Judge Freezes Rocky Mountain Energy Assets; Ex-CEO, Counsel Suspected of 'Pump and Dump' Scheme

A Houston judge has frozen the assets of former executives with Rocky Mountain Energy Corp. (RMEC) after the Securities and Exchange Commission (SEC) alleged the company had illegally worked to manipulate its stock price.

The SEC accused RMEC, its former CEO John Ehrman and former general counsel Roderick Johnson of an ongoing "pump and dump" scheme to raise the stock price, according to the complaint.

Ehrman, 48, and Johnson, 73, have used "bogus share exchange transactions to amass 30 million Rocky Mountain shares that Ehrman controlled secretly in accounts held by Johnson," according to the SEC complaint. The men then dumped nearly $800,000 of the company's shares on the market, the SEC said.

Spencer Barasch, associate administrator for the SEC office in Texas, said all of RMEC's books and computers and their Houston offices were secured by a receiver appointed by the court. A "pump and dump" scheme, said the SEC, is used by company insiders to pump up their company's stock price using false statements, which in turn drives the share price up. The insiders then dump the shares for a profit before the true facts are known.

The SEC alleges that Ehrman issued several press releases about transactions by the small oil and gas independent to buy valuable assets. However, the SEC claims that the announcements were "blatantly false and misleading," and were used to finance deals that never materialized. According to the SEC, RMEC alleged in one press release that it was one of five companies able to fight oil well fires in Iraq and said it was in negotiations to send personnel there to work.

Just last month RMEC said it was negotiating a merger agreement with a larger independent (see Daily GPI, March 12). Ehrman said in a press release that the merger negotiations were between two candidates and likely would be structured as a sale of RMEC's assets.

Former CEO Ehrman was described by the SEC as a "securities recidivist" because he previously had been sued by the agency for securities fraud when he worked for TransWestern Oil and Gas, also based in Houston. According to the SEC's complaint, Ehrman was ordered by a federal judge in 1991 to not violate securities laws in connection with an earlier oil and gas scheme. Ehrman also was barred from associating with any broker, dealer, investment company or municipal securities dealer.

RMEC first began actively trading on Aug. 5, 2002, and its shares closed that day at 91 cents. On Tuesday, RMEC closed at about 3 cents a share. RMEC originated as Cavallo Corp., based in Texas, and then merged with a Nevada publicly held company named Emission Control Devices, which had no assets. It then was renamed RMEC and began acquiring properties in Wyoming and Montana.

Just before the SEC unveiled its investigation, Ehrman resigned April 2 from RMEC where he had held the title of CEO, president and director. He was replaced by Michel Clerin. When he resigned, Ehrman told the Houston Chronicle, "I realized that I am a controversial guy and frankly, I don't want that to come back on the company. For the good of the shareholders and shareholder value, I resigned."

Following his resignation, Ehrman stated, "The company is in good hands with the board of directors and Mr. Clerin. The excellent board which we have assembled will be in a strong position to manage the future growth of the company. They are highly qualified to execute on the business plan. My family will continue to be large shareholders, and I give all my support to the board, and to my successor. Mr. Clerin's years of running companies and raising capital provides me with the confidence that RMEC will maximize its potential."

Clerin was touted by the present RMEC board as " an international executive with significant experience in the corporate sector, in investment and commercial banking, public sector advisor in the field of FDI, privatization, specialist in raising equity and debt and setting up guarantee funds, venture capital and private equity funds. He has demonstrated results in diverse industries: banking, finance, energy, mining, Agro food, monitoring and promoting trade projects, management, capacity building in various countries and in ministries of trade, economy and in diverse functions," the announcement said.

"I look forward to working with RMEC and building it to its potential," said Clerin. "The development of properties in place and development of our recent acquisition of OCS Inc. will be our primary focus for building fundamentals."

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