The Texas Department of Banking issued a cease-and-desist order Tuesday against Houston Petroleum Bank Inc., an unlicensed company that claimed to be a bank and had been soliciting deposits.
Bank Commissioner Randall James said in an interview Wednesday that his department learned about Houston Petroleum after a man who would not identify himself called the department two weeks ago, saying he had been solicited by Houston Petroleum for deposits and was wondering if the company was legitimate.
The department’s concerns arose from several factors, Mr. James said. “The institution had apparently been in operation since early 2006, they were advertising for deposits, they were referencing being a depository for public funds, and they indicated some form of relationship with Wachovia Securities, which would lend credibility to the organization.”
Houston Petroleum’s Web site, whose motto reads “Customer Deposits are Never at Risk,” said deposits are converted into AA-plus securities on a dollar-for-dollar basis and held at a reserve account at Wachovia Securities. The site also said Houston Petroleum had a strategic partnership with Wachovia Securities to provide asset management services to individuals.
Calls to Houston Petroleum was not immediately returned. A spokesman for Wachovia Securities said he was not familiar with the case and could not discuss it, but Mr. James said it does not appear Wachovia Corp. was knowingly involved in the operation.
The Department of Banking said it is working with the Texas State Securities Board and the Attorney General’s Office to look into the matter but has yet to recover any deposit records to determine the amount of funds Houston Petroleum had taken in.
Houston Petroleum’s site lists John J. Gallagher as its chairman and chief executive officer and William L. Smith as its president and chief operating officer.
