United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
Lindsay United States District Judge.
the court are: Defendant Raymond McGlamery's Motion to
Dismiss First Amended Complaint (Doc. 19), filed September
28, 2015; Defendants Fred and Marlane Minton's Motion to
Dismiss First Amended Complaint (Doc. 20), filed September
28, 2015; and Defendants Paul Gilman, Oil Migration Group,
LLC, and Wavetech29, LLC's Motion to Dismiss First
Amended Complaint (Doc. 21), filed September 28, 2015. After
careful consideration of the motions, responses, replies,
pleadings, and applicable law, the court grants Defendant
Raymond McGlamery's Motion to Dismiss First Amended
Complaint; grants in part and denies in part Defendants Fred
and Marlane Minton's Motion to Dismiss First Amended
Complaint; and grants in part and denies in part Defendants
Paul Gilman, Oil Migration Group, LLC, and Wavetech29,
LLC's Motion to Dismiss First Amended Complaint.
Procedural and Factual Background
case arises from an alleged fraudulent investment scheme in
oil and gas and bio-fuel companies. Plaintiff Claudette Lohr
(“Lohr” or “Plaintiff”), a widow
living in Dallas, Texas, brings this private securities fraud
action against Defendants and alleges that, acting in
concert, they fraudulently induced her into making a total
investment of $540, 000 in two companies-Oil Migration Group,
Inc. (“OMG”) and Wavetech29, LLC
(“Wavetech”)-both of which she contends are sham
enterprises. According to Plaintiff, Defendants falsely
promoted these enterprises to her as owning, or owning a
license to, cutting edge audio technology that affects oil
viscosity and oil recovery procedures (hereinafter the
“OMG Technology” and the “Water Separation
Technology”). Plaintiff alleges that she was induced by
Defendants' myriad fraudulent statements about the
technology to invest in OMG and Wavetech, and charges that
Defendants made these misrepresentations knowingly and
willfully, or in reckless disregard of their falsity, and
that she relied on the statements to her detriment. The court
now sets out the facts upon which it relies in deciding the
pending motions to dismiss, accepting all well-pleaded facts
in the complaint as true and viewing them in the light most
favorable to Plaintiff. Sonnier v. State Farm Mut. Auto.
Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007). The facts
are drawn from Plaintiff's First Amended Complaint
(“Complaint”), the live pleading. See
Compl. (Doc. 15).
The Alleged Solicitation by Frederick and Marlane
about late 2013, Plaintiff met Defendant Marlane Minton
(“Mrs. Minton”) at a Bible study at a church they
both attended. Mrs. Minton often discussed oil and gas
businesses and bio-fuel businesses in which she and her
husband, Defendant Frederick Minton (“Mr.
Minton”) (sometimes collectively, the
“Mintons”) allegedly invested. Mrs. Minton seemed
especially interested in discussing the Mintons' alleged
investments with widows who attended the Bible study. In or
about 2014, Plaintiff learned that Mrs. Minton had dental
surgery and prepared a meal, which she took to the Minton
home, at which time Mr. Minton discussed investing in OMG.
The Mintons told Plaintiff that they had met Defendant Paul
Gilman (“Gilman”) in connection with their
investments in the movie industry, and that Gilman was
seeking investments in OMG and Wavetech to obtain funding for
additional testing and to pursue patents for the OMG
Technology. The Mintons told Plaintiff that Gilman was about
to meet with investors in New York to raise money to file for
patents and for further testing of the OMG Technology. The
Mintons also told Plaintiff that time was of the essence to
invest in OMG and Wavetech, as the value of the two entities
was certain to increase as Gilman continued to prove the
application of the OMG Technology in various areas of the oil
and gas industry. The Mintons assured Plaintiff that Gilman
would sell his concept through OMG and Wavetech, and that she
would receive a return on her investment prior to the end of
2014. The Mintons made these false representations with the
intent that Plaintiff would rely upon them and invest in OMG
Gilman's Role in the Alleged Scheme
Plaintiff expressed an interest in investing in OMG and
Wavetech, the Mintons introduced her to Gilman. Plaintiff
alleges that Gilman, acting at all times as a representative
and owner of OMG and Wavetech, enticed Plaintiff to invest
initially in OMG, and later in Wavetech, by making, among
others, the following fraudulent representations:
• Gilman claimed that OMG owned, or owned a license to,
the OMG Technology, an audio technology he developed:
that positively affects the viscosity of oil that assists in
the recovery (secondary, tertiary, fracking, and all other
known methods of oil discovery) of oil; the storage of oil
(due to less adhesion to tanks); and the transportation of
oil (due to less adhesion to tanks, pipelines and shipping
vessels, as well as a decrease in friction and significant
acceleration of the oil's viscosity of travel through
pipelines)[.] Compl. ¶ 18.
• Gilman told Plaintiff that “through extensive
study of velocity profiles and fluid dynamics” his
“team has identified the correlation between this
decrease in friction and a significant acceleration of the
oil's velocity of travel through transport
pipelines.” Id. ¶ 19.
• Gilman claimed that the OMG Technology could
“greatly reduce” the “work of a pumping
[station]” creating options for the operator to
“either reduce the pumping power (reduction in costs)
or maintain power at a sustained rate and increas[e] output
(quicker payback for [the] operator).” Id.
• Gilman represented that the OMG Technology would
“lower the emulsion tendencies” and increase
“the monetary value of the hydrocarbon”;
“recover oil that was dormant or in a well that has
dropped on the production curve to rise to higher
levels”; and that “numerous laboratory
studies” were conducted that were “focused on
applying” the OMG Technology “at certain
frequencies to a 42 gallon barrel of B10 biodiesel oil mixed
with algae” and that he witnessed “a significant
reduction in viscosity as a result of this
sonification” and it was “proven that the
sonified oil did not have irreversible tendencies.”
Id. ¶¶ 25-27.
• Gilman also claimed that all his representation
regarding OMG Technology were “confirmed through a
series of independent tests conducted by [sic] third party
laboratory.” Id. ¶ 28.
• Gilman then offered Plaintiff an opportunity to invest
in OMG, to which he had given or assigned an exclusive
license in the “patent-pending” OMG Technology.
Id. ¶ 29.
• On February 4, 2015, Gilman e-mailed Plaintiff
regarding news that the “Panama Pipeline is slowing and
thickening” in an effort to convince her that OMG was
going to have an opportunity to deploy the OMG Technology.
Id. ¶ 44. During subsequent telephone
conversations, Gilman told Plaintiff that the OMG Technology
was not deployed on the Panama Pipeline because the
pipeline's owner had an emergency in Japan.
alleges, on information and belief, that Gilman's
representations concerning OMG and OMG Technology were false
and were made only to induce Plaintiff into investing in OMG.
Plaintiff further alleges, on information and belief, that
representations about technology and possible deployment of
the technology were false and made for the purpose of
assuring Plaintiff that the OMG Technology and her investment
in OMG were legitimate, and to induce her into making further
Plaintiff's Transfer of $40, 000 to Gilman's
about February 7, 2014, Gilman e-mailed Plaintiff a
“Memorandum of Understanding” in a further
attempt to induce her to invest in OMG. See
Memorandum of Understanding (“MOU”), attached as
Exhibit 1 to Complaint. Neither Gilman nor Plaintiff executed
the MOU, although that fact did not dissuade Gilman from
accepting Plaintiff's money on behalf of OMG. The MOU
references a “Non-Disclosure Agreement, ” but
Plaintiff never received or executed any such document. Later
that same day, Gilman e-mailed Plaintiff instructions to wire
her “investment' in OMG to an account held in
Gilman's name at City National Bank (the “Gilman
Account”), located in Beverly Hills, California. On or
about February 10, 2014, in reliance upon the Mintons'
and Gilman's representations detailed above, Plaintiff
wired $40, 000 to the Gilman Account for what Gilman
described as a 2% ownership and/or equity interest in OMG.
McGlamery's Role in the Alleged Scheme
February 25, 2014, more than two weeks after Plaintiff wired
the $40, 000 to the Gilman Account, Defendant Raymond
McGlamery (“McGlamery”) formed OMG by filing a
certificate of formation with the Texas Secretary of State.
See Certificate of Formation, attached as Exhibit 2
to the Complaint. The Certificate of Formation lists
McGlamery and Gilman as OMG's “Managers.”
Id. Plaintiff alleges, on information and belief,
that McGlamery filed the Certificate of Formation with the
Texas Secretary of State “to give an air of legitimacy
to the scheme that Gilman, McGlamery, and the Mintons had
concocted to trick people into investing in OMG, including,
but not limited to, ” Plaintiff. Compl. ¶ 36.
alleges, on information and belief, that McGlamery knew of
Gilman's false representations, knew she had invested in
OMG, personally benefited from Gilman's false
representations, and took no action to inform her of the
false nature of Gilman's representations.
Plaintiff's Transfer of Additional Amounts to the Gilman
Account Following Further Fraudulent
about May 20, 2014, Gilman provided Plaintiff with a document
titled “Gilman -Soundwave Viscosity Investor
Overview” to further induce her into investing
additional funds in OMG and also investing in Wavetech.
See “Gilman - Soundwave Viscosity Investor
Overview” (“Soundwave Overview”), attached
as Exhibit 3 to the Complaint. Page One of the Soundwave
Overview contains a quotation attributed to Gilman, described
as “CEO/Inventor & Chief Technologist, ”
which states: “Viscosity is the holy grail of the oil
industry and we've captured it.” See id.
about May 20, 2014, Gilman e-mailed Plaintiff to acknowledge
her 2% interest in OMG and promised to deliver “more
formal documents” evidencing her interest in OMG.
Compl. ¶ 38. None of the Defendants ever provided
Plaintiff with these promised documents.
on Gilman's and the Mintons' representations, and the
Certificate of Formation filed by McGlamery, see
supra, in addition to her initial $40, 000 investment,
Plaintiff made the following investments in OMG and Wavetech:
• On May 21, 2014, Plaintiff transferred $150, 000 to
Gilman in exchange for another alleged 1% interest in OMG.
• On July 24, 2014, Plaintiff transferred $100, 000 to
Gilman in exchange for an alleged 2% interest in Wavetech.
Later that day, Gilman confirmed via e-mail to Plaintiff that
her investment of $100, 000 was in exchange for a 2% interest
in Wavetech. Gilman also provided Plaintiff with instructions
for wiring money to an account held by “iWavetech29,
LLC.” Id. ¶ 41.
• On October 10, 2014, Plaintiff transferred $100, 000
to Gilman in exchange for an alleged 3% interest in the
“first one to come in” in OMG or Wavetech.
Id. ¶ 42. After this transfer, Gilman sent an
e-mail to Plaintiff indicating that they will
“formalize terms on a future date with more information
from arrangements we enter with Axcess Worldwide and
others.” Id. ¶ 43. None of the Defendants
provided Plaintiff with more formal terms related to her
• On February 29, 2015, Plaintiff transferred $100, 000
to Gilman as an investment in Wavetech in exchange for an
alleged 2% interest in the Water Separation Technology
purportedly owned by Wavetech.
• On March 11, 2015, Plaintiff transferred another $50,
000 to Gilman as an investment in Wavetech in exchange for an
alleged 1% interest in the Water Separation Technology
purportedly owned by Wavetech.
alleges, on information and belief, that the above-pleaded
representations made by Gilman concerning OMG, OMG
Technology, Wavetech, and “Water Separation
Technology” were false and were made only to induce
Plaintiff into investing in OMG and Wavetech, which were sham
enterprises. Plaintiff further alleges, on information and
belief, that Wavetech does not own any Water Separation
Technology and, therefore, this statement was false and made
for the purpose of inducing Plaintiff into investing in
Wavetech and the Water Separation Technology.
The Mintons' Continued Role in the Alleged
Minton, who holds a PhD. in Psychology, and Mrs. Minton,
actively participated and assisted Gilman in inducing
Plaintiff to invest in Gilman's sham companies (OMG and
Wavetech) and contrived OMG Technology and Water Separation
Technology. The Mintons knew that Gilman's
representations, made in his capacity as owner or
representative of OMG and Wavetech, were false. The Mintons
personally benefited from assisting Gilman in inducing
Plaintiff into investing in the sham companies and contrived
Minton, whom Plaintiff met at the church she attends, used
his training in psychology to cultivate a relationship of
trust with Plaintiff, even going so far as counseling her
free of charge, notwithstanding that his professional
counseling license had expired. During all relevant times,
the Mintons reassured Plaintiff of Gilman's ability to
create the technology and vouched for his credibility and
trustworthiness so as to convince Plaintiff of the legitimacy
of the OMG Technology and the Water Separation Technology, as
well as the legitimacy of the companies Gilman created and in
which he was actively seeking investors, all despite the
Mintons' knowledge that Gilman's representations were
false. The Mintons' assurances often involved referencing
the “Christian God” to cause Plaintiff to trust
the representations, as the Mintons and Plaintiff attended
the same church. Id. ¶ 53. It was common that
the Mintons would pray with Plaintiff, and the prayers often
included a petition for Plaintiff to get accustomed to being
someone wealthy, as well as a petition for blessings for
Gilman. The Mintons' reassurances directly assisted, and
aided and abetted, OMG, Wavetech, McGlamery, and Gilman
“in pilfering” Plaintiff's money.
Id. ¶ 55.
furtherance of their scheme, Mr. Minton provided Plaintiff
with counseling regarding how to “fit in” with
the “rich folk” at the Bonaventure in preparation
for her receipt of “millions” from her
investment. Id. ¶ 56. Mr. Minton discussed how
Plaintiff would set up foundations to handle the
“millions” that he indicated she would be
receiving from her investments. Id. Mr. Minton made
these reassuring comments despite knowing Gilman's
representations regarding OMG Technology and Water Separation
Technology were false.
Allegations Regarding Defendants' Disregard of ...