003) (respondent's failure to file periodic reports for less than one year was egregious
violation).
b. ERHE's Violations Of Section 13(A) Have
Been Not Just Recurrent, But Continuous
ERHE's violations are not unique and singular, but continuous. ERHE has failed
to file any of its periodic reports since the period ended June 30, 2017. The serial and
continuous nature of ERHE's violations of Exchange Act Section 13(a) further supports
the sanction of revocation here.
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c. ERHE's Degree of Culpability Supports Revocation
In Gateway, the Commission stated that, in determining the appropriate sanction
in connection with an Exchange Act Section 12(j) proceeding, one of the factors it will
consider is "the degree of culpability involved." Gateway, at 10, 2006 SEC LEXIS 1288,
at *21. ERHE's Answer reveals that it was fully aware of its reporting obligations: in
fact it boasts of ten years' worth of timely periodic reports prior to its current string of
reporting violations. Answer at 2. ERHE attributes its delinquencies to litigation over
mineral rights with a third party. This argument is unavailing. The Commission has
repeatedly held that third party conduct does not excuse a company's failure to comply
with its periodic reporting obligations. Eagletech Communications, Inc., Exchange Act
Rel. No. 54095, 2006 SEC LEXIS 1534 at *6 (July 5, 2006) (third party criminal
activity); Cobalis Corporation, Exchange Act Rel. No. 64813, 2011 SEC LEXIS 2313 at
*20 (July 6, 2011) (actions of shareholder in forcing involuntary bankruptcy proceeding
and forcing i~suance of stock did not excuse Exchange Act violations).
d. ERHE's Has Not Made Any Credible Assurances Against Future
Violations
ERHE's assurances against future violations are not credible. They are being
made after two years of ongoing delinquency and are wholly unsupported by any dates or
times as to when it will obtain the funds or bring itself current. Such vague assurances
especially viewed in the context of its violations lack credibility. In any case, a
Commission administrative proceeding "is not an e~tension of time to file delinquent
reports or correct filing deficiencies as sometimes occurs during the normal filing
process.'~ Citizens Capital Corp., Initial Dec. Rel. No. 433, 2011 SEC LEXIS 3307, at
* 18 (September 23, 2011 ).
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e. Revocation is the Appropriate Remedy for ERHE
As discussed above, a full analysis of the Gateway factors establishes that
revocation is the appropriate remedy for ERHE's violations of the periodic reporting
requirements. The Company's recurrent failures to file its periodic reports have not been
outweighed by "a strongly compelling showing with respect to the other factors" which
"would justify a lesser sanction than revocation." Jmpax Laboratories, Inc., 2008 SEC
LEXIS 1197 at *27. A lesser sanction would also diminish the deterrent power of
Exchange Act Section l 2(j) proceedings. As the Commission has held:
Dismissal [] would reward those issuers who fail to file required periodic reports
when due over an extended period of time, become the subject of Exchange Act Section
l 2(j) revocation proceedings, and then, on the eve of hearings before the law judge or, in
this case, oral argument on appeal, make last-minute filings in an effort to bring
themselves current with their reporting obligations, while prolonging indefinitely the
period during which public investors would be without accurate, complete, and timely
reports (that comply with the re-quirements of the Exchange Act and its rules and
regulations) to make informed investment decisions.
Nature's Sunshine Products, Inc., Exchange Act Rel. No. 59268, 2009 SEC LEXIS 81, at
*33-*34 (January 21, 2009)(footnote omitted).
Moreover, revocation will not be overly harmful to whatever business operations,
finances, or shareholders ERHE may have. See Eagletech Communications, Inc.,
Exchange Act Rel. No. 54095, 2006 SEC LEXIS 1534, at *9 (July 5, 2006) (revocation
would lessen, but not eliminate, shareholders' ability to transfer their securities).
Revocation will not only protect current and future investors in the Company, who
presently lack the necessary information about ERHE because of the issuer's failure to
make Exchange Act filings; it will also deter other similar companies from becoming lax
in their reporting obligations.
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A new registration process will place all investors on an even playing field. All
current investors will still own the same amount of shares in ERHE that they did before,
though their shares will no longer be devalued because of the company's delinquent
status. All investors, current and future alike, will also benefit from the legitimacy,
reliability, and transparency of a company in compliance. The period of revocation will
protect the status quo, and will give ERHE the opportunity to come into full compliance,
to calmly and thoroughly work through all of ERHE's issues with its attorney,
consultants, auditors, and management, and to complete its financial statements in
compliance with Regulations S-K and S-X~
Conclusion
For the reasons set forth above, the Division respectfully requests that the
Commission grant the Division's motion for leave to file its motion for ruling on the
pleadings and, if granted, grant its motion for ruling on the pleadings and revoke the
registration of each class ofERHE's securities registered under Exchange Act Section 12.
Dated: October 25, 2019 Respectfully submitted,
~ q?f~ v---=----e.
James Carlson (202) ~1&
David S. Frye (202) 551-4728
Securities and Exchange C_ommission
100 F Street, N.E.
Washington, D.C. 20549-5010
COUNSEL FOR
DIVISION OF ENFORCEMENT
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CERTIFICATE OF SERVICE
I hereby certify that I caused true copies of the Division of Enforcement's Motion
for Leave to File Motion for Ruling on the Pleadings and Motion for Ruling on the
Pleadings Against ERHC Energy, Inc. to be served on the following on this 25th day of
October, 2019, in the manner indicated below:
By Email:
Apfilings@sec.gov
By United Parcel Service:
'. :: ·: ~C: Energy, Inc.
5444 Westheimer Road, Suite 1440
Houston, TX 77056
