SEC: Man Switches Company Name For Offering, Buys Autodialer And Database For 17K, Targets Wealthy Investors, Racks Up $1.4 Million Before Scheme Collapses

UPDATED 6:15 P.M. ET (U.S.A.) A California man ordered by five states to cease and desist from selling unregistered securities started using a different corporate name, bought an autodialer and database with the names of wealthy investors for $17,737 and used it for at least six months to fleece clients before the scheme collapsed in December 2009, the SEC said.

The scheme, which targeted investors in the United States and Canada, raised at least $1.4 million — some apparently before the database acquisition in June 2009.

The SEC now has gone to court to stop Thomas L. Labry and his company, Cherokee Gas Systems, from fleecing investors in a fraudulent oil-and-gas scheme at a property in Oklahoma known as the “Walters Field Priddy Sand Unit.”

The assets of Labry and Cherokee have been frozen and a receiver has been appointed, the SEC said.

While operating by a different name — Iron Horse Petroleum Inc. — Labry was ordered by five states to cease selling unregistered securities: Illinois, Pennsylvania, Wisconsin, Alabama and Arizona, the SEC said. Some of the orders date back to 2000.

In addition, Labry was sued in California under RICO statutes for fraud, and the plaintiffs secured a judgment of $647,776.12 in a 2006 case.

Cherokee was incorporated in Oklahoma in 1991, and conducted business from Costa Mesa, Calif., the SEC said. It is not registered to sell securities. Labry lives in Newport Beach. The Cherokee website was registered in January 2009, according to web records.

The website appears to use a shared server that hosts 3,751 other sites, which may lead to questions about why a company that charged investors $25,000 per unit and purported that each unit would return $725 a month at a minimum did not use dedicated hosting.

“In approximately December 2008, Cherokee began soliciting potential investors throughout the United States, including through the use of cold calling,” the SEC said.

Investors received a brochure from Cherokee that was “almost identical to the brochure previously disseminated by Iron Horse . . . except that the Cherokee brochure refers to ‘Cherokee’ rather than ‘Iron Horse,’” the SEC said.

The Oklahoma corporate registration of Iron Horse was suspended in August 2006 for failure to pay franchise taxes, records show.

In December 2008, Labry began to use the name of Cherokee in an investment offer, according to the SEC.

“To facilitate this general solicitation, Labry, using Cherokee investor monies, purchased dialing software that can automatically place outbound calls from a preloaded database of numbers,” the SEC said. “In these calls, Cherokee representatives offer investors the opportunity to purchase units in oil and gas wells purportedly owned by Cherokee located on Walters Field in Oklahoma, for $25,000 per unit. In instances where an investor does not want to purchase an entire unit, Cherokee allows the investor to purchase a fraction of a unit. Cherokee representatives tell investors that they will start receiving returns on their investments, paid monthly, within 45 to 60 days of the investment.”

In June 2009, Labry purchased a database that targets telephone numbers of  “Homeowners Age 60+ with income $100K and up” and “Homeowners Age 60+ with wealth 1 million,” the SEC said.

Cherokee represented that investors would receive returns of 35 percent a month.

Although investors did not get paid, the attorney who represented Labry in the California lawsuit filed by investors did — as did a convicted felon, the SEC said.

The attorney received cashier’s checks totaling $105,000, the SEC said.  The attorney has not been accused of wrongdoing.

Investigators identified the felon as Gary Maddux, whom the SEC said was convicted of wire fraud and mail fraud in 1998. Maddux received cashier’s checks totaling $221,195, the SEC said.

Maddux was charged in 1997 with bilking elderly investors in a fraudulent telemarketing scheme known as “Prizewinners.” In the Prizewinners case, people were told they had won a sweepstakes and could collect their winnings for a fee.

Since December 2008, the SEC said, Labry withdrew at least $268,000 in cash from the Cherokee bank account, as well as $466,283 that was used to purchase cashier’s checks for “various individuals who were not investors.”

Labry also “made withdrawals totaling $148,126 that were used to purchase cashier’s checks made out to ‘SCS,’ one or more of which he then cashed,” the SEC said.

When investors questioned why they weren’t getting paid, they were “falsely told by Cherokee agents that oil production is ‘behind’ and that they will receive payment within a certain number of weeks or by a certain date.”

The payments were not made, the SEC said.

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8 Responses to “SEC: Man Switches Company Name For Offering, Buys Autodialer And Database For 17K, Targets Wealthy Investors, Racks Up $1.4 Million Before Scheme Collapses”

  1. We are the investors that secured the judgement against Mr. Labry in 2006. I think it’s important to state that we never received a penny of that judgement, which makes you wonder what the value is. I guess the real value was that we were contacted and were able to share the documents from our efforts.

    Hopefully Mr. Labry and anyone else involved will be stopped from ruining lives and draining the savings of hard working, but uninformed investors.

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  2. I worked for Tom. If anyone needs any information regarding his wrong doing. I. Can help. I knew there was something that was not right. Please contact me!!! If anyone needs any info

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  3. I’d like to know if Tom Labry has been tried, and sentenced fro his activities. I read that he was scheduled for trial in something like May or June of 2010.

    I’d like to know if he has been convicted of these charges, and if so how many months he’s bee sentenced to. I’m suspect that if convicted he would be doing about 121 months.

    Please let me know the results of his trial (if any) and I’ll pass the info on to other interested parties.

    Thank you

    Dave G.

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  4. Earl Burba: We are the investors that secured the judgement against Mr. Labry in 2006. I think it’s important to state that we never received a penny of that judgement, which makes you wonder what the value is. I guess the real value was that we were contacted and were able to share the documents from our efforts.Hopefully Mr. Labry and anyone else involved will be stopped from ruining lives and draining the savings of hard working, but uninformed investors.

    Dave G.: I’d like to know if Tom Labry has been tried, and sentenced fro his activities. I read that he was scheduled for trial in something like May or June of 2010.I’d like to know if he has been convicted of these charges, and if so how many months he’s bee sentenced to. I’m suspect that if convicted he would be doing about 121 months.
    Please let me know the results of his trial (if any) and I’ll pass the info on to other interested parties.
    Thank youDave G.

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  5. Has Thomas Anthony Labry (he moved to California in about 84 from Ashtabula Ohio) had a trial and been sentenced. If so how many years did he get in the federal pen? I’m hoping at least 10. I say sentenced because there could be NO (ZERO) excuse for his actions.

    I was sorry to see on the net that his father “passed” in 2009 (he was a nice hard working guy), but at least (and mercifully) it was before he had to witness the evidence of his son crimes.

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  6. SECURITIES AND EXCHANGE COMMISSION v. LABRY

    SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
    v.
    THOMAS A. LABRY, CHEROKEE GAS SYSTEMS, INC., SHEA C. SILVA, AND GARY MADDUX, Defendants.

    Case No. SACV 10-0018 JVS (VBKx).

    United States District Court, C.D. California, Southern Division.

    June 23, 2010.

    http://www.leagle.com/xmlResult.aspx?xmldoc=in%20fdco%2020100623b45.xml&docbase=cslwar3-2007-curr

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  7. Apparently Tom Labry’s day in court will be 4.19.11. He was able to post pone his trial date until April 19th. of 2011. I’m suspect that the trial will be a short one, fallowed by a looooooong prison sentence. One can only hope.

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  8. I don’t see anything here where Labry or any of his fellow operators have been sentenced to anything in prison. Does anyone know what happened to him?
    Sure would give me a little sense of relief knowing he is spending some time somewhere without any of the luxuries of freedom.
    I recently received notice from the IRS that I owed taxes on the 401K I rolled over to pay for my investment share.. yes this is 2013!!!! I’m still paying for the SOB ripping me off… I’ve gathered a small book of “evidence” that I have nothing left of the investment and never received a dime from it to defend myself of not having to pay for a disbursement that IRA Resources says I have.
    Will this ever end? I have nothing left and have been trying to pick up the pieces from this mess every since it began.
    I hope he rots in HELL!

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