Investors drag ReconAfrica to court
US class action against oil search
03 November 2021 | Justice
Earlier warnings by Namibia's most experienced geologists that the chances of commercially viable oil exploration in the Kavango are zero, and ReconAfrica's oil search is nothing more than a “scam” can be proved true if the prospective US action against the Canadian oil company succeeds.
Dr Chris Brown, chief executive of the Namibian Chamber of the Environment (NEC), told this publication earlier this year that the oil search was nothing more than a “major stock market scam by a small, unknown Canadian company that is part of the targeting worlds unknown to Americans”. He said the country's leading geologists agree.
Dr Roy Miller, one of those geologists, confirmed this, saying the area could produce coal, but not commercially exploitable quantities of oil.
In the US class action, it is alleged that the company misled investors about the prospect of extracting oil in Namibia and Botswana.
In 70 pages of court documents filed in a district court in New York on 25 October, Eric Muller claims on behalf of investors that ReconAfrica and its top executives were aware of “certain unfavourable facts” about the company’s oil search and did not share it with investors.
Furthermore, the documents state that investors suffered financial damage when ReconAfrica’s share price fell as media reports revealed “serious irregularities” with the company’s drilling plans in the environmentally sensitive Kavango region as well as its “disappointing drilling results”.
The other defendants on whom the court documents were served are ReconAfrica’s chairman and CEO, Jay Park and Scott Evans; the former and current CFOs, Ian Brown and Carlos Escribano; ReconAfrica’s advisor and consultant Shiraz Dhanani; directors Mark Gerltz and James Granath; media spokespersons Claire Preece and Ndapewoshali Shapwanale; as well as the local environmental consultant, Dr Sindfila Mwiya.
Muller further claims that ReconAfrica misled investors about its plan to use unconventional mining methods (including fracturing), perform unlicensed drilling tests, use water illegally for its test holes and appoint an “incompetent” environmental consultant.
In addition, it is alleged that ReconAfrica did not provide sufficient and accessible information to those who would be affected by its exploration drilling and failed to disclose that its interests were actually in the Owambo basin, not the Kavango basin as consistently presented.
Finally, it is alleged that ReconAfrica failed to disclose that it was “constantly engaged in unauthorized share promotion”.
In October 2020, National Geographic published a report revealing the potential environmental and social impact of ReconAfrica’s planned exploration activities. NG reported on concerns that drilling “could threaten the water resources of thousands of people and endanger wildlife” in a transboundary conservation and world heritage site.
ReconAfrica’s share price fell by 6% after the report. In January 2021, another report appeared in this authoritative magazine that caused stock prices to fall by a further 7%.
Additional media reports over the next few months, including a Yale Environment 360 report, two more National Geographic articles, a report in The Namibian newspaper and four Viceroy Research reports, have made investors even more worried, the pieces read.
The share price has fallen further with each of these reports, leading to financial damage to investors, it is argued.
All investors who bought or otherwise acquired ReconAfrica shares between 28 February 2019 and 7 September 2021 can join this class action before 27 December this year.
Meanwhile, ReconAfrica announced in a statement on 28 October that it would oppose the case. “ReconAfrica will take strong steps to defend itself against any such claims,” according to the statement.