B. BLACKBURN OPERATES BEHIND THE SCENES TO HIRE TREATY’S SECURITIES COUNSEL, AND APPOINT OFFICERS AND DIRECTORS, OF HIS CHOOSING. 18. Given his background, Blackburn held no formal title at Treaty, and instead operated behind the scenes as a purported consultant. In reality, Blackburn controlled nearly all aspects of Treaty’s day-to-day operations between July 2009 and September 2013. 19. For instance, in or around July 2009, Blackburn was present and participated in hiring Whitley to serve as Treaty’s corporate and securities counsel, which role Whitley filled until July 2013. 20. Soon thereafter, beginning in or around September 2009 and through April 2010, Blackburn appointed two consecutive Chief Executive Officers (“CEO”) until finally appointing Reid to the position in April 2010. Reid served as Treaty’s CEO, as well as Chairman of the Board, from his appointment in April 2010 until his resignation on July 28, 2014. On July 15, 2014, the Financial Industry Regulatory Authority, Inc. (“FINRA”) permanently barred Reid from associating, in any capacity, with any National Association of Securities Dealers (“NASD”) member firm due to his misappropriation of client funds while employed as a registered representative at Williams Financial Group located in Dallas, Texas. 21. In or around November 2011, Blackburn appointed Gwyn to serve as Treaty’s co-CEO alongside Reid, which position he held until January 2013. In addition, Gwyn served as Treaty’s Chief Operating Officer (“COO”) from January 2013 through March 2014 and was a Treaty director beginning in April 2011 and until his resignation from the company on March 14, 2014. On February 13, 2014, the National Futures Association (“NFA”) ordered Gwyn and his futures firms – Level III Management LLC and Level III Trading LLC – to withdraw from NFA membership based on Gwyn’s willful provision of misleading information to the participants in Level III Trading Partners, LP, a pool operated by Level III Management LLC, by investing the pool’s funds in Treaty securities instead of commodity futures contracts. Currently, Level III Trading Partners, LP is liquidating its assets through a Chapter 11 bankruptcy proceeding pending in the Eastern District of Louisiana and styled In re Level III Trading Partners, LP, No.13-12120. 22. In or around April 2010, Blackburn appointed Mulshine to act as Treaty’s corporate secretary. 23. In or around November 2011, Blackburn appointed Schlesinger to act as Treaty’s Chief Investment Officer (“CIO”), which position Schlesinger held until he resigned from Treaty in September 2013. C. UNDER BLACKBURN’S UNDISCLOSED CONTROL, TREATY MISREPRESENTS AND OMITS MATERIAL FACTS CONCERNING HIS CRITICAL ROLE IN THE COMPANY, HIS CRIMINAL BACKGROUND, AND THE TRUE NATURE OF THE COMPANY’S DRILLING OPERATIONS IN BELIZE. 24. Blackburn purported to act merely as a consultant for Treaty, even going so far as to execute a Consulting Agreement with the company in April 2010 whereby he agreed to provide enumerated services for the company, including coordinating with Treaty’s executives to improve execution of its business plan. In reality, Blackburn was only a consultant on paper and actually acted as a de facto officer of the company who directed its day-to-day operations from its 2008 formation through, at least, September 2013. 25. Treaty, Blackburn, Reid, Gwyn, Schlesinger, and Mulshine (Reid, Gwyn, Schlesinger, and Mulshine collectively, the “Treaty Officers”) (Blackburn and the Treaty Officers collectively, “Treaty Defendants”) have never disclosed Blackburn’s control over the company despite the fact that, with the Treaty Officers’ knowledge, he: (a) was Treaty’s majority shareholder between January 2009 and early 2010 and continued to hold a substantial percentage of stock thereafter; (b) was paid nearly twice as much compensation as Reid, the next-highest paid Treaty officer; (c) worked in the same office as Reid, Gwyn, and Schlesinger in Treaty’s New Orleans headquarters; (d) frequently communicated with the Treaty Officers about day-to-day operations of the company; (e) directed the Treaty Officers’ work through in person, telephonic, and email communications; (f) oversaw a highly-touted oil and gas drilling program in Belize (“Belize Program”), for which he (i) served as Treaty’s primary point of contact with the company’s joint venture partner in the program; (ii) hired drilling personnel whom he instructed to report directly to him; and (iii) provided status reports and updates to the Treaty Officers; (g)participated in selecting and working with Treaty’s vendors and professional service providers, including hiring the Belize Program’s drilling personnel and communicating with Treaty’s auditor; (h) orchestrated sales and transfers of Treaty stock by soliciting investors and either arranging for Treaty to issue stock to them directly or, alternatively, selling them his own Treaty shares. For example, after Blackburn told a prospective investor that Treaty’s testing confirmed the presence of millions of barrels of oil in Belize, the investor purchased 4.6 million shares of Treaty restricted stock from the company for $120,000; (i) used proceeds from sales of his own Treaty stock – which funds were often commingled between Treaty’s and Blackburn’s bank accounts – to pay the company’s expenses; (j) managed Treaty’s funds and dictated how company money would be spent; (k) routinely negotiated loans on Treaty’s behalf and personally guaranteed or pledged his own Treaty stock as collateral for certain loans; and (l) on numerous dates including, but not limited to October 19, 2009, April 22, 2010,September 12, 2011, October 3, 2011, March 29, 2012, and July 2, 2012, directed and approved the timing and content of key press releases published by Mulshine for Treaty. 26. Despite his extensive involvement in nearly all facets of Treaty’s operations, Treaty materially misrepresented and, in other instances, altogether omitted to disclose, in Forms 10-Q and 10-K, Blackburn’s criminal history or connection to, and influence over, the company.
Much more here... Investors should really read the charges by the SEC for a better understanding of how Treaty Really works.
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