SEC v. HOMELAND COMMUNICATIONS CORP, No. 8:13-cv-00868, Southern District of Florida (Apr. 8, 2013)

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

CASE NO.:

SECURITIES AND EXCHANGE COMMISSION,  )
)
Plaintiff, )
)
v.            )

)

GLENN HOPPES,  )

UNITED STATES ENERGY CORP.,  )

TN-KY DEVELOPMENT FUND LP, )

TN-KY DEVELOPMENT FUND II LP,  AND )

TN-KY DEVELOPMENT FUND III LP )

)

Defendants. )

____________________________________________  )

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
Plaintiff Securities and Exchange Commission alleges:
I. INTRODUCTION
1. The  Commission  brings  this  action  to  enjoin  Glenn  Hoppes  and  four  companies
he  controls,  United  States  Energy  Corporation  (“US  Energy”),  TN-KY  Development  Fund  LP
(“TN-KY  I”),  TN-KY  Development  Fund  II  LP  (“TN-KY  II”)  and  TN-KY  Development  Fund
III LP (“TN-KY III”), from further violations of the anti-fraud and registration provisions of the
federal securities laws.
2. From no later than April 2011 until at least January 2012, Hoppes and US Energy
employed unregistered brokers, including a recidivist securities law violator, to sell securities in
the form of limited partnership units in at least three oil drilling projects in Tennessee, TN-KY I,
TN-KY II and TN-KY III (collectively “TN-KY I-III”).
3. To  lure  investors,  Hoppes  misrepresented  information  about  US  Energy’s  oil
wells and failed to disclose his 2006 bankruptcy.

4. Hoppes  also  failed  to  disclose  that  US  Energy’s  vice  president  of  sales  was  a
recidivist securities law violator.  Hoppes hired Joseph Hilton to solicit investors in the TN-KY
I-III  offerings  despite  knowing  Hilton  was  the  subject  of  two  prior  Commission  enforcement
actions  which  resulted  in  the  United  States  District  Court  for  the  Southern  District  of  Florida
enjoining Hilton from violating the anti-fraud and registration provisions of the federal securities
laws and the Commission barring Hilton from acting as a broker.
5. Hoppes  hired  Hilton  despite  knowing  Hilton  used  an  alias  to  conceal  his  true
identity as a recidivist securities law violator.
6. Despite  knowing  Hilton’s  true  identity  as  a  recidivist  securities  law  violator,
Hoppes  employed  Hilton  in  a  sales  capacity  and  financially  supported  Hilton’s  boiler  room
where Hilton managed a team of unregistered broker-dealers to solicit investors in the TN-KY I-
III offerings.
7. The  US  Energy  offerings  raised  approximately  $2.5  million  from  approximately
100 investors nationwide.
8. Through their conduct, Hoppes, US Energy, and TN-KY I-III each have violated
the anti-fraud and registration provisions of the federal securities laws.  Based on the scienter the
Defendants  have  demonstrated  through  their  willful  and  wanton  disregard  for  the  federal
securities laws, the Defendants have shown they are reasonably likely to continue to violate the
law unless the Court grants the injunctive and other relief the Commission seeks.
II. DEFENDANTS AND RELATED ENTITIES
A. Defendants
9. Hoppes, 72, is the president of U.S. Energy.  His last known permanent address is
in Clearwater, Florida.  The state of Colorado entered a cease-and-desist order against Hoppes to
prevent  him  from  offering  securities.  In  the  Matter  of  United  States  Energy  Corp,  et.  al,  Case
2

No.  XY  12-CD-07  (Colo.,  Feb.  2,  2012).     Hoppes  filed  for  personal  bankruptcy  in  May  2006
and  received  a  discharge  in  September  19,  2006.  Hoppes  has  never  been  registered  with  the
Commission in any capacity.
10. US  Energy  is  a  Florida  corporation  with  its  principal  place  of  business  in
Clearwater,  Florida.    It  is  engaged  in  the  business  of  U.S.  oil  exploration  and  investment  and
served  as  the  general  partner  for  at  least  three  offerings  of  participation  or  limited  partnership
units,  including  TN-KY  I-III.   US  Energy  commenced  the  TN-KY  I  offering  in  approximately
May 2011, the TN-KY II offering in approximately September 2011, and the TN-KY III offering
in  approximately  November  2011.    In  January  2012,  the  state  of  Pennsylvania  issued  a  cease-
and-desist order against US Energy preventing it from offering securities.  In the Matter of TN-
KY Development Fund III, L.P., et. al, Admin. Proc. Docket No. 2012-01-06 (Jan. 25, 2012).  In
February 2012, the state of Colorado issued a cease-and-desist order preventing US Energy from
offering securities. In the Matter of United States Energy Corp, et. al, Case No. XY 12-CD-07
(February 2, 2012).  US Energy has never been registered with the Commission in any capacity.
11. TN-KY  I-III  are  Florida  limited  partnerships  started  in  June  2011,  September
2011  and  November  2011,  respectively,  and  are  located  in  Clearwater,  Florida.    They  are
purportedly in the business of acquiring oil drilling leases and drilling for oil.  US Energy is the
general partner for all the partnerships.  None of the partnerships has registered any offering of
securities  under  the  Securities  Act  of  1933  (“Securities  Act”)  or  a  class  of  securities  under  the
Securities Exchange Act of 1934 (“Exchange Act”).  In January 2012, the state of Pennsylvania
issued a cease-and-desist order against TN-KY III to prevent it from offering securities.  In the
Matter of TN-KY Development Fund III, L.P., et. al, Admin. Proc. Docket No. 2012-01-06 (Jan.
25, 2012).
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A. Related Entities and Individuals
12. Hilton, 51, resides in Boca Raton, Florida.  From March 2011 until January 2012,
Hilton  was  Vice  President  of  US  Energy.   He  was  known  by  his  given  name,  Joseph  Yurkin,
until November 2011, when he changed his name to Joseph Hilton.  On September 24, 2012, the
Commission  filed  an  emergency  civil  action  against  Hilton  and  related  entities.    SEC  v.  Joseph
Hilton,  f/k/a  Joseph  Yurkin,  et.  al,  Civil  Action  No.  12-CV-81033  (S.D.  Fla.  September  24,
2012).  Thereafter, Hilton consented to preliminary and permanent injunctions.  The Commission
also previously filed an enforcement action against Hilton for violations of the federal securities
laws. SEC v. Homeland Communications Corp., et al., Case No. 07-80802 (S.D. Fla. Nov. 16,
2007), in which Hilton consented to a Final Judgment enjoining him from future violations of the
anti-fraud and registration provisions of the federal securities laws, imposing a penny stock bar,
and  ordering  him  to  pay  $915,704  in  disgorgement,  prejudgment  interest  and  civil  penalties.
Hilton has not satisfied the Final Judgment.  In  2008,  the  Commission  entered  an  order  barring
Hilton  from  associating  with  a  broker-dealer.    In  the  Matter  of  Joseph  Yurkin,  Exchange  Act
Release  No.  58768  (Oct.  10,  2008).    In  addition,  Texas  and  Colorado  have  entered  cease-and-
desist orders against Hilton to prevent him from offering securities.  In the Matter of Homeland
Communications Corp., et al., Case No. Enf-06-CDO-1621 (Tex. Oct. 12, 2006); In the Matter
of United States Energy Corp, et. al, Case No. XY 12-CD-07 (Colo., Feb. 2, 2012).  Hilton has
never been registered with the Commission in any capacity.
13. New  Horizon  Publishing  Inc.  is  a  Florida  corporation  Hilton  incorporated  in
March  2009  that  purports  to  be  in  the  business  of  selling  sales  leads.    Hilton  is  the  sole  officer
and  director  of  New  Horizon.    The  Commission’s  recent  emergency  civil  enforcement  action
against  Hilton  is  also  against  New  Horizon,  and  the  Company  has  consented  to  a  permanent
injunction,  disgorgement,  prejudgment  interest,  and  a  penalty.    SEC  v.  Joseph  Hilton,  f/k/a
4

Joseph  Yurkin,  et.  al,  Civil  Action  No.  12-CV-81033  (S.D.  Fla.  September  24,  2012).    The
Company has never been registered with the Commission in any capacity.
14. Pacific  Northwestern  Energy  LLC  is  a  Wyoming  corporation  incorporated  in
November 2011 with its principal place of business in Cheyenne, Wyoming.  Pacific purports to
be  in  the  business  of  oil  development  and  investment  with  drilling  locations  in  the  Kentucky
region  known  as  the  “The  Knox  Formation.”    The  Commission’s  recent  emergency  civil
enforcement  action  against  Hilton  and  New  Horizon  also  names  Pacific  as  a  defendant.    The
Court  granted  the  Commission’s  motion  to  appoint  a  receiver  over  Pacific,  and  the  Company
remains in a receivership.  SEC v. Joseph Hilton, f/k/a Joseph Yurkin, et. al, Civil Action No. 12-
CV-81033  (S.D.  Fla.  September  24,  2012).    Pacific  has  never  registered  any  offering  of
securities or a class of securities with the Commission.
III. JURISDICTION AND VENUE
15. The Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and
22(a)  of  the  Securities  Act,  15  U.S.C.  §§  77t(b),  77t(d),  and  77v(a);  and  Sections  21(d),  21(e),
and Section 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa.
16. This  Court  has  personal  jurisdiction  over  the  Defendants,  and  venue  is  proper  in
the   Middle   District   of   Florida,   because   many   of   the   Defendants’   acts   and   transactions
constituting  violations  of  the  Securities  Act  and  the  Exchange  Act  occurred  in  the  Middle
District of Florida.  In addition, U.S. Energy’s and TN-KY I-III’s principal places of business are
in  the  Middle  District  of  Florida,  Hoppes  resided  in  the  Middle  District  of  Florida  during  all
times relevant to the conduct alleged herein, Hoppes managed U.S. Energy’s operations from the
Middle  District  of  Florida,  and  U.S.  Energy  received  investor  contributions  at  its  address  in
Clearwater, Florida.
5

17. In connection with the conduct alleged in this Complaint, the Defendants, directly
and indirectly, singly or in concert with others, have made use of the means or instrumentalities
of  interstate  commerce,  the  means  or  instruments  of  transportation  and  communication  in
interstate commerce, and the mails.
IV. THE US ENERGY FRAUD
A. The US Energy Sponsored TN-KY I-III Offerings
18. In  approximately  May  2011,  US  Energy  began  offering  limited  partnership
interests  in  TN-KY  I.     The  terms  of  the  offering  were  memorialized  in  a  private  placement
memorandum (“PPM”) Hoppes drafted, pursuant to which each partnership unit consisted of a .5
percent working interest and .3 percent net revenue interest in TN-KY I’s drilling leases, priced
at  $5,000  each.    The  PPM  was  dated  May  6,  2011  and  stated  US  Energy  sought  to  raise  $1
million for this offering.
19. According  to  the  PPM,  TN-KY  I  would  acquire  a  100  percent  working  interest
and  a  60  percent  net  revenue  interest  in  drill  site  locations  in  Overton  County,  Tennessee  and
Christian   County,   Kentucky,   and   would   generate   profits   by   drilling   eight   wells   there.
According  to  the  PPM,  a  working  interest  is  defined  as  “an  interest  in  an  oil  and  gas  lease  that
gives  the  owner  of  the  interest  the  right  to  drill  for  and  produce  oil  and  gas  on  the  leased
acreage....”
20. In approximately September 2011, US Energy began offering limited partnership
interests in TN-KY II.   The terms of the offering were memorialized in a PPM Hoppes drafted,
pursuant to which each partnership unit consisted of a .5 percent working interest and .3 percent
net  revenue  interest  in  TN-KY  II’s  drilling  leases,  priced  at  $5,000  each.    The  PPM  was  dated
September 15, 2011 and stated US Energy sought to raise $875,000 for this offering.
6

21. According to the PPM for the TN-KY II offering, TN-KY II would acquire a 100
percent  working  interest  and  a  60  percent  net  revenue  interest  in  drill  site  locations  in  Overton
County,  Tennessee  and  Monroe  County,  Kentucky,  and  would  generate  profits  by  drilling  five
wells there.
22. In approximately November 2011, US Energy began offering limited partnership
interests in TN-KY III.   The terms of the offering were memorialized in a PPM Hoppes drafted,
pursuant to which each partnership unit consisted of a 2 percent working interest and 1.2 percent
net revenue interest in TN-KY III’s drilling leases, priced at $17,500 each.  The PPM was dated
November 15, 2011 and stated US Energy sought to raise $875,000 for this offering.
23. According  to  the  PPM  for  the  TN-KY  III  offering,  TN-KY  III  would  acquire  a
100  percent  working  interest  and  a  60  percent  net  revenue  interest  in  drill  site  locations  in
Overton County, Tennessee and Monroe or Cumberland County, Kentucky, and would generate
profits by drilling five wells there.
24. No registration statement has been filed or was in effect with the Commission in
connection with the securities US Energy offered in TN-KY I, TN-KY II, or TN-KY III, nor is
US Energy entitled to any registration exemption.
B. Hoppes Employed Hilton To Manage The Solicitation Of Investors
25. Hoppes  managed  all  day-to-day  business  operations  for  US  Energy  and  had
ultimate  authority  for  making  all  management,  employee  hiring,  marketing,  and  business
decisions on behalf of US Energy.
26. In  March  2011,  Hoppes  hired  Hilton  to  solicit  investors  for  the  TN-KY  I-III
offerings, both directly and by managing a small boiler room in Boca Raton where Hilton and at
least two other individuals placed cold calls to potential investors nationwide.  US Energy paid
Hilton’s companies, New Horizon and Pacific, for raising investor funds.
7

27. After  contacting  potential  investors  by  telephone,  Hilton  sent  them  marketing
materials  that  included,  among  other  things,  a  TN-KY  I-III  PPM  Hoppes  drafted  and  letters
Hoppes  wrote  containing  updates  on  the  oil  drilling  projects.    Hilton  then  placed  follow-up
telephone calls to potential investors to close the sales.
28. Hilton also sent frequent e-mails to potential and existing investors updating them
on  the  status  of  US  Energy’s  oil  drilling  efforts  and  encouraging  them  to  make  initial  or
additional investments.
29. By   March   2012,   US   Energy   had   raised   more   than   $2.5   million   from
approximately 100 investors.
30. As  a  result  of  his  promotional  efforts,  US  Energy  paid  Hilton,  directly  and
through  New  Horizon  and  Pacific,  nearly  $400,000.    US  Energy  also  paid  Hilton  for  the
promotional  efforts  of  his  agents.    To  conceal  the  true  nature  of  his  work,  Hilton  required  US
Energy  to  characterize  its  payments  to  him  as  a  salary  rather  than  traditional  broker-dealer
commissions.
31. Hilton also entered into separate agreements with the sales agents who worked in
his  boiler  room.    Hilton  paid  these  agents  commissions  equal  to  six  percent  of  the  investor
contributions they solicited.
C. Misrepresentations and Omissions in the US Energy Offerings
32. In connection with US Energy’s TN-KY I-III offerings, Hoppes, U.S. Energy, and
TN-KY   I-III   made   material   misrepresentations   and   omissions   about:   (a)   Hoppes’   2006
bankruptcy; (2) the prior Commission enforcement actions against Hilton; and (3) US Energy’s
oil well assets.
8

1. Omissions About Hoppes’ Bankruptcy
33. The PPMs Hoppes drafted for TN-KY I and II each stated US Energy’s principals
had not been subject to a “petition under the Bankruptcy Act or any state insolvency law” in the
last five years.  This statement was false. Hoppes filed for personal bankruptcy in May 2006 and
the Court did not discharge the petition until September 19, 2006.
2. Omissions About Hilton’s Regulatory History
34. In  no  later  than  March  2011,  Hoppes  learned  about  Hilton’s  regulatory  history,
which included: (1) an emergency civil enforcement action the Commission filed against Hilton
in a federal district court in 2007, which resulted in, among other things, a permanent injunction
against violations of the anti-fraud and registration provisions of the federal securities laws; and
(2) a public administrative proceeding the Commission instituted against Hilton in 2008, which
resulted in an order barring Hilton from associating with a broker-dealer.
35. In late March 2011, Hoppes, on behalf of US Energy, entered into an employment
agreement  with  Joseph  Hilton.    Pursuant  to  that  agreement,  Hoppes  hired  Hilton  as  senior  vice
president and director of US Energy.
36. From  no  later  than  May  2011  until  at  least  January  2012,  Hoppes,  directly  and
through US Energy, distributed TN-KY I-III PPMs Hoppes drafted that stated: “during the past
five years, none of the principals of [US Energy] have been convicted in a criminal proceeding
nor has any formal complaint been filed with the Securities and Exchange Commission...”
37. At  no  time  did  Hoppes  or  US  Energy  disclose  to  investors  Hilton’s  regulatory
history.
3. Misrepresentations About US Energy’s Oil Well Assets
38. Hoppes  authored  at  least  one  letter  to  investors  designed  to  deceive  them  about
US Energy’s current and future drilling prospects.  In a letter to TN-KY I investors dated July 5,
9

2011, Hoppes told investors that a picture of a well gushing a large quantity of oil attached to the
letter  was  US  Energy’s  “Ruble”  well  and  was  located  in  Overton  County,  Tennessee.    This
representation was false.  The well pictured was not the “Ruble” well, a well in Overton County
(the location of US Energy’s other wells), or even a well in Tennessee.
D. Hoppes’ Scheme To Conceal Hilton’s Background
39. From no later than March 2011 until approximately January 2012, Hilton engaged
in  a  fraudulent  scheme  to  conceal  from  investors  the  Commission’s  prior  civil  enforcement
action against him for defrauding investors and the Final Judgment against him in that case.
40. Hoppes participated in Hilton’s scheme by hiring Hilton to sell securities despite
knowing  the  Commission  had  barred  Hilton  from  associating  with  broker-dealers  and  a  federal
district court had permanently enjoined Hilton from violating the federal securities laws.
41. Hilton disclosed his past regulatory troubles to Hoppes no later than March 2011.
Hilton also provided Hoppes with an attorney opinion letter stating that Hilton would not violate
his prior injunction and bar if he, among other things, did not have any “direct contact with the
general public to solicit sales,” received the title and job duties of “Vice President of Operations”
rather  than  sales  and  marketing,  and  received  a  salary  rather  than  commissions.    Nonetheless,
Hoppes  employed  Hilton  to  solicit  investors  directly,  operate  a  boiler  room,  and  run  the  sales
process with almost unfettered discretion.
42. Hoppes  further  participated  in  Hilton’s  scheme  by  permitting  Hilton  to  use  an
alias  in  communications  with  potential  investors  to  conceal  Hilton’s  true  identity  as  Joseph
Yurkin,  against  whom  the  Commission  obtained  a  temporary  restraining  order  for  defrauding
investors  in  connection  with  a  2007  offering  fraud.    Hoppes  was  aware  that  Hilton’s  real  name
was Yurkin by no later than March 2011.
10

43. Hoppes  also  continued  to  employ  Hilton  to  raise  money  for  the  US  Energy
offerings   after   learning   from   various   investors   and   a   sales   agent   that   Hilton   made
misrepresentations  to  investors.    For  example,  in  November  2011,  Hoppes  learned  from  an
investor that Hilton told potential investors US Energy owned natural gas wells.  Hoppes knew
US Energy did not own natural gas wells.  That same month, another investor informed Hoppes
of  the  oil  production  numbers  and  revenue  projections  Hilton  had  quoted  him.    Hoppes  knew
these numbers were substantially exaggerated.  Nonetheless, Hoppes continued to pay Hilton to
solicit investors.  He did not correct Hilton’s misrepresentations with all investors, tell Hilton to
stop making these claims, or even monitor Hilton’s communications with investors thereafter.
COUNT I
Sale of Unregistered Securities in Violation of Sections 5(a) and 5(c) of the Securities Act

Against Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-KY III

44. The  Commission  repeats  and  realleges  paragraphs  2,  7,  9-14,  and  18-29  of  this
Complaint as if fully restated herein.
45. No registration statement was filed or in effect with the Commission pursuant to
the  Securities  Act  and  no  exemption  from  registration  exists  with  respect  to  the  securities  and
transactions described in this Complaint.
46. Hoppes  and  U.S.  Energy,  from  no  later  than  May  2011  through  January  2012;
TN-KY  I,  from  no  later  than  May  2011  through  at  least  September  2011;  TN-KY  II,  from  no
later  than  September  2011  through  at  least  December  2011;  and  TN-KY  III,  from  no  later  than
November  2011  through  January  2012,  directly  or  indirectly:  (a)  made  use  of  the  means  or
instruments  of  transportation  or  communication  in  interstate  commerce  or  of  the  mails  to  sell
securities,  through  the  use  or  medium  of  a  prospectus  or  otherwise;  (b)  carried  securities  or
caused such securities to be carried through the mails or in interstate commerce, by any means or
11

instruments of transportation, for the purpose of sale or delivery after sale; and (c) made use of
the  means  or  instruments  of  transportation  or  communication  in  interstate  commerce  or  of  the
mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise,
without a registration statement having been filed or being in effect with the Commission as to
such securities.
47. By reason of the foregoing, Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-
KY  III  directly  or  indirectly  violated,  and,  unless  enjoined,  are  reasonably  likely  to  continue  to
violate,  Sections  5(a)  and  5(c)  of  the  Securities  Act  of  1933  (the  “Securities  Act”)  [15  U.S.C.
§§ 77e(a) and 77e(c)].
COUNT II
Fraud in Violation of Section 10(b) and Rule 10b-5(b) of the Exchange Act

Against Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-KY III

48. The Commission repeats and realleges paragraphs 1 through 43 of its Complaint.
49. Hoppes and US Energy, from no later than May 2011 through January 2012; TN-
KY  I,  from  no  later  than  May  2011  through  at  least  September  2011;  TN-KY  II,  from  no  later
than  September  2011  through  at  least  December  2011;  and  TN-KY  III,  from  no  later  than
November  2011  through  January  2012,  directly  or  indirectly,  by  use  of  the  means  and
instrumentalities of interstate commerce, and of the mails in connection with the purchase or sale
of  securities,  knowingly,  willfully  or  recklessly:  (a)  employed  devices,  schemes  or  artifices  to
defraud;  (b)  made  untrue  statements  of  material  facts  and  omitted  to  state  material  facts
necessary in order to make the statements made, in light of the circumstances under which they
were made, not misleading; or (c) engaged in acts, practices and courses of business which have
operated, are now operating and will operate as a fraud upon the purchasers of such securities.
12

50. By reason of the foregoing, Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-
KY  III  directly  or  indirectly  violated,  and,  unless  enjoined,  are  reasonably  likely  to  continue  to
violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule l0b-5(b)
[17 C.F.R. § 240.10b-5].
COUNT III
Fraud in Violation of Section 10(b) and Rules 10b-5(a) and (c) of the Exchange Act

Against Hoppes and U.S. Energy

51. The  Commission  realleges  and  incorporates  paragraphs  1  through  43  of  this
Complaint.
52. From  no  later  than  March  2011  through  at  least  January  2012,  Hoppes  and  US
Energy,  directly  and  indirectly,  by  use  of  any  means  or  instrumentality  of  interstate  commerce,
or  of  the  mails,  in  connection  with  the  purchase  or  sale  of  securities,  knowingly,  willfully  or
recklessly  employed  devices,  schemes,  or  artifices  to  defraud  and  engaged  in  acts,  practices,  or
courses of business which operate or would operate as a fraud or deceit upon any person.
53. By reason of the foregoing, Hoppes and US Energy directly or indirectly violated,
and, unless enjoined, are reasonably likely to continue to violate, Section 10(b) of the Exchange
Act [15 U.S.C. § 78j(b)] and Exchange Act Rules l0b-5(a) and (c) [17 C.F.R. § 240.10b-5].
COUNT IV
Fraud in the Offer or Sale of Securities in Violation of

Section 17(a)(1) and (3) of the Securities Act

Against Hoppes and U.S. Energy

54. The Commission repeats and realleges paragraphs 1 through 43 of this Complaint
as if fully restated herein.
55. From  no  later  than  March  2011  until  approximately  January  2012,  Hoppes  and
US  Energy,  directly  or  indirectly,  by  use  of  the  means  or  instruments  of  transportation  or
13

communication  in  interstate  commerce  or  by  use  of  the  mails,  in  the  offer  or  sale  of  securities,
have:  (a)  employed  devices,  schemes  or  artifices  to  defraud;  and  (b)  engaged  in  transactions,
practices, or courses of business which operated or would operate as a fraud or deceit upon the
purchasers of such securities.
56. By reason of the foregoing, Hoppes and US Energy directly or indirectly violated,
and, unless enjoined, are reasonably likely to continue to violate, Sections 17(a)(l) and (3) of the
Securities Act [15 U.S.C. § 77q(a)(1) and (a)(3)].
COUNT V
Fraud in the Offer or Sale of Securities in

Violation of Sections 17(a)(2) of the Securities Act

Against Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-KY III

57. The Commission repeats and realleges paragraphs 1 through 43 of this Complaint
as if fully restated herein.
58. Hoppes and US Energy, from no later than May 2011 through January 2012; TN-
KY  I,  from  no  later  than  May  2011  through  at  least  September  2011;  TN-KY  II,  from  no  later
than  September  2011  through  at  least  December  2011;  and  TN-KY  III,  from  no  later  than
November 2011 through January 2012, directly or indirectly, in the offer or sale of securities, by
the use of means or instruments of transportation or communication in interstate commerce, or of
the mails have: obtained money or property by means of untrue statements of material fact or by
omitting to state material facts necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
59. By reason of the foregoing, Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-
KY III, directly or indirectly violated, and, unless enjoined, are reasonably likely to continue to
violate, Section 17(a)(2) of the Securities Act [15 U.S.C. §§ 77q(a)(2)].
14

COUNT VI

Aiding And Abetting Hilton’s Unregistered

Broker-Dealer Conduct in Violation of Section 15(a)(1) of the Exchange Act

Against Hoppes and U.S. Energy

60. The  Commission  repeats  and  realleges  paragraphs  2,  4,  6-7,  9-14,  and  18-31  of
this Complaint as if fully restated herein.
61. Hilton,  from  no  later  than  March  2011  until  at  least  January  2012,  directly  and
indirectly by the use of the means and instrumentalities of interstate commerce, while acting as a
broker or dealer engaged in the business of effecting transactions in securities for the accounts of
others, effected transactions in securities, or induced or attempted to induce the purchase and sale
of  securities,  without  registering  as  a  broker-dealer  in  accordance  with  Section  15(b)  of  the
Exchange Act, 15 U.S.C. § 78o(b).
62. Hoppes and U.S. Energy knowingly or recklessly provided substantial assistance
to Hilton in connection with his violations of Section 15(a)(1) of the Exchange Act.
63. By  reason  of  the  foregoing,  Hoppes  and  U.S.  Energy  aided  and  abetted  Hilton’s
violations of Section 15(a)(1) of the Exchange Act.  [15 U.S.C. § 78o(a)(1)].
COUNT VII
Control Person Liability under Section 20(a) of the

Exchange Act for U.S. Energy, TN-KY I, TN-KY II and TN-KY III’s

Violations of Section 10(b) of the Exchange Act and Rule 10b-5(b)

Against Hoppes, Alternatively

64. The Commission repeats and realleges paragraphs 1 through 43 of this Complaint
as if fully restated herein.
65. US  Energy,  TN-KY  I,  TN-KY  II  and  TN-KY  III  made  untrue  statements  of
material fact or omitted to state material facts necessary in order to make the statements made, in
15

light  of  the  circumstances  under  which  they  were  made,  not  misleading  in  violation  of  Section
10(b) of the Exchange Act and Rule 10b-5(b).
66. Hoppes,  as  president  of  US  Energy,  the  general  partner  for  TN-KY  I,  TN-KY  II
and TN-KY III, exercised control over the management, general operations, and policies of US
Energy,  TN-KY-I,  TN-KY  II,  and  TN-KY  III,  as  well  as  the  specific  activities  upon  which  US
Energy, TN-KY I, TN-KY II, and TN-KY III’s violations are based.
67. By reason of the foregoing, Hoppes is liable as control person under Section 20(a)
of the Exchange Act for US Energy, TN-KY I, TN-KY II and TN-KY III’s violations of Section
10(b) of the Exchange Act and Rule 10b-5(b) [15 U.S.C. §78t(a)].
RELIEF REQUESTED

            WHEREFORE, the Commission respectfully requests that the Court:

I.

Declaratory Relief

Declare,  determine  and  find  that  the  Defendants  have  committed  the  violations  of  the
federal securities laws alleged herein.
II.

Permanent Injunction

Issue  a  Permanent  Injunction,  restraining  and  enjoining:  Defendants  Hoppes,  U.S.
Energy,  TN-KY  I,  TN-KY  II  and  TN-KY  III,  their  officers,  agents,  servants,  employees,
attorneys,  and  all  persons  in  active  concert  or  participation  with  them,  and  each  of  them,  from
violating  Sections  5(a)  and  (c)  and  17(a)(2)  of  the  Securities  Act  and  Section  10(b)  and  Rule
10b-5(b)  of  the  Exchange  Act;  and  Defendants  Hoppes  and  U.S.  Energy,  their  officers,  agents,
servants, employees, attorneys, and all persons in active concert or participation with them, and
16

each  of  them,  from  violating  Sections  17(a)(1)  and  (3)  of  the  Securities  Act  and  Rule  10b-5(a)
and (c) of the Exchange Act; and Section 15(a)(1) of the Exchange Act.
III.

Disgorgement

Issue  an  Order  directing  the  Defendants  to  disgorge  all  ill-gotten  gains,  including
prejudgment interest, resulting from the acts or courses of conduct alleged in this Complaint.
IV.

Penalties

Issue an Order directing all Defendants to pay civil money penalties pursuant to Section
20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C.
§ 78u(d).
V.

Further Relief

Grant such other and further relief as may be necessary and appropriate.
VI.

Retention of Jurisdiction

Further, the Commission respectfully requests that the Court retain jurisdiction over this
action in order to implement and carry out the terms of all orders and decrees that it may enter, or
to entertain any suitable application or motion by the Commission for additional relief within the
jurisdiction of this Court.
17

April            4,            2013                                                            Respectfully            submitted,
     By:
                                                                        Amie            Riggle            Berlin
Senior Trial Counsel
Florida Bar No. 630020
Direct Dial: (305) 982-6322
Direct email: [email protected]
                                                                        Attorney            for            Plaintiff
SECURITIES AND EXCHANGE
      COMMISSION
                                                                        801            Brickell            Avenue,            Suite            1800
                                                                        Miami,            Florida            33131
                                                                        Telephone:            (305)            982-6300
                                                                        Facsimile:            (305)            536-4154
                                                                        Susan            Cooke            Anderson
                                                                        Senior            Counsel
Court ID No. A5501760
Direct Dial: (617) 573-4538
Direct email: [email protected]
SECURITIES AND EXCHANGE
            COMMISSION
33 Arch Street, 23
rd
 Floor
                                                                        Boston,            Massachusetts            02110
                                                                        Telephone:            (617)573-8900
                                                                        Facsimile:            (617)            573-4590
18

Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 1 of 19 PageID 1 

UNITED STATES DISTRICT COURT
 
MIDDLE DISTRICT OF FLORIDA 


CASE NO.: 


SECURITIES AND EXCHANGE COMMISSION,  ) 
) 

Plaintiff, ) 
) 

v. ) 

)
 

GLENN HOPPES,  ) 

UNITED STATES ENERGY CORP.,  ) 

TN-KY DEVELOPMENT FUND LP,  ) 

TN-KY DEVELOPMENT FUND II LP,  AND )
 
TN-KY DEVELOPMENT FUND III LP ) 


) 

Defendants. ) 


____________________________________________ ) 


COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF 

Plaintiff Securities and Exchange Commission alleges: 

I. INTRODUCTION 

1. The Commission brings this action to enjoin Glenn Hoppes and four companies 

he controls, United States Energy Corporation (“US Energy”), TN-KY Development Fund LP 

(“TN-KY I”), TN-KY Development Fund II LP (“TN-KY II”) and TN-KY Development Fund 

III LP (“TN-KY III”), from further violations of the anti-fraud and registration provisions of the 

federal securities laws. 

2. From no later than April 2011 until at least January 2012, Hoppes and US Energy 

employed unregistered brokers, including a recidivist securities law violator, to sell securities in 

the form of limited partnership units in at least three oil drilling projects in Tennessee, TN-KY I, 

TN-KY II and TN-KY III (collectively “TN-KY I-III”).  

3. To lure investors, Hoppes misrepresented information about US Energy’s oil 

wells and failed to disclose his 2006 bankruptcy. 



 

 

 

  

   

 

 

 

 

 

  

   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 2 of 19 PageID 2 

4. Hoppes also failed to disclose that US Energy’s vice president of sales was a 

recidivist securities law violator.  Hoppes hired Joseph Hilton to solicit investors in the TN-KY 

I-III offerings despite knowing Hilton was the subject of two prior Commission enforcement 

actions which resulted in the United States District Court for the Southern District of Florida 

enjoining Hilton from violating the anti-fraud and registration provisions of the federal securities 

laws and the Commission barring Hilton from acting as a broker. 

5. Hoppes hired Hilton despite knowing Hilton used an alias to conceal his true 

identity as a recidivist securities law violator. 

6. Despite knowing Hilton’s true identity as a recidivist securities law violator, 

Hoppes employed Hilton in a sales capacity and financially supported Hilton’s boiler room 

where Hilton managed a team of unregistered broker-dealers to solicit investors in the TN-KY I-

III offerings. 

7. The US Energy offerings raised approximately $2.5 million from approximately 

100 investors nationwide. 

8. Through their conduct, Hoppes, US Energy, and TN-KY I-III each have violated 

the anti-fraud and registration provisions of the federal securities laws.  Based on the scienter the 

Defendants have demonstrated through their willful and wanton disregard for the federal 

securities laws, the Defendants have shown they are reasonably likely to continue to violate the 

law unless the Court grants the injunctive and other relief the Commission seeks. 

II. DEFENDANTS AND RELATED ENTITIES 

A. Defendants 

9. Hoppes, 72, is the president of U.S. Energy.  His last known permanent address is 

in Clearwater, Florida. The state of Colorado entered a cease-and-desist order against Hoppes to 

prevent him from offering securities. In the Matter of United States Energy Corp, et. al, Case 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 3 of 19 PageID 3 

No. XY 12-CD-07 (Colo., Feb. 2, 2012). Hoppes filed for personal bankruptcy in May 2006 

and received a discharge in September 19, 2006. Hoppes has never been registered with the 

Commission in any capacity. 

10. US Energy is a Florida corporation with its principal place of business in 

Clearwater, Florida. It is engaged in the business of U.S. oil exploration and investment and 

served as the general partner for at least three offerings of participation or limited partnership 

units, including TN-KY I-III. US Energy commenced the TN-KY I offering in approximately 

May 2011, the TN-KY II offering in approximately September 2011, and the TN-KY III offering 

in approximately November 2011.  In January 2012, the state of Pennsylvania issued a cease-

and-desist order against US Energy preventing it from offering securities.  In the Matter of TN-

KY Development Fund III, L.P., et. al, Admin. Proc. Docket No. 2012-01-06 (Jan. 25, 2012).  In 

February 2012, the state of Colorado issued a cease-and-desist order preventing US Energy from 

offering securities. In the Matter of United States Energy Corp, et. al, Case No. XY 12-CD-07 

(February 2, 2012). US Energy has never been registered with the Commission in any capacity.   

11. TN-KY I-III are Florida limited partnerships started in June 2011, September 

2011 and November 2011, respectively, and are located in Clearwater, Florida.  They are 

purportedly in the business of acquiring oil drilling leases and drilling for oil.  US Energy is the 

general partner for all the partnerships. None of the partnerships has registered any offering of 

securities under the Securities Act of 1933 (“Securities Act”) or a class of securities under the 

Securities Exchange Act of 1934 (“Exchange Act”).  In January 2012, the state of Pennsylvania 

issued a cease-and-desist order against TN-KY III to prevent it from offering securities.  In the 

Matter of TN-KY Development Fund III, L.P., et. al, Admin. Proc. Docket No. 2012-01-06 (Jan. 

25, 2012). 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 4 of 19 PageID 4 

A. Related Entities and Individuals 

12. Hilton, 51, resides in Boca Raton, Florida.  From March 2011 until January 2012, 

Hilton was Vice President of US Energy. He was known by his given name, Joseph Yurkin, 

until November 2011, when he changed his name to Joseph Hilton.  On September 24, 2012, the 

Commission filed an emergency civil action against Hilton and related entities.  SEC v. Joseph 

Hilton, f/k/a Joseph Yurkin, et. al, Civil Action No. 12-CV-81033 (S.D. Fla. September 24, 

2012). Thereafter, Hilton consented to preliminary and permanent injunctions.  The Commission 

also previously filed an enforcement action against Hilton for violations of the federal securities 

laws. SEC v. Homeland Communications Corp., et al., Case No. 07-80802 (S.D. Fla. Nov. 16, 

2007), in which Hilton consented to a Final Judgment enjoining him from future violations of the 

anti-fraud and registration provisions of the federal securities laws, imposing a penny stock bar, 

and ordering him to pay $915,704 in disgorgement, prejudgment interest and civil penalties. 

Hilton has not satisfied the Final Judgment.  In 2008, the Commission entered an order barring 

Hilton from associating with a broker-dealer.  In the Matter of Joseph Yurkin, Exchange Act 

Release No. 58768 (Oct. 10, 2008).  In addition, Texas and Colorado have entered cease-and-

desist orders against Hilton to prevent him from offering securities.  In the Matter of Homeland 

Communications Corp., et al., Case No. Enf-06-CDO-1621 (Tex. Oct. 12, 2006); In the Matter 

of United States Energy Corp, et. al, Case No. XY 12-CD-07 (Colo., Feb. 2, 2012).  Hilton has 

never been registered with the Commission in any capacity. 

13. New Horizon Publishing Inc. is a Florida corporation Hilton incorporated in 

March 2009 that purports to be in the business of selling sales leads.  Hilton is the sole officer 

and director of New Horizon.  The Commission’s recent emergency civil enforcement action 

against Hilton is also against New Horizon, and the Company has consented to a permanent 

injunction, disgorgement, prejudgment interest, and a penalty.  SEC v. Joseph Hilton, f/k/a 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 5 of 19 PageID 5 

Joseph Yurkin, et. al, Civil Action No. 12-CV-81033 (S.D. Fla. September 24, 2012).  The 

Company has never been registered with the Commission in any capacity. 

14. Pacific Northwestern Energy LLC is a Wyoming corporation incorporated in 

November 2011 with its principal place of business in Cheyenne, Wyoming.  Pacific purports to 

be in the business of oil development and investment with drilling locations in the Kentucky 

region known as the “The Knox Formation.”  The Commission’s recent emergency civil 

enforcement action against Hilton and New Horizon also names Pacific as a defendant.  The 

Court granted the Commission’s motion to appoint a receiver over Pacific, and the Company 

remains in a receivership.  SEC v. Joseph Hilton, f/k/a Joseph Yurkin, et. al, Civil Action No. 12-

CV-81033 (S.D. Fla. September 24, 2012).  Pacific has never registered any offering of 

securities or a class of securities with the Commission.  

III. JURISDICTION AND VENUE 

15. The Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and 

22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d), and 77v(a); and Sections 21(d), 21(e), 

and Section 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa. 

16. This Court has personal jurisdiction over the Defendants, and venue is proper in 

the Middle District of Florida, because many of the Defendants’ acts and transactions 

constituting violations of the Securities Act and the Exchange Act occurred in the Middle 

District of Florida.  In addition, U.S. Energy’s and TN-KY I-III’s principal places of business are 

in the Middle District of Florida, Hoppes resided in the Middle District of Florida during all 

times relevant to the conduct alleged herein, Hoppes managed U.S. Energy’s operations from the 

Middle District of Florida, and U.S. Energy received investor contributions at its address in 

Clearwater, Florida. 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 6 of 19 PageID 6 

17. In connection with the conduct alleged in this Complaint, the Defendants, directly 

and indirectly, singly or in concert with others, have made use of the means or instrumentalities 

of interstate commerce, the means or instruments of transportation and communication in 

interstate commerce, and the mails. 

IV. THE US ENERGY FRAUD 

A. The US Energy Sponsored TN-KY I-III Offerings 

18. In approximately May 2011, US Energy began offering limited partnership 

interests in TN-KY I. The terms of the offering were memorialized in a private placement 

memorandum (“PPM”) Hoppes drafted, pursuant to which each partnership unit consisted of a .5 

percent working interest and .3 percent net revenue interest in TN-KY I’s drilling leases, priced 

at $5,000 each. The PPM was dated May 6, 2011 and stated US Energy sought to raise $1 

million for this offering.   

19. According to the PPM, TN-KY I would acquire a 100 percent working interest 

and a 60 percent net revenue interest in drill site locations in Overton County, Tennessee and 

Christian County, Kentucky, and would generate profits by drilling eight wells there. 

According to the PPM, a working interest is defined as “an interest in an oil and gas lease that 

gives the owner of the interest the right to drill for and produce oil and gas on the leased 

acreage….”    

20. In approximately September 2011, US Energy began offering limited partnership 

interests in TN-KY II. The terms of the offering were memorialized in a PPM Hoppes drafted, 

pursuant to which each partnership unit consisted of a .5 percent working interest and .3 percent 

net revenue interest in TN-KY II’s drilling leases, priced at $5,000 each.  The PPM was dated 

September 15, 2011 and stated US Energy sought to raise $875,000 for this offering.   

6 




 

 

 

 

 

 

  

  

 

 

 

 

 

   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 7 of 19 PageID 7 

21. According to the PPM for the TN-KY II offering, TN-KY II would acquire a 100 

percent working interest and a 60 percent net revenue interest in drill site locations in Overton 

County, Tennessee and Monroe County, Kentucky, and would generate profits by drilling five 

wells there.     

22. In approximately November 2011, US Energy began offering limited partnership 

interests in TN-KY III.  The terms of the offering were memorialized in a PPM Hoppes drafted, 

pursuant to which each partnership unit consisted of a 2 percent working interest and 1.2 percent 

net revenue interest in TN-KY III’s drilling leases, priced at $17,500 each.  The PPM was dated 

November 15, 2011 and stated US Energy sought to raise $875,000 for this offering. 

23. According to the PPM for the TN-KY III offering, TN-KY III would acquire a 

100 percent working interest and a 60 percent net revenue interest in drill site locations in 

Overton County, Tennessee and Monroe or Cumberland County, Kentucky, and would generate 

profits by drilling five wells there. 

24. No registration statement has been filed or was in effect with the Commission in 

connection with the securities US Energy offered in TN-KY I, TN-KY II, or TN-KY III, nor is 

US Energy entitled to any registration exemption. 

B. Hoppes Employed Hilton To Manage The Solicitation Of Investors 

25. Hoppes managed all day-to-day business operations for US Energy and had 

ultimate authority for making all management, employee hiring, marketing, and business 

decisions on behalf of US Energy. 

26. In March 2011, Hoppes hired Hilton to solicit investors for the TN-KY I-III 

offerings, both directly and by managing a small boiler room in Boca Raton where Hilton and at 

least two other individuals placed cold calls to potential investors nationwide.  US Energy paid 

Hilton’s companies, New Horizon and Pacific, for raising investor funds. 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 8 of 19 PageID 8 

27. After contacting potential investors by telephone, Hilton sent them marketing 

materials that included, among other things, a TN-KY I-III PPM Hoppes drafted and letters 

Hoppes wrote containing updates on the oil drilling projects.  Hilton then placed follow-up 

telephone calls to potential investors to close the sales. 

28. Hilton also sent frequent e-mails to potential and existing investors updating them 

on the status of US Energy’s oil drilling efforts and encouraging them to make initial or 

additional investments.   

29. By March 2012, US Energy had raised more than $2.5 million from 

approximately 100 investors.  

30. As a result of his promotional efforts, US Energy paid Hilton, directly and 

through New Horizon and Pacific, nearly $400,000.  US Energy also paid Hilton for the 

promotional efforts of his agents.  To conceal the true nature of his work, Hilton required US 

Energy to characterize its payments to him as a salary rather than traditional broker-dealer 

commissions.  

31. Hilton also entered into separate agreements with the sales agents who worked in 

his boiler room.  Hilton paid these agents commissions equal to six percent of the investor 

contributions they solicited. 

C. Misrepresentations and Omissions in the US Energy Offerings 

32. In connection with US Energy’s TN-KY I-III offerings, Hoppes, U.S. Energy, and 

TN-KY I-III made material misrepresentations and omissions about: (a) Hoppes’ 2006 

bankruptcy; (2) the prior Commission enforcement actions against Hilton; and (3) US Energy’s 

oil well assets. 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 9 of 19 PageID 9 

1.  Omissions About Hoppes’ Bankruptcy 

33. The PPMs Hoppes drafted for TN-KY I and II each stated US Energy’s principals 

had not been subject to a “petition under the Bankruptcy Act or any state insolvency law” in the 

last five years. This statement was false. Hoppes filed for personal bankruptcy in May 2006 and 

the Court did not discharge the petition until September 19, 2006.   

2. Omissions About Hilton’s Regulatory History 

34. In no later than March 2011, Hoppes learned about Hilton’s regulatory history, 

which included: (1) an emergency civil enforcement action the Commission filed against Hilton 

in a federal district court in 2007, which resulted in, among other things, a permanent injunction 

against violations of the anti-fraud and registration provisions of the federal securities laws; and 

(2) a public administrative proceeding the Commission instituted against Hilton in 2008, which 

resulted in an order barring Hilton from associating with a broker-dealer.   

35. In late March 2011, Hoppes, on behalf of US Energy, entered into an employment 

agreement with Joseph Hilton.  Pursuant to that agreement, Hoppes hired Hilton as senior vice 

president and director of US Energy.     

36. From no later than May 2011 until at least January 2012, Hoppes, directly and 

through US Energy, distributed TN-KY I-III PPMs Hoppes drafted that stated: “during the past 

five years, none of the principals of [US Energy] have been convicted in a criminal proceeding 

nor has any formal complaint been filed with the Securities and Exchange Commission…”   

37. At no time did Hoppes or US Energy disclose to investors Hilton’s regulatory 

history. 

3. Misrepresentations About US Energy’s Oil Well Assets 

38. Hoppes authored at least one letter to investors designed to deceive them about 

US Energy’s current and future drilling prospects.  In a letter to TN-KY I investors dated July 5, 

9 




 

  

 

  

  

 

   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 10 of 19 PageID 10 

2011, Hoppes told investors that a picture of a well gushing a large quantity of oil attached to the 

letter was US Energy’s “Ruble” well and was located in Overton County, Tennessee.  This 

representation was false. The well pictured was not the “Ruble” well, a well in Overton County 

(the location of US Energy’s other wells), or even a well in Tennessee.   

D. Hoppes’ Scheme To Conceal Hilton’s Background 

39. From no later than March 2011 until approximately January 2012, Hilton engaged 

in a fraudulent scheme to conceal from investors the Commission’s prior civil enforcement 

action against him for defrauding investors and the Final Judgment against him in that case.   

40. Hoppes participated in Hilton’s scheme by hiring Hilton to sell securities despite 

knowing the Commission had barred Hilton from associating with broker-dealers and a federal 

district court had permanently enjoined Hilton from violating the federal securities laws.   

41. Hilton disclosed his past regulatory troubles to Hoppes no later than March 2011. 

Hilton also provided Hoppes with an attorney opinion letter stating that Hilton would not violate 

his prior injunction and bar if he, among other things, did not have any “direct contact with the 

general public to solicit sales,” received the title and job duties of “Vice President of Operations” 

rather than sales and marketing, and received a salary rather than commissions.  Nonetheless, 

Hoppes employed Hilton to solicit investors directly, operate a boiler room, and run the sales 

process with almost unfettered discretion.   

42. Hoppes further participated in Hilton’s scheme by permitting Hilton to use an 

alias in communications with potential investors to conceal Hilton’s true identity as Joseph 

Yurkin, against whom the Commission obtained a temporary restraining order for defrauding 

investors in connection with a 2007 offering fraud.  Hoppes was aware that Hilton’s real name 

was Yurkin by no later than March 2011. 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 11 of 19 PageID 11 

43. Hoppes also continued to employ Hilton to raise money for the US Energy 

offerings after learning from various investors and a sales agent that Hilton made 

misrepresentations to investors.  For example, in November 2011, Hoppes learned from an 

investor that Hilton told potential investors US Energy owned natural gas wells.  Hoppes knew 

US Energy did not own natural gas wells. That same month, another investor informed Hoppes 

of the oil production numbers and revenue projections Hilton had quoted him.  Hoppes knew 

these numbers were substantially exaggerated.  Nonetheless, Hoppes continued to pay Hilton to 

solicit investors. He did not correct Hilton’s misrepresentations with all investors, tell Hilton to 

stop making these claims, or even monitor Hilton’s communications with investors thereafter. 

COUNT I 

Sale of Unregistered Securities in Violation of Sections 5(a) and 5(c) of the Securities Act 

Against Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-KY III 


44. The Commission repeats and realleges paragraphs 2, 7, 9-14, and 18-29 of this 

Complaint as if fully restated herein. 

45. No registration statement was filed or in effect with the Commission pursuant to 

the Securities Act and no exemption from registration exists with respect to the securities and 

transactions described in this Complaint. 

46. Hoppes and U.S. Energy, from no later than May 2011 through January 2012; 

TN-KY I, from no later than May 2011 through at least September 2011; TN-KY II, from no 

later than September 2011 through at least December 2011; and TN-KY III, from no later than 

November 2011 through January 2012, directly or indirectly: (a) made use of the means or 

instruments of transportation or communication in interstate commerce or of the mails to sell 

securities, through the use or medium of a prospectus or otherwise; (b) carried securities or 

caused such securities to be carried through the mails or in interstate commerce, by any means or 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 12 of 19 PageID 12 

instruments of transportation, for the purpose of sale or delivery after sale; and (c) made use of 

the means or instruments of transportation or communication in interstate commerce or of the 

mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise, 

without a registration statement having been filed or being in effect with the Commission as to 

such securities. 

47. By reason of the foregoing, Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-

KY III directly or indirectly violated, and, unless enjoined, are reasonably likely to continue to 

violate, Sections 5(a) and 5(c) of the Securities Act of 1933 (the “Securities Act”) [15 U.S.C. 

§§ 77e(a) and 77e(c)]. 

COUNT II 

Fraud in Violation of Section 10(b) and Rule 10b-5(b) of the Exchange Act 

Against Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-KY III 


48. The Commission repeats and realleges paragraphs 1 through 43 of its Complaint. 

49. Hoppes and US Energy, from no later than May 2011 through January 2012; TN-

KY I, from no later than May 2011 through at least September 2011; TN-KY II, from no later 

than September 2011 through at least December 2011; and TN-KY III, from no later than 

November 2011 through January 2012, directly or indirectly, by use of the means and 

instrumentalities of interstate commerce, and of the mails in connection with the purchase or sale 

of securities, knowingly, willfully or recklessly: (a) employed devices, schemes or artifices to 

defraud; (b) made untrue statements of material facts and omitted to state material facts 

necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading; or (c) engaged in acts, practices and courses of business which have 

operated, are now operating and will operate as a fraud upon the purchasers of such securities. 

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50. By reason of the foregoing, Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-

KY III directly or indirectly violated, and, unless enjoined, are reasonably likely to continue to 

violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule l0b-5(b) 

[17 C.F.R. § 240.10b-5]. 

COUNT III 

Fraud in Violation of Section 10(b) and Rules 10b-5(a) and (c) of the Exchange Act 

Against Hoppes and U.S. Energy 


51. The Commission realleges and incorporates paragraphs 1 through 43 of this 

Complaint.  

52. From no later than March 2011 through at least January 2012, Hoppes and US 

Energy, directly and indirectly, by use of any means or instrumentality of interstate commerce, 

or of the mails, in connection with the purchase or sale of securities, knowingly, willfully or 

recklessly employed devices, schemes, or artifices to defraud and engaged in acts, practices, or 

courses of business which operate or would operate as a fraud or deceit upon any person. 

53. By reason of the foregoing, Hoppes and US Energy directly or indirectly violated, 

and, unless enjoined, are reasonably likely to continue to violate, Section 10(b) of the Exchange 

Act [15 U.S.C. § 78j(b)] and Exchange Act Rules l0b-5(a) and (c) [17 C.F.R. § 240.10b-5]. 

COUNT IV 

Fraud in the Offer or Sale of Securities in Violation of  

Section 17(a)(1) and (3) of the Securities Act 


Against Hoppes and U.S. Energy 


54. The Commission repeats and realleges paragraphs 1 through 43 of this Complaint 

as if fully restated herein. 

55. From no later than March 2011 until approximately January 2012, Hoppes and 

US Energy, directly or indirectly, by use of the means or instruments of transportation or 

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communication in interstate commerce or by use of the mails, in the offer or sale of securities, 

have: (a) employed devices, schemes or artifices to defraud; and (b) engaged in transactions, 

practices, or courses of business which operated or would operate as a fraud or deceit upon the 

purchasers of such securities. 

56. By reason of the foregoing, Hoppes and US Energy directly or indirectly violated, 

and, unless enjoined, are reasonably likely to continue to violate, Sections 17(a)(l) and (3) of the 

Securities Act [15 U.S.C. § 77q(a)(1) and (a)(3)]. 

COUNT V 

Fraud in the Offer or Sale of Securities in  

Violation of Sections 17(a)(2) of the Securities Act 


Against Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-KY III 


57. The Commission repeats and realleges paragraphs 1 through 43 of this Complaint 

as if fully restated herein. 

58. Hoppes and US Energy, from no later than May 2011 through January 2012; TN-

KY I, from no later than May 2011 through at least September 2011; TN-KY II, from no later 

than September 2011 through at least December 2011; and TN-KY III, from no later than 

November 2011 through January 2012, directly or indirectly, in the offer or sale of securities, by 

the use of means or instruments of transportation or communication in interstate commerce, or of 

the mails have: obtained money or property by means of untrue statements of material fact or by 

omitting to state material facts necessary in order to make the statements made, in the light of the 

circumstances under which they were made, not misleading. 

59. By reason of the foregoing, Hoppes, U.S. Energy, TN-KY I, TN-KY II, and TN-

KY III, directly or indirectly violated, and, unless enjoined, are reasonably likely to continue to 

violate, Section 17(a)(2) of the Securities Act [15 U.S.C. §§ 77q(a)(2)]. 

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COUNT VI 


Aiding And Abetting Hilton’s Unregistered  

Broker-Dealer Conduct in Violation of Section 15(a)(1) of the Exchange Act 


Against Hoppes and U.S. Energy 


60. The Commission repeats and realleges paragraphs 2, 4, 6-7, 9-14, and 18-31 of 

this Complaint as if fully restated herein. 

61. Hilton, from no later than March 2011 until at least January 2012, directly and 

indirectly by the use of the means and instrumentalities of interstate commerce, while acting as a 

broker or dealer engaged in the business of effecting transactions in securities for the accounts of 

others, effected transactions in securities, or induced or attempted to induce the purchase and sale 

of securities, without registering as a broker-dealer in accordance with Section 15(b) of the 

Exchange Act, 15 U.S.C. § 78o(b). 

62. Hoppes and U.S. Energy knowingly or recklessly provided substantial assistance 

to Hilton in connection with his violations of Section 15(a)(1) of the Exchange Act. 

63. By reason of the foregoing, Hoppes and U.S. Energy aided and abetted Hilton’s 

violations of Section 15(a)(1) of the Exchange Act.  [15 U.S.C. § 78o(a)(1)]. 

COUNT VII 

Control Person Liability under Section 20(a) of the  

Exchange Act for U.S. Energy, TN-KY I, TN-KY II and TN-KY III’s 


Violations of Section 10(b) of the Exchange Act and Rule 10b-5(b)  

Against Hoppes, Alternatively 


64. The Commission repeats and realleges paragraphs 1 through 43 of this Complaint 

as if fully restated herein. 

65. US Energy, TN-KY I, TN-KY II and TN-KY III made untrue statements of 

material fact or omitted to state material facts necessary in order to make the statements made, in 

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light of the circumstances under which they were made, not misleading in violation of Section 

10(b) of the Exchange Act and Rule 10b-5(b). 

66. Hoppes, as president of US Energy, the general partner for TN-KY I, TN-KY II 

and TN-KY III, exercised control over the management, general operations, and policies of US 

Energy, TN-KY-I, TN-KY II, and TN-KY III, as well as the specific activities upon which US 

Energy, TN-KY I, TN-KY II, and TN-KY III’s violations are based. 

67. By reason of the foregoing, Hoppes is liable as control person under Section 20(a) 

of the Exchange Act for US Energy, TN-KY I, TN-KY II and TN-KY III’s violations of Section 

10(b) of the Exchange Act and Rule 10b-5(b) [15 U.S.C. §78t(a)]. 

RELIEF REQUESTED 


 WHEREFORE, the Commission respectfully requests that the Court: 


I. 


Declaratory Relief
 

Declare, determine and find that the Defendants have committed the violations of the 

federal securities laws alleged herein. 

II. 


Permanent Injunction
 

Issue a Permanent Injunction, restraining and enjoining: Defendants Hoppes, U.S. 

Energy, TN-KY I, TN-KY II and TN-KY III, their officers, agents, servants, employees, 

attorneys, and all persons in active concert or participation with them, and each of them, from 

violating Sections 5(a) and (c) and 17(a)(2) of the Securities Act and Section 10(b) and Rule 

10b-5(b) of the Exchange Act; and Defendants Hoppes and U.S. Energy, their officers, agents, 

servants, employees, attorneys, and all persons in active concert or participation with them, and 

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each of them, from violating Sections 17(a)(1) and (3) of the Securities Act and Rule 10b-5(a) 

and (c) of the Exchange Act; and Section 15(a)(1) of the Exchange Act. 

III.
 

Disgorgement
 

Issue an Order directing the Defendants to disgorge all ill-gotten gains, including 

prejudgment interest, resulting from the acts or courses of conduct alleged in this Complaint. 

IV. 


Penalties
 

Issue an Order directing all Defendants to pay civil money penalties pursuant to Section 

20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d) of the Exchange Act, 15 U.S.C. 

§ 78u(d). 

V. 


Further Relief
 

Grant such other and further relief as may be necessary and appropriate. 

VI. 


Retention of Jurisdiction 


Further, the Commission respectfully requests that the Court retain jurisdiction over this 

action in order to implement and carry out the terms of all orders and decrees that it may enter, or 

to entertain any suitable application or motion by the Commission for additional relief within the 

jurisdiction of this Court. 

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   Case 8:13-cv-00868-SDM-AEP Document 1 Filed 04/05/13 Page 18 of 19 PageID 18 

April 4, 2013     Respectfully submitted, 

     By:
      Amie Riggle Berlin 

Senior Trial Counsel 
Florida Bar No. 630020 
Direct Dial: (305) 982-6322 
Direct email: [email protected] 

      Attorney for Plaintiff 
SECURITIES AND EXCHANGE  

      COMMISSION
      801 Brickell Avenue, Suite 1800 
      Miami, Florida 33131 
      Telephone: (305) 982-6300 
      Facsimile: (305) 536-4154 

      Susan Cooke Anderson 
      Senior Counsel 

Court ID No. A5501760 
Direct Dial: (617) 573-4538 
Direct email: [email protected] 

SECURITIES AND EXCHANGE  
 COMMISSION 

33 Arch Street, 23rd Floor 
      Boston, Massachusetts 02110 
      Telephone: (617)573-8900 
      Facsimile: (617) 573-4590 

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