The Securities and Exchange Commission today announced that Equal Earth, Inc., a San Diego, California-based green energy company, its Chief Executive Officer, and its Chief Operating Officer agreed to settle charges arising out of a two-year offering fraud.
The SEC’s complaint alleges that Equal Earth, CEO Andrew J. Duggan of San Diego, California, and COO Ghassan “Mark” Hamade of Santa Monica, California, fraudulently induced investments in Equal Earth, raising approximately $5.6 million from at least 266 investors. As alleged in the complaint, Duggan and Hamade made materially false and misleading representations to investors concerning Equal Earth’s financial health and suggested, incorrectly, that Equal Earth was a fast-growing company that would soon go public by telling investors that the company had significant historical revenues, had acquired multiple companies that could generate future revenue, and had projects with significant power generation capacity. In fact, as alleged in the complaint, none of these representations were true. The complaint further alleges that, during the time that the defendants were making these false and misleading statements, Duggan sold some of his own Equal Earth stock holdings and misappropriated at least $40,000 in investor money.
The SEC’s complaint, which was filed in the United States District Court for the Southern District of California yesterday, charges all defendants with violations of the antifraud provisions of Section 10(b) and Rule 10b-5(b) of the Securities Exchange Act of 1934 (“Exchange Act”), Equal Earth and Duggan with violations of the antifraud provisions of Sections 17(a) of the Securities Act and Exchange Act Rules 10b-5(a) and (c), and all defendants with violations of the registration provisions of Sections 5(a) and (c) of the Securities Act of 1933 (“Securities Act”).
Without admitting or denying the allegations, the defendants have consented to the entry of final judgments permanently enjoining them from violating the antifraud and registration provisions of the federal securities laws. Equal Earth has agreed to pay a total of $6.8 million in disgorgement and prejudgment interest, as well as an $855,000 penalty. Duggan has agreed to pay over $800,000 in disgorgement and interest and a penalty of $167,500, and to a permanent director-and-officer bar, while Hamade has agreed to pay a penalty of $167,500 and to a permanent director-and-officer bar. The settlements are subject to court approval.
The SEC’s investigation was conducted by Lucee Kirka and Dora Zaldivar, and was supervised by Robert Conrrad of the SEC’s Los Angeles regional office.