A powerful member of the Texas Legislature has been accused of fraud and sued for more than $1 million, yet the mainstream media has ignored the case because it involves a liberal Republican known for attacking conservatives.
State Rep. Byron Cook (R–Corsicana) and other business partners are being sued by Calco Land Development, LLC in Collin County in November. The plaintiffs allege Cook engaged in fraud relating to his involvement in Unity Resources, LLC.
Texas Scorecard takes a look inside the lawsuit and its allegations.
What is Unity Resources?
Initially set up in 2008, Unity Resources, LLC, was pitched to investors as a vehicle for investment in mineral interests, specifically natural gas producing acreage. The company’s website put a heavy emphasis on the use of tax avoidance schemes including 1031 exchanges. Its CEO was Mark Mersman and its COO was Mark Solomon. The company’s membership agreement required directors to disclose when the company engaged in any business transaction with a member.
What was the Unity Resources Business Model?
The company was pitched to investors as a unique business opportunity that would be involved in investments in oil and gas producing real estate, but would never directly own mineral interests. Instead, Unity Resources would pair buyers with real estate opportunities, and then help those buyers flip the investment properties to subsequent purchasers. In the process, the buyer and Unity’s investors would split the profits.
How was Cook Involved?
State Rep. Byron Cook became involved in Unity Resources in 2010 and is alleged to own approximately 20% of the company. As the largest shareholder, Cook is thought to have a great deal of control over Unity’s day-to-day operations. According to the lawsuit, Unity CEO Mark Mersman, in explaining the cancellation of an investment agreement, told investors in Calco Land Development that “Byron calls the shots.”
What other politicians were involved?
Between 2010 and 2014, Cook got various public officials, including now retired state representatives Jim Keffer of Eastland and Allan Ritter of Nederland, as well as Texas Attorney General Ken Paxton, involved in Unity. However, Paxton was pushed out as a director of Unity Resources during his run against one of Cook’s allies, State Rep. Dan Branch, for attorney general. Paxton says he lost over $80,000 investing in Unity Resources.
Who is Joel Hochberg and what is Trade Rare?
Joel Hochberg is a wealthy Florida businessman that has done business with Cook since the 1970s. Hochberg and Cook formed Trade Rare, LLC, a mashup of the names of their successful video game enterprises, Tradewest, Inc. and Rare, Inc. The two used the entity to “land bank” various properties identified by Unity Resources without disclosing such involvement with its members and business partners.
How was Calco Land Development Allegedly Defrauded?
Calco Land Development alleges they were defrauded by Cook when they arranged to purchase 39 net mineral acres located in Oklahoma from David and Brenda Kilian for $628,334 through Unity. However, Calco alleges that Cook and Unity CEO Mark Mersman lied to them and that Unity actually only paid the Kilians $390,000 and pocketed the $238,334 difference. That was in spite of promises that Unity Resources would only profit from the subsequent resale of the acreage to a subsequent purchaser who had, allegedly, already been identified.
What else is alleged in the suit?
The lawsuit also identifies properties owned by Trade Rare and various members of the Cook family that were acquired by Unity Resources subsidiaries Cypress Income Fund II, LLC and Legacy Income Royalty Fund, LLC, as well as by Unity Resources directly. Some of these properties were allegedly acquired after the price for oil collapsed in July of 2014. The price Unity Resources paid for these properties is unknown, but it is alleged the transactions were for more than a fair market value. Unity investors allege they were never notified of these self-dealing transactions involving Cook despite requirements to that effect in the Unity Resources membership agreement.
How is Cook Reacting to the Suit?
Byron Cook has used his legislative continuance, a privilege granted to state lawmakers, to put the suit on hold and avoid testifying while the 85th Texas Legislature is meeting. He has also partnered with a Democratic colleague in order to secure a legislative continuance for his co-defendants. That continuance will expire and proceedings on the suit will continue in July.