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Colorado Based HEI Wins Decisively in Denver District Court Court; Denies Colorado Securities Commission Attempt to Expand Regulatory Authority

Colorado Springs business practices validated by Denver District Court in suit with State Securities regulators.

Colorado Based HEI Wins Decisively in Denver District Court Court; Denies Colorado Securities Commission Attempt to Expand Regulatory Authority
Colorado Springs, CO, October 21, 2013 --( In a case being watched closely by securities regulators and lawyers alike, Colorado Springs based oil and gas exploration company, HEI Resources, Inc. (HEI), its President and CEO Reed Cagle, and its employees received a favorable judgment following a four-year long challenge from the Colorado Securities Commissioner. The Court’s decision validates HEI’s and Cagle’s business structure and practices.

In bringing the lawsuit, the State sought to expand its regulatory authority by designating interests in joint venture partnerships as securities, despite contrary rulings by a federal district court, the Colorado Securities Board, and a Colorado jury.

Following a seven day trial in which the Court heard from numerous experts and more than a dozen joint venture partners, the Honorable Michael A. Martinez issued a thoughtful, 33-page order outlining his factual findings in the case and his decision that joint venture interests offered by HEI are not securities.

“It’s unfortunate that I have spent the time, money, and emotion defending against these baseless claims, but I have an obligation to my employees and my partners to fight these claims and preserve the ability of my partners to continue to enjoy the benefits of direct participation programs,” said Cagle.

Among other allegations, the state alleged that investors in the company’s oil and gas exploration projects were elderly, uneducated and not capable of making wise investment decisions. Contrary to their depiction, HEI partners testified as to their wealth, education and business savvy. One partner described herself as a “smart and tough” businesswoman running a multi-property real estate business. Another partner was a former Wall Street financier who brought in many of his friends from major Wall Street titans to participate in partnerships alongside him.

Judge Martinez was ultimately unswayed by the State’s arguments, finding that, "There is no indication that HEI targeted any specific age or demographic group other than to establish that HEI actively sought out individuals that were wealthy, educated and sophisticated investors with sufficient business experience to exercise the significant partnership powers granted them under the joint venture agreements."

The Court found HEI’s partners to be educated, wealthy and experienced in business affairs, with many holding executive management positions or owning their own businesses. Based upon these facts, and dozens of others from the 16 witnesses that provided testimony at trial, Judge Martinez concluded the following:

"The persuasive and credible evidence in the record compels the court’s conclusion that the partners in the joint ventures were capable of intelligently exercising the partnership powers granted to them."

“Mr. Cagle has fought long and hard to protect his partners, to protect his employees, and to uphold his integrity and reputation,” stated Otto Hilbert, a senior partner of Robinson, Waters and O’Dorisio, who represented Cagle at trial. “His efforts have helped to keep general partnerships available in the industry and free from costly and unnecessary regulatory oversight.”

“Colorado is my home,” said Cagle. “I have raised my family here, and HEI supports the local economy, multiple charities, and provides jobs and support for dozens of families in Colorado. This ruling is a tremendous victory for us all.”

About HEI Resources, Inc. Cagle founded HEI Resources in 1997 for the acquisition, exploration and development of domestic oil and gas reserves, and based upon partner demand, has recently expanded into mining. Despite the inherent risks involved, the company has been at the forefront of providing direct participation opportunities, having sponsored more than 100 joint ventures in these combined industries. For more information, visit
Contact Information
Tuckahoe Strategies
Ramsey Poston
Attached Files
Denver District Court Ruling Joseph v. HEI et al
Filename: DenverOrderJosephvHEIetal.pdf

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