U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17607 / July 11, 2002

   SECURITIES AND EXCHANGE COMMISSION v. TEXON ENERGY CORPORATION,
   LONESTAR PETROLEUM CORPORATION, JAMES E. HAMMONDS aka JAKE HAMMONDS
   aka JAKE DAVIS and BARRY V. REED (Case No. CV-01-09706-LGB(MANx)
   (C.D.Cal.)

   $1.2 MILLION JUDGMENT ENTERED AGAINST COMPANIES IN PONZI SCHEME THAT
   USED SEPTEMBER 11 TERRORIST ATTACKS TO SELL INVESTMENTS TO THE ELDERLY

   Following the September 11 terrorist attacks, Texon Energy Corp.
   solicited the elderly to invest in its oil and gas Ponzi scheme,
   claiming that Texon was in a "good position" to benefit from the war
   on terrorism because energy prices would rise and Texon owned oil and
   gas well interests. On July 8, 2002, a federal district court entered
   a judgment against Texon and a related company, Lonestar Petroleum
   Corp., pursuant to consent, enjoining each of them from committing
   further securities fraud and violating the securities registration
   provisions. The judgment also ordered Texon and Lonestar to pay
   jointly and severally in disgorgement $1,268,253, the amount raised
   from investors plus prejudgment interest. As part of the settlement,
   Texon and Lonestar did not admit or deny the SEC's allegations.

   The SEC's complaint further alleged that Texon and Lonestar, which
   were controlled by Barry V. Reed and repeat securities-law violator
   James E. Hammonds, sold unregistered securities by fraudulently
   promising investors an annual 12% "dividend" derived from Texon's oil
   and gas profits and misrepresenting that Texon was a profitable
   business and safe investment. Instead, Texon paid investors the
   so-called "dividend" with money raised from other investors.

   Previously, the U.S. District Court for the Central District of
   California appointed a Receiver to take control of Texon and Lonestar
   for the investors' benefit. The Receiver is in the process of
   collecting and liquidating Texon's and Lonestar's assets, the net
   proceeds of which will be distributed to investors pursuant to a plan
   approved at a later date by the district court. The judgment provides
   that if the Receiver's recovery and liquidation of Texon's and
   Lonestar's assets fail to satisfy the disgorgement and prejudgment
   interest amount of $1,268,253, then the unsatisfied amount shall be
   waived. The judgment further provides that if the Receiver collects
   more than $1,268,253, Texon and Lonestar shall pay civil penalties in
   an amount not to exceed $1,254,100.

   The SEC enjoined Hammonds in 1994 for participating in a similar oil
   and gas fraud and barred Hammonds in 1996 from the securities