Tribe files second lawsuit
Another lawsuit has been filed against the former management team of a limited-liability company created to handle investments for the Osage Nation.
Osage LLC is blamed for losing millions of dollars that were supposed to have been invested for the benefit of tribal members.
The latest civil action, filed last week in Osage County District Court, is the second — so far — against two ex-officials of Osage LLC, a venture capital enterprise founded by the Osage Nation in 2008. Both lawsuits name Carol Leese, the former manager/CEO of Osage LLC, as well as the OLLC ex-treasurer and chief financial officer, Robert Petre. A previous action was filed May 22 against the pair and associates.
In a related development, the Osage Nation Congress — by a unanimous July 16 vote — approved a $100,000 appropriation to fund litigation related to the OLLC case.
The latest suit’s petition states that, sometime prior to April 14, 2010, Leese requested a appropriation of $7.5 million from the tribal Congress “to fund various economic development projects.” About three months later, Leese convinced the Osage LLC board of directors to fund a purchase of $800,000 worth of stock in a company, EquityStation, Inc., which the Leese said would provide the Osage-owned company with “an investment banking platform,” the suit states. OLLC made an additional investment of at least $50,000 in EquityStation over the next 2 1/2 years, the lawsuit adds.
When EquityStation was dissolved in 2013, Osage LLC was left “with on-paper assets that were worthless or virtually worthless,” according to the petition. The suit claims the defendants misrepresented the company’s value “in order to induce the OLLC purchase of the EquityStation stock.”
Osage LLC records show “no cash was ever distributed to OLLC and there is no indication in those records that any bona fide, collectible accounts receivable or ‘refundable deposits’ existed or were actually paid to OLLC, alleges the petition. In three years, “EquityStation distributed no profits or dividends to OLLC.”
Supposedly, tribal officials were led to believe the EquityStation had no working capital but instead relied on periodic infusions of cash from its majority shareholder, vFinance, acting as underwriter of the sale of EquityStation stock. The suit claims vFinance “did not in fact
downstream the cash that OLLC paid to vFinance” for its purchase of EquityStation shares “or provide any other working capital to EquityStation.”
A third defendant in the second action, Michael Morrisett, had allegedly been involved with companies which doing business with Osage LLC, the petition said. Morrisett was himself employed as an agent for Osage LLC in addition to serving was a financial adviser for EquityStation, the lawsuit states. The lawsuit further claims that Osage-named subsidiaries created by the OLLC management, in concert with vFinance Companies. it says the activities “yielded not a single dollar of profit” to the Osage Nation.
“On the contrary, these putative profit-making enterprises were used to funnel cash to one or more of the vFinance companies and its principals…,” the suit adds.
The petition claims untrue/misleading statements and material omissions made by defendants constitute securities fraud and that OLLC is entitled — under the Oklahoma Securities Act — to recovery of its entire $800,000 investment, plus interest, attorneys’ fees and proximate damages amounting to $75,000.
Leese, who resigned from his OLLC positions in early 2014, is now believed to be living in Wisconsin, the lawsuit states. Petre resigned approximately six months before Leese and is currently thought to be a resident of Tulsa, according to the suit. Morrisett could be residing in Florida, the petition surmised.
Both legal actions have been filed by the Shield Law Group, a Jenks law firm that includes Amanda Proctor, a tribal member who last year placed second in the race for Osage Assistant Principal Chief. Proctor signed both of the petitions.