ReconAfrica oil drilling site in Namibia in an undated photo.Die Paten TV
Oil company ReconAfrica has cancelled a planned stock promotion campaign led by a Florida-based company whose registered owner had previously been sanctioned by regulators in Canada.
The company, FTB Capital Inc., is registered to Andrew Paul Rudensky, a Canadian who was suspended and fined by the Investment Industry Regulatory Organization of Canada in 2018. Records obtained by The Globe and Mail show that Mr. Rudensky still owes more than $80,000 in unpaid fines or costs resulting from that case.
The terminated contract with FTB Capital is the latest in ReconAfrica’s RECO-X tangled history of promotional campaigns for its controversial oil exploration program in Namibia. The Globe reported last week that the company had quietly agreed to pay US$10.8-million to settle two court cases with Canadian and U.S. investors who complained of allegedly misleading statements about the Namibia project.
Just weeks after disclosing those court settlements, the company – officially Reconnaissance Energy Africa Ltd. – announced in late March that it was hiring FTB Capital to conduct “investor awareness, advertising and marketing activities” on its behalf, including banner ads and paid articles.
At the time, ReconAfrica said it would pay US$995,000 in cash to FTB, along with granting it two million stock options. But now the Vancouver-based oil exploration company says it is terminating the contract and cancelling the options.
Priced at $1.10 a share, the options were set to vest in quarterly increments over a 12-month period. They were already “in the money,” meaning the strike price was below the market price. Recon’s shares closed at $1.22 apiece on the TSX Venture Exchange on Monday.
The company’s project in Namibia, near the Okavango River, has been highly controversial for the past three years. Environmentalists have denounced it for allegedly jeopardizing the world-famous Okavango Delta, a UNESCO World Heritage site that attracts thousands of tourists every year. The activists also worry that the exploration drilling could disrupt the migration routes of endangered desert elephants. The company denies it would damage the environment.
ReconAfrica, in a news release last Thursday, said it cancelled the FTB contract on May 10 – before The Globe published its report, but nine days after The Globe first contacted the company with queries about it. The release said the contract with FTB was terminated “prior to the provision of any marketing or investor awareness services.”
The company has not responded to The Globe’s questions about the FTB contract and the court settlements with disgruntled investors, including new questions last week about the timing of the contract termination and the reasons for it.
In 2018, IIROC investigated and suspended Mr. Rudensky for two years for making false and misleading representations to an investment dealer about his personal financial dealings with a client.
ReconAfrica did not respond to The Globe’s questions about Mr. Rudensky and his role in the promotional contract. It also did not respond to a question about whether it would recover the full amount of the US$995,000 payment to FTB Capital. Mr. Rudensky could not be reached for comment.
Mr. Rudensky has not yet paid his fine to Canadian regulators. According to the unpaid fines report at Canadian Investment Regulatory Organization (CIRO), the successor to IIROC, he still owes $80,423.
“We have our fine collection powers to seek recovery,” Joanna Nicholson, manager, corporate communications and public affairs with CIRO, wrote in an e-mail to The Globe. “He cannot return to a CIRO-regulated dealer without paying his fine.”
Yolanda Holtzee, a Seattle metro region-based whistle-blower who has decades of experience working with U.S. and Canadian regulators, said it’s uncommon for companies to cancel stock promotion campaigns.
“The catalyst was your story,” she opined.
After the court settlements with the investors in Canada and the United States, ReconAfrica disclosed the agreements but not the amount of the payments. The Globe reported the amounts that were disclosed by a Canadian law firm and a U.S. court reporting website.
In both settlements, the company denied the allegations and made no admission of liability. It said the amounts of the payments were “within our insured limits” and would not cause any “direct financial impact” to the company.