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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 15083 / September 27, 1996
SECURITIES AND EXCHANGE COMMISSION V. RUSSELL S. SMITH, JAMES O.
FOUST, JOHN E. BURSE, AND JAMES E. FISHER, Civil Action No.
1:96cv-166-R (W.D.Ky. September 27, 1996) (TBR)
The Securities and Exchange Commission today sued four
individuals currently or formerly associated with an Albany, KY
oil exploration company for their roles in selling working
interests in the company's oil properties.
The suit, filed in Federal District Court for the Western
District of Kentucky, alleges the following:
Russell S. Smith, president of Smitco Oil, Inc. ("Smitco"),
James O. Foust, a former principal of Smitco, and two salesmen
formerly employed by Smitco, John E. Burse and James E. Fisher,
over a period extending from fall of 1992 to the fall of 1993,
used, or directed others to use, high-pressure telephone calls to
sell investors working interests in oil wells then being drilled
by Smitco. These techniques, employed by Burse and Fisher under
the supervision of Smith and Foust, included the use of written
offering materials that portrayed the working interests in a
misleading fashion and failed to adequately state the risks of
the ongoing offering, and oral sales presentations which
similarly failed to adequately discuss the risks of the
investment and included misstatements of material fact about the
offering and Smitco. For example, according to the Complaint,
certain individuals solicited by Smitco were told that an
investment in a Smitco working interest was similar to an
investment in a savings account or a certificate of deposit.
Prospective investors were also sent written materials describing
their prospective investments which contained numerous false and
misleading statements, including a discussion of investment risk
that likened the risk of a Smitco investment to the risk of
"driving your car everyday [sic]."
Using responses received from direct-mail postcards, Burse
and Fisher, acting under the direction and supervision of Smith
and Foust, telephoned individuals and delivered a sales
presentation from an outline prepared by Burse. These oral sales
presentations included false and misleading information about
investment risks (including overstated estimates of yield from
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION V. RUSSELL S. SMITH, JAMES O. FOUST, JOHN E. BURSE, AND
The Securities and Exchange Commission today sued four individuals currently or formerly
The suit, filed in Federal District Court for the Western District of Kentucky, alleges the
Russell S. Smith, president of Smitco Oil, Inc., James O. Foust, a former principal of
These techniques, employed by Burse and Fisher under the supervision of Smith and Foust,
For example, according to the Complaint, certain individuals solicited by Smitco were told
Using responses received from direct-mail postcards, Burse and Fisher, acting under the
These oral sales presentations included false and misleading information about investment
including the Kentucky Department of Financial Institutions --had issued orders barring
According to the Complaint, Burse, Fisher, and, later, the other salemen hired by Burse, also
In the event that an oil well drilled by Smitco did strike oil, investors who held working
This was frequently done in order to solicit additional investments from individuals who had
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