OKLAHOMA CITY – Two Oklahomans who raised approximately $23.3 million from more than 250 investors in four real estate projects agreed to pay almost $1.6 million to settle a complaint that they violated federal securities laws.
Gregory K. Womack, 58, of Edmond, and Gene D. Larson, 78, a resident of Edmond and of Mesa, Arizona, consented to the settlement without admitting or denying the allegations.
From late 2017 through December 2018 GreneCo, Larson and Womack offered three investment options, but “focused on a specific option that provided for the creation of charitable tax deductions…,” the federal Securities and Exchange Commission reported.
Prior to July 2019, Larson and Womack each owned 50% of GreneCo and co-managed the company, soliciting investors to buy membership units in limited liability companies managed by GreneCo. The membership units were securities, but Womack and Larson “failed to register their offerings” with the SEC “and no registration exemption applied,” the complaint alleges.
Larson was “primarily responsible for identifying real estate development opportunities.” Womack, a licensed investment adviser in five states, was “primarily responsible for identifying potential investors,” the SEC related.
Since at least 2000 Womack also has been the sole owner and “control person” of Womack Investment Advisers Inc., an Oklahoma corporation based in Edmond. In its most recent Form ADV, WIA listed approximately $70 million in assets under management, the SEC reported. (Form ADV is the form used by investment advisers to register with both the SEC and state securities authorities.)
Womack failed to inform clients “that he would receive millions of dollars in management fees from investor funds through the GreneCo offerings, including his portion of $472,698 attributable to eight WIA investor clients,” the SEC alleged. Womack and WIA also failed to inform clients that WIA received at least $160,000 directly from GreneCo as a result of the offerings.
Instead, in its Form ADV filed on March 9, 2018, WIA “misleadingly represented that WIA ‘receives no compensation from a client’s participation and does not charge the client a fee for this investment.’”
Management fees
siphoned $11.5M
of the investments
GreneCo’s four investment offerings were:
• Doc’s Field of Dreams attracted 109 investors in an oil storage facility, and The Orchard at Turtle Creek secured 25 investors in a multistory office building. Those two offerings sold membership units of approximately $10.4 million, the SEC reported.
• Sweetwater Cove Partners raised $4.7 million from 51 investors in condominiums.
• Buck Mountain raised $8.2 million from 117 investors in cabin-style homes.
Eight WIA clients collectively invested more than $1 million in the GreneCo offerings, the SEC reported. However, Womack did not disclose to those investors that GreneCo received 28.7% of the investor funds as management fees for DFOD and Turtle Creek, 51.4% of the investor funds for Sweetwater Cove, and 74.3% of the investor funds for Buck Mountain.
Womack split the $11.5 million in management fees equally with Larson. That included $472,698 in management fees paid by WIA client-investors, court records show.
The SEC accused GreneCo, Larson and Womack each of violating the Securities Act of 1933, while Womack and his WIA each violated the Investment Advisers Act of 1940.
Penalties imposed
total $1,596,308
U.S. District Judge Stephen Friot imposed civil penalties of $414,364 against GreneCo, $41,440 against Larson, $145,031 against Womack, and $517,955 against WIA.
Womack also was required to disgorge $236,739 “representing net profits gained as a result of the conduct alleged” in the SEC complaint, together with $48,170 in prejudgment interest.
Similarly, WIA was required to surrender $160,000 “representing net profits gained as a result of the conduct alleged in the complaint,” together with $32,609 in prejudgment interest.
All of those sums must be paid to the SEC “within 30 days after entry of this Final Judgment,” Friot ordered.
In addition, GreneCo, Larson and Womack are “permanently restrained and enjoined” from violating the Securities Act, while Womack and WIA are forbidden from ever again violating the Investment Advisers Act.