Feds charge real estate company with defrauding investors during Bakken oil boom
The federal government has charged a Washington-based real estate company with conning investors out of $125,000 on a failing Williston development in 2015.
BISMARCK — A Washington-based family business is accused of defrauding investors of over $100,000 on a failing Williston real estate development during the Bakken oil boom.
The U.S. Securities and Exchange Commission alleges Kirk Sperry and his company Sperry and Sons, based in Bellevue, Washington, used false and misleading statements to draw $125,000 out of two investors. These investments were made in the fall and winter of 2015, just months before an oil price collapse ended the boom, according to an SEC statement released Wednesday, Sept. 9.
"Investors are entitled to full and complete disclosure of the material risks associated with their investments so that they can make informed decisions," said Erin Schneider, director of the SEC’s San Francisco regional office, in the statement. "As we allege, Sperry and Sons mislead investors in order to raise money rather than honestly inform its investors about the status of its real estate project."
SEC claims Sperry and Sons assured their investors they would have the first position mortgage on the Williston property, when in fact another investor had already secured the first position.
And according to the SEC complaint, Sperry and Sons told investors they already had purchases on several property lots, even though those purchases had been canceled earlier in the year. With the funds accrued from their two investors, Sperry and Sons allegedly paid back other investors on unrelated company ventures, according to the SEC.
In an interview with The Forum, Sperry disputed the allegations, stating he and his company had legitimate purchase agreements in place.
"Around that time, the bottom fell out on the price of oil, and all of these developers and local contractors who were purchasing these lots to build spec homes" backed out of the agreements, he said.
Sperry added that he and his company worked with many large investors during the Bakken oil boom, but said the two investors behind the SEC lawsuit were disgruntled by the market situation and tried to recoup bad investments, while others cut their losses.
"In all honesty, we informed all of the investors of the change in scenario when we were literally struggling to raise the last amount of funds needed," Sperry said, arguing he and his partners worked diligently to inform their investors of the sudden shifts in the status of other purchases and made a point of setting up individual conference calls with each investor to discuss the situation.
"We did our best to save what we could for everybody, but there were losses taken," Sperry said.
The SEC filed the charges against Sperry in the U.S. District Court for the Western District of Washington. Sperry said he and his company have not decided whether they will challenge the allegations in court.
Readers can reach Forum reporter Adam Willis, a Report for America corps member, at firstname.lastname@example.org.