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[SEAL OF THE STATE OF TEXAS]
[STATE SECURITIES BOARD LETTERHEAD]
SSB DOCKET NO. 00-014
IN THE MATTER OF )
TBX RESOURCES, INC. AND ) Order No. SUS-1395
TIMOTHY PAUL BURROUGHS )
TO: Timothy Paul Burroughs
TBX Resources, Inc.
12300 Ford Road, Suite 265
Dallas, Texas 75234-7273
TBX Resources, Inc.
123000 Ford Road, Suite 265
Dallas, Texas 75234-7273
ORDER OF SUSPENSION OF EXEMPTION
This is your OFFICIAL NOTICE of the issuance by the Securities Commission of
the State of Texas ("Securities Commissioner") of an ORDER SUSPENDING THE
EXEMPTION OF SECURITIES, pursuant to Section 5.0 of the Texas Securities Act,
TEX. REV. CIV. STAT. ANN. art. 581-1 et seq. (Vernon 1964 & Supp. 2000) ("Texas
Securities Act").
1. The Staff of the Enforcement Division of the Texas State Securities Board
("Staff") has presented evidence sufficient for the Securities Commissioner
to find that the sale of outstanding securities issued by TBX Resources,
Inc. ("Respondent TBX") would tend to work a fraud or deceit upon any
purchaser or purchasers thereof.
2. The Staff has presented evidence sufficient for the Securities
Commissioner to find that there are approximately 225 shareholders of
outstanding shares of common stock issued by Respondent which are currently
quoted in the "pink sheets" maintained by the National Quotation Bureau
under the ticker symbol TBXR:
3. The Staff has presented evidence sufficient for the Securities
Commissioner to find that Timothy Paul Burroughs ("Respondent Burroughs")
is the President, Chairman of the Board, and founder of Respondent TBX and
that Respondent Burroughs has held these positions since the company's
inception in 1995.
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4. The Staff has presented evidence sufficient for the
Securities Commissioner to find that Respondent
Burroughs, together with the Burroughs Family Trust,
which is controlled by Respondent Burroughs, owns 6.7
million of the outstanding shares of Respondent TBX,
which constitutes more than 5% of the common stock of
Respondent TBX.
5. The Staff has presented evidence sufficient for the
Securities Commissioner to find that since its inception
In 1995, Respondent TBX has offered and sold units in
eleven (11) joint ventures created to purchase and own
working interests in existing oil and gas walls in east
Texas and Louisiana. The joint venture agreements
represented that Respondent TBX would rework existing
wells, replace equipment, and perform other services to
enhance production.
6. The Staff has presented evidence sufficient for the
Securities Commissioner to find that Respondent TBX
remains the joint venture manager on only one of the
above referenced joint ventures, and that investors in
the other ten (10) joint ventures have exchanged their
joint venture interests in return for the common stock of
Respondent TBX.
7. The Staff has presented evidence sufficient for the
Securities Commissioner to find that, in connection with
the offer and sale of the above referenced joint venture
units, Respondent Burroughs has been doing business as
TBX Resources, Inc. (TBX); Texeast Operating Inc.
(Texeast); Gulftex Operating, Inc. (Gulftex); Petroleum
Holdings, Inc. (PHI); Sweetwater Oil & Gas, Inc. (SOGI):
Sweet Water Land & Oil Co. (SWLOC); Marketing Research
Group, Inc. (MRGI); and Marketing Research, Inc. (MRI);
all operated at 12300 Ford Road, Suite 265, Dallas, Texas
75234-7273.
8. The Staff has presented evidence sufficient for the
Securities Commissioner to find that, in connection with
the above referenced joint ventures, the wells were
operated by Texeast or Gulftex, two companies controlled
by Respondent Burroughs.
9. The Staff has presented evidence sufficient for the
Securities Commissioner to find that, in connection with
the offer for sale and sale of the above-referenced
shares of common stock, Respondents made statements that
are materially misleading or otherwise have misled or
deceived offerees and purchasers by intentionally failing
to disclose the following material facts:
a. In connection with the above referenced joint
ventures, Respondent Burroughs, Respondent TBX,
Texeast and Gulftex either did no work on the
wells or did minimal work necessary to make the
wells marginally productive;
b. In connection with the above referenced joint
ventures Respondent
ORDER OF SUSPENSION OF EXEMPTION / TBX RESOURCES, INC., ET AL. / PAGE 2
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Burroughs incorporated the following shell corporations in Wyoming on
December 28, 1995 to use as a condult for the wrongful laundering of funds
from the joint ventures by setting up out-of-state corporations:
1. PETROLEUM HOLDINGS, INC.
Tax Identification Number (TIN) 75-265869;
2. MARKETING RESEARCH GROUP, INC.
TIN: 75-2658630; and
3. SWEETWATER LAND & OIL CO.
TIN: 75-2658631.
The records of the Wyoming Secretary of State's Office confirm that, as of
April 24, 2000, these shell corporations were active corporations having
the same address as Respondent TBX, with an address of 12300 Ford Road,
Suite 265, Dallas, Texas, 75234, and Respondent Burroughs was listed as the
president of these corporations.
c. Petroleum Holdings, Inc. was incorporated in Texas on January 7, 1998;
however, other than filing the articles of incorporation, no other filings
were made. The corporation lost its charter to do business in Texas on
December 30, 1999. Neither Marketing Research Group, Inc. nor Sweetwater
Land & Oil Co. filed articles of incorporation with the Texas Secretary of
State or registered with the Texas Secretary of State as foreign
corporations doing business in Texas. Since these three corporations listed
a Texas address as their principal place of business, they would be
required to file articles of incorporation and public information reports
with the Texas Secretary of State's Office in order to obtain the authority
to do business in Texas.
d. In connection with the above referenced shell corporations, Respondent
Burroughs directed an employee to fabricate invoices from the shell
corporations to launder money from the joint ventures for various corporate
or personal expenses. Upon Respondent Burroughs' instructions, the employee
fabricated invoices from the aforementioned shell corporations to
Respondent TBX and/or the joint venture projects, and subsequently issued
checks from Respondent TBX or the joint venture accounts to look like
legitimate expenses were being paid. These checks, payable to the shell
corporations for the non-existent expenses, were deposited into cash
management accounts at other banks in the name of the shell corporations.
Respondent Burroughs further issued checks from these accounts and
deposited them into accounts at yet other banks, also in the names of the
shell corporations. Respondent Burroughs write checks on these accounts for
personal expenses, including $ 60,000.00 of the initial $ 120,000.00.
ORDER OF SUSPENSION OF EXEMPTION / TBX RESOURCES, INC., ET AL. /PAGE 3
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raised on one joint venture, to fund the construction loan on his
current residence.
a. In connection with the offer and sale of the above referenced joint
venture units, Respondent Burroughs hired two salesmen to offer and
sell the joint venture interests to investors. One of the salesman had
been enjoined by a Dallas federal court from violating the securities
laws and had agreed to be barred from association with anyone selling
securities in a settlement with the U.S. Securities and Exchange
Commission. The other salesman was on probation for criminal conviction
and was not permitted to work in any commissioned position as a
requirement of his probation.
f. In connection with the North Quitman and J.C. Whatley Joint Ventures,
Respondent Burroughs sold some of the wells in these projects without
informing the investors of the sale. Respondent Burroughs never
forwarded any sales proceeds to the joint venture investors as required
by the joint venture agreement. Respondent Burroughs deposited the
money through the above-described shell corporations and eventually
used the money to pay off his personal credit cards.
g. In connection with the Pittman Heirs Joint Venture, Respondent
Burroughs told the joint venture investors that they were buying 50% of
the Manziel Field Joint Venture; however, he did not disclose that he
had previously sold the Manziel Field wells to other investors, and
that he had not performed his contractual obligations to those existing
investors.
h. Respondents have electronically filed Form 10-SB on or about March 10,
2000, with the U.S. Securities and Exchange Commission to register the
shares of common stock of Respondent TBX. In connection with the above
reference joint ventures, Respondents represent in this filing that:
1. "While acquiring producing properties which respond positively to
improved production practices and enhance recovery techniques, we
have built an inventory of low risk, infield development drilling
locations."
2. "...Mr. Burroughs developed his low risk strategy for building an
oil and gas production company."
3. "[t]he working interest partners enjoyed immediate cash
returns...."
4. Respondent TBX has leasehold rights in eight oil and gas fields
and 61 oil and gas wells. Respondent TBX expects to generate
sufficient
ORDER OF SUSPENSION OF EXEMPTION/TBX RESOURCES, INC., ET AL./ PAGE 4
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revenues from the sale of production to pay all costs
associated with the company for at least the next twelve
months.
The Securities Commissioner hereby FINDS and is of the opinion that
the evidence presented by the Staff shows that the sale of the common stock of
TBX Resources, Inc. would tend to work a fraud or deceit upon any purchaser or
purchasers thereof.
The Securities Commissioner hereby FINDS and is of the opinion that
the evidence presented by the Staff demonstrates sufficient proof that the
public interest and protection of investors requires the issuance of an ORDER
OF SUSPENSION OF EXEMPTION as provided by Section 5.O of the Texas Securities
Act in connection with the offer for sale and sale of the common stock of TBX
Resources, Inc.
ORDER
It is therefore ORDERED by the Securities Commissioner, pursuant to
Section 5.O of the Texas Securities Act, that the exemption provided by Section
5.O of the Texas Securities Act in connection with the offer for sale and sale
of the common stock of TBX Resources, Inc. is HEREBY SUSPENDED. No securities
dealer shall offer for sale or sell the common stock of TBX Resources, Inc.
while this suspension is in force and effect.
Dated this 17th day of May, 2000.
/s/ DENISE VOIGT CRAWFORD
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DENISE VOIGT CRAWFORD
Securities Commissioner
ORDER OF SUSPENSION OF EXEMPTION/TBX RESOURCES, INC., ET AL./ PAGE 5
