The SEC has asked a Fort Worth court to make a Texas oil company and eleven others answer subpoenas, two years after it issued the first batch, and says it has received 8,344 documents out of a universe their own lawyer calls hundreds of thousands

Eight thousand three hundred and forty four documents have been produced. The respondents' own lawyer has told the Securities and Exchange Commission that the full set may run to hundreds of thousands, and possibly millions.

That gap is why the Commission went to court on Thursday. It has asked the Northern District of Texas, Fort Worth Division, for an order compelling twelve respondents to comply with administrative subpoenas, the earliest of which were issued on 18 April 2024. The case is a miscellaneous action, number 4:26-mc-00012, and it is not an enforcement case. It is an application to make people answer.

The respondents oppose it.

What the investigation is about

The Commission says it has been investigating 1859 Operating, LLC since 31 January 2024, when it issued the formal order that authorises staff to compel testimony and documents. The subject is the sale of fractional undivided working interests in oil leases, which is a way of selling a slice of a well's output rather than a share in a company.

Its memorandum of law says the evidence identified so far tends to show that from about September 2021 to the present, 1859 and other respondents raised approximately $42.7m from investors in at least 40 states. The Commission says the evidence also points to possible materially false statements and omissions in three areas: the criminal background of Duane Slade and his role at the company, the projected production rates and investment returns of the wells, and the use of investor funds.

None of that is a charge. The formal order authorises an inquiry into whether anyone has violated the securities laws, and the memorandum is careful to say so.

The people and the money

Four of the individual respondents, according to the memorandum, serve or have served as managers or managing members of 1859: Adam Fieldsted, Dillon Murrow, Dallin Slade and Mason Slade. Each of the other named entities is owned by one of the individuals and each, the Commission says, received investor money. DMMD Marketing, owned by Dallin Slade and Mason Slade, took in more than $17m of it and routed a majority onward to the others.

Duane Slade is not listed in public records as a manager of 1859. The Commission says its evidence tends to show that he exercised managerial control anyway and received payments from investor funds. The memorandum states that he pleaded guilty in 2013 to federal fraud charges arising from his role in a $166m Ponzi scheme, and in a separate investment fraud was ordered to pay $2.5m in restitution.

The family map is in the filing too. Duane Slade is the father of Dallin and Mason Slade and the father-in-law of Murrow. Alison Slade is his spouse. The Commission says the couple's residence, titled solely in her name, was paid for in part with 1859 investor funds, and that the company's office building was built on the same property with them.

What has and has not been produced

Six respondents were subpoenaed for testimony. One has given it. The Commission says several failed to appear on dates previously agreed, and that over the last ten months their counsel cancelled scheduled testimony more than once shortly before it was due.

The order the Commission wants would give five individuals 21 days to testify at its Fort Worth office and give every respondent except Alison Slade 30 days to produce documents, a privilege log, a log of anything lost or destroyed with the dates, and a signed certificate that the production is complete.

The application carries a certificate of conference recording that staff conferred repeatedly with the respondents' counsel, Matthew Aaron Ford of Ford O'Brien Landy LLP, and that the application is submitted as opposed. No statement from any respondent appears in the documents published with it, and the substance of their objection is not in the record read for this item.