Sept. 11–Victor Carrillo, once Texas’ top oil and gas regulator, is out as chief executive of Zion Oil and Gas, a Dallas-based firm that looks to the Bible for clues about where to drill for oil in Israel.
Carrillo told the American-Statesman that it was “just time for me to move on,” but his departure comes as the company is under investigation by the U.S. Securities and Exchange Commission. At least a decade into operations, the company has yet to strike a producing well, and stock prices have recently tumbled.
Carrillo’s last day at the firm was Aug. 31, when he submitted a resignation letter. In comments to the Statesman, he ranked guiding the company through the acquisition of its 99,000-acre license to drill as his top accomplishment.
“I believe that God led me to Zion and that it was a part of my mission to help guide the company to drill this key, deep well,” he wrote in his resignation letter.
In its vision, shepherding the company to the brink of greatness, the claim has a Moses-like quality to it, one that reflects the company’s biblical orientation. Citing Genesis and Deuteronomy and biblical promises of treasure buried deep, Zion officials have said discovering oil in Israel would be another sign of the imminent return of the Christian Messiah.
Carrillo, who earned a master’s degree in geology before putting himself through law school, served as commissioner on the Texas Railroad Commission, the state’s oil and gas regulator, from 2003 to 2011. In 2016, he told the Statesman his job as Zion’s chief executive officer was to “bring the geology that informs the theology.”
“We make our plans for how and where to drill, but ultimately, the outcome, that’s in God’s hands,” Carrillo said.
But so far, the Promised Land has been richer in milk and honey than in oil.
That hasn’t stopped Zion from asking the biblically minded to invest, raising money through stock offerings to pay salaries, office leases and drilling costs.
Its website has an “invest now” button that includes testimonials: “Zion’s shareholders are unique. They are more interested in benefiting Israel than they are to make a quick dollar,” says its general counsel. “I recognize and empathize for your unwavering belief and support of Zion Oil & Gas. I recognize and empathize with your patience in a process that, while arduous at times, is outlined by God’s timing,” its president says.
Zion Oil and Gas has been coming under more and more scrutiny. “For a company with no product to sell, Zion is unusual in that it records substantial marketing expenses,” the Financial Times observed in June.
The company has spent tens of millions of dollars on investor relations.
Its founder, John Brown, calls himself a Christian Zionist, or one who believes that establishing the state of Israel was a prerequisite for the return of Christ.
Once a manufacturing executive in Michigan and a self-described alcoholic, Brown had a religious awakening in the early 1980s and moved to Texas, determined to start an oil company after hearing a sermon suggesting the Bible revealed that a massive oil field lies beneath Israel. After losing so much of his savings that he resorted to cleaning toilets at his Baptist church, he founded Zion in 2000.
“This is a faith company, created by faith, created by God,” Brown, who remains chairman of the board, said in a promotional video for Zion.
In a June 30 filing with the SEC, the company noted that it has no revenue from oil and gas operations and debt of $168 million.
“These factors raise substantial doubt about the company’s ability to continue as a going concern,” the company noted in an SEC filing. “The company needs further financing for exploration and development activities.”
In 2017, Carrillo earned $448,902, according to company filings. Carrillo told the Statesman his departure “had absolutely nothing to do with (the) SEC inquiry.”
Carrillo still “has a good friendship with the company,” said Andrew Summey, the company’s vice president for marketing and investor relations.
The stock was trading at $1.32 a share on Monday, down from its year-to-date high of $5.53 in March.
In July, the company disclosed to investors that it had received a subpoena in June from the SEC to produce documents, “informing Zion of the existence of a non-public, fact-finding inquiry into the company.” The filing said “the SEC stated that ‘the investigation and the subpoena do not mean that we have concluded that (Zion) or anyone else has violated the law.'”
Summey said the company has submitted the documents the SEC requested, but he would not disclose what the documents were.
SEC spokesman Chris Carofine said the agency doesn’t comment on ongoing investigations.
The issuance of a subpoena suggests that an “investigation has progressed to the point that senior enforcement officials have taken a look and think there’s good reason to arm the staff with a compulsory process,” said Jason C. Rodgers, a former SEC enforcement attorney who is now a defense attorney with Jackson Walker in Fort Worth.
Summey said, “Internally, we were not overly surprised (by the SEC investigation) because of the unique character of the company.” Summey described the company’s work as “extreme exploration.”
“We see this as an ongoing miracle and a great amount of faith by our investors to continue with a wildcat expedition in this way,” he said.
He said that many of the company’s investors “almost have a donor mentality: They understand they might just lose it. They put the money in as if they’re approaching a nonprofit.”
But not all investors or would-be investors believe investing in the company should be a matter of faith.
Yolanda Holtzee, who lives in Seattle, told the Statesman she reported the company to the SEC because she suspected it of affinity fraud, which involves calling on a class of investors that have a similar ethnic, religious or other background.
“I don’t like to see naive investors get fleeced,” said Holtzee, who said she has not invested in Zion and described herself as a religious person. “On and off 10 years, I’ve tried to make the SEC aware of what’s going on. Innocent until proven guilty, but — whether it’s Jesus, Hashem, Buddha, Muhammad — I don’t like to see God’s name evoked this way.”
Though not commenting on the details of the Zion case, Rodgers said that affinity fraud is not a violation in itself, but “there’s a heightened betrayal of trust than in a typical scam, because the perpetrators are appealing to individuals as members of a group and holding themselves out as like-minded, when in reality they’re targeting a group of people in a single scam.”
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