The U.S. Securities and Exchange Commission on
Tuesday sued three defendants it accused of running a fraud and
Ponzi scheme in which they raised more than $62 million from
investors eager to benefit from growth in the North Dakota oil
According to the SEC, North Dakota Developments LLC and its
owners, Robert Gavin and Daniel Hogan, illegally raised money
from hundreds of investors since May 2012 by selling stakes in
four short-term housing projects, known as "man camps," for
workers in the Bakken oil field region of North Dakota and
The SEC said investors were promised returns of up to 42
percent in the first year, or a "guaranteed" or "assured" annual
return of up to 25 percent, though the defendants knew the first
project was significantly delayed and faced low occupancy rates,
while the other projects were delayed or had not yet been begun.
It also said the defendants paid investors in the first
project, Watford West in Arnegard, North Dakota, with money from
investors in later projects, and misappropriated more than $25
million to cover hidden broker commissions, payments to Gavin
and Hogan, and investment in other Bakken projects.
The SEC civil lawsuit filed in a North Dakota federal court
seeks to recoup ill-gotten gains, impose fines and obtain an
injunction against further violations.
North Dakota Developments did not immediately respond to
requests for comment. Lawyers for the Williston, North
Dakota-based company and Gavin did not immediately respond to
similar requests. A lawyer for Hogan could not immediately be
The complaint said North Dakota Developments raised money
from investors in more than one dozen U.S. states, and in
countries including Australia, France, Great Britain and Spain.
The case is SEC v North Dakota Developments LLC et al, U.S.
District Court, District of North Dakota, No. 15-00053.