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Osage Nation files suit against former Osage LLC management and consultants

The Osage Nation is suing the former management of the Osage LLC, two consultants and the heads of former companies in Osage County District Court. The lawsuit details an alleged fraudulent investment deal that cost the Nation more than a million dollars.

Carol Leese and Robert Petre, formerly of the Osage LLC; Yancey Red Corn (Osage), Betsy Brown, of Red Eagle Feather Distributing, LLC; New Market Technology Fund I, LLC; New Market Technology Fund, LLC; Howard Hill; TeraDact Solutions LLC; and Christopher Schrichte are named as defendants in the civil suit.

Filed on May 22 by Amanda Proctor, Osage attorney and owner of Shield Law Group PLC, the lawsuit asks for damages, attorneys fees and contains four claims of relief for violation of the Oklahoma Securities Act, Common Law Fraud, Constructive Fraud, Conspiracy to Defraud the Osage LLC Board of Directors and the Osage Nation, Negligent Misrepresentation and Breach of Fiduciary Duty.

The lawsuit asks for monetary damages in excess of $75,000, plus attorney’s fees, for each of the four claims.

According to the lawsuit, in 2010 the Osage Nation Congress appropriated $7.5 million to the Osage LLC to fund various economic development projects. The focus of the lawsuit is an investment in a Delaware-based company named New Market Technology Fund I, that resulted in the purchase of five units of stock at $50,000 a piece for a total of $250,000 on June 17, 2010. On August 31, 2010, an additional 15 units of stock were purchased for a total of $750,000 from TeraDact Solutions, LLC. The units are considered “securities” in Oklahoma law. In a separate transaction, Petre requested the Osage LLC’s bank, Bank of Oklahoma, wire $26,666.67 to Red Eagle Feather Distributing in addition to the $750,000. Red Corn and Brown acted as consultants for the transaction, according to the lawsuit.

On July 27, 2010, just 30 days after the Osage LLC’s first purchase of the stock, New Market Technology Fund I completed a “recapitalization,” where the former owners of the company redeemed their stock in exchange for a monetary payment from the company. The recapitalization involved purchasing “the remaining founder’s stock” in TeraDact Solutions.

The lawsuit alleges the $250,000 that was paid to New Market Technology Fund I was transferred to TeraDact Solutions and the money was given to certain employees, consultants, directors and “certain creditors” of “the Company.”

In the Osage LLC’s annual report in 2010, to its board of directors and the Osage Congress, Leese reported that Osage LLC held a $1 million “equity position” in TeraDact. But in TeraDact’s financial statements, TeraDact spent $500,000 during the 2010 calendar year and ended with less than $8,000 in the bank. However, the company posted a loss of $573,255.91 on income of $47,100.00, according to the lawsuit. By the end of the 2011 calendar year, TeraDact posted a loss of $634,859.45 on income of $47,100.00, “the identical amount of income shown for 2010.”

“OLLC’s million-dollar funding of TeraDact via NewMarket-I went straight into the pockets of TeraDact’s ‘founders’ rather [than] into the coffers of TeraDact to fund that company’s research and development, operations, or other budget requirements,” according to the lawsuit.

The company’s performance worsened in 2012 and the name of the company changed numerous times. No profit was ever made from the purchase of the stock and the “OLLC reasonably fears that units purchased in 2010 eventually may prove to be completely worthless,” according to the lawsuit. According to Osage LLC records as of April 2014, it showed the owner of the stock as actually Carol Leese, and not the Osage LLC.

The lawsuit alleges that since Leese failed to report the loss in value of the investment of the stock to either the Osage LLC board or Congress, he and the parties named in the lawsuit acted in their own self interest, worked in concert to actively conspire and fool the Osage Nation and personally profited from the transactions.

“The New Market Units [stock] were sold to OLLC by means of untrue statements of one or more material facts and by one or more material omissions … The Board did not know of the untruths and omissions and, in the exercise of reasonable care, could not have known of the untruths and omissions,” according to the lawsuit.

Defendants

Leese is the former CEO of the Osage LLC and resigned March 31, 2014. During his tenure the Osage Nation Congress appropriated more than $18 million to the Osage LLC. Leese is believed to be currently working for a tribal nation in Wisconsin, according to the lawsuit. Leese was the CEO for the LLC since its inception in April of 2008.

Petre is the former Chief Financial Officer for the Osage LLC and resigned in August of 2013. Petre resides in Tulsa, according to the lawsuit.

Red Corn is the owner of Red Eagle Feather Distributing, LLC, and served as a consultant for the transaction, along with Betsy Brown, an attorney who works with Red Corn, according to the lawsuit. In one of the exhibits is an email from Brown to Leese detailing the “rosy future” of TeraDact Solutions, citing interest in the company from entities such as Counter Terrorism and Homeland Security, the NSA, the Joint Special Operations Command, LexisNexis, Microsoft Office group, and a bevy of high profile clientele.

Christopher Schricte and Howard Hill are managing partners, executive officers, or directors for the New Market Group entities, according to the lawsuit.


By

Shannon Shaw Duty


Original Publish Date: 2015-06-03 00:00:00

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Shannon Shaw Dutyhttps://osagenews.org
Shannon Shaw Duty is the editor of the Osage News. She is a graduate of the University of Oklahoma with a bachelor's degree in Journalism and a master's degree in Legal Studies, Indigenous Peoples Law from the OU College of Law. She served on the Board of Directors for the Native American Journalists Association (NAJA) from 2013-2016 and served as a board member and Chairwoman for the Pawhuska Johnson O’Malley Parent Committee from 2017-2020. She is a Chips Quinn Scholar, a former instructor for the Freedom Forum’s Native American Journalism Career Conference and the Freedom Forum’s American Indian Journalism Institute. She is a former reporter for The Santa Fe New Mexican. She is a 2012 recipient of the Native American 40 Under 40 from the National Center for American Indian Enterprise Development (NCAIED). In 2014 she helped lead the Osage News to receive the Elias Boudinot Free Press Award, NAJA’s highest honor. An Osage tribal member, she and her family are from the Grayhorse District. She currently resides in Pawhuska, Okla., with her husband and six children.
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