Dallas Cowboys Owner’s Oil and Gas Company Sued in Fraud Case

March 15, 2010

A lawsuit accuses an employee of an oil and gas company owned by Dallas Cowboys owner Jerry Jones of aiding and abetting an alleged $15 million securities fraud under investigation by federal officials.

Jones is not named in the lawsuit, which was filed in federal district court in Dallas. The defendants listed are the Jones-owned company Blue Star Oil and Gas and its exploration manager, Lonnie Williams, who reports directly to Jones, according to the lawsuit.

The new lawsuit is rooted in a 2008 action filed by the Securities and Exchange Commission, which alleges that Louisiana businessman James Gurgainers defrauded 160 investors out of $12 million.

Kelly Crawford, the court-appointed receiver in the SEC case, sued Blue Star and Williams in an effort to recover at least $1.8 million he says Blue Star received by doing business with Gurgainers.

In the lawsuit, Crawford alleges that Williams and Blue Star knew Gurgainers was defrauding investors by touting his connection to Jones and promising inflated returns that he never delivered. Crawford says Williams acted as Gurgainers’ mentor in the oil and gas business, provided him with a suite at a Cowboys game to entertain investors and helped solicit money from some of the biggest investors.

Investors now claim they lost more than $15 million in the alleged scheme.

“Blue Star knew or should have known that (Gurgainers) was defrauding investors,” said Mitch Little, an attorney for Crawford. “But they took the money anyway.”

Retta Miller, an attorney for Blue Star who also spoke on behalf of Williams, said Crawford’s claims are without merit. “We plan to vigorously defend this lawsuit and look forward to our day in court,” she said in a statement.

Cowboys spokesman Rich Dalrymple said Jones had no comment. The Associated Press could not locate a phone number for Williams, who does not yet have an attorney, or for Gurgainers, who is representing himself against the SEC allegations.

According to the lawsuit, Gurgainers and Williams met at a Cowboys game in 2005 and quickly came to a business agreement. Williams needed a company to drill fresh wells on some south Texas property where Blue Star had leased the mineral rights. Gurgainers raised a $192,000 “prospect fee” that allowed him to do business with Jones’ company, and then set about raising more money to drill.

The SEC accuses Gurgainers of a long list of misdeeds in raising capital. He didn’t use a registered broker or registered securities, and instead of using money for its intended purpose, he pooled the funds and used them as he saw fit in violation of securities laws, the SEC says.

The agency also accuses Gurgainers of skimming more than $700,000 to fund gambling trips to Las Vegas and Shreveport, La., hotels and expensive meals.

Crawford accuses Blue Star and Williams of knowing of these alleged misdeeds and even helping Gurgainers commit them.

“The environment created by Blue Star was one of high pressure to drill a series of wells,” Little said. “They took shortcuts and essentially assisted (Gurgainers) in defrauding investors all around the country.”

Williams is notorious among football fans in Texas – but not because of his connection to Jones. Texas Longhorns fans know him for his alleged role in “The Spy Game,” an infamous Texas-Oklahoma college football game in 1976. Before the game, Texas coach Darrell Royal accused Williams of spying for the Sooners by sneaking into a Longhorns practice before the 1972 game.

Williams has not spoken publicly about the spy accusations. But former Oklahoma coach Barry Switzer confirmed the incident in his autobiography, before later denying it to reporters.

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