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Tag: oil-and-gas schemes

  • BULLETIN: Recidivist Huckster Jailed In Florida In ‘Body Scan’ Securities Swindle Masterminded Separate Ponzi Scheme In California That Netted $11 Million, SEC Says; Jerry Aubrey Charged Amid Allegations He And Brother Peeled Off Millions For Basketball Tickets And Lavish Home Featuring ‘Giant Fish Aquariums With Miniature Sharks’

    Jerry L. Aubrey: Source: 2010 booking photo at Volusia County Jail in Florida.

    Jerry L. Aubrey first came on the SEC’s radar screens in 1998, when he was hawking “securities in a fictitious cruise ship,” records show.

    By 2007, he’d been charged criminally in Florida with securities fraud for selling shares of a bogus “body scan imaging business” between December 2000 and October 2003. He was convicted of those charges last year and ordered to spend five years in state prison and pay $5.7 million in restitution.

    But even as Aubrey was sitting in prison, investigators were putting together another fraud case — this one involving a purported oil-and-gas venture in West Virginia that Aubrey hawked from California before he was jailed in Florida.

    Aubrey now has been charged civilly in that case, and the SEC said the business — Progressive Energy Partners LLC (PEP) — was an $11 million Ponzi scheme operated through a boiler room with 196 phone lines.

    The scammer and his brother, Tim Aubrey, peeled off millions from the PEP Ponzi, the SEC charged.

    “Jerry and Tim Aubrey misappropriated more than $3.2 million of investor funds for their personal use,” the SEC charged. “Jerry Aubrey withdrew about $500,000 directly from PEP’s bank accounts to pay for personal expenses, and he distributed another $2.7 million in cash and checks to himself, Tim Aubrey, their mother, and their company, Allied Marketing Consultants. A portion of the $2.7 million in cash and checks were alleged salary and sales commissions paid to Jerry and Tim Aubrey, even though PEP’s legitimate business activities were virtually nonexistent.”

    How did the money get spent?

    On “all kinds of things,” the SEC charged — things such as “limo rides . . . to [Staples Center] for Lakers game[s] . . . Vegas . . .  strip clubs and just being a high roller.”

    But that wasn’t all, according to the SEC:

    The rent alone on the “Aubrey family’s lavish house” in California consumed as much as $7,100 a month, the SEC charged, alleging that the three-story, 4,000-square-foot home was “equipped with large screen televisions, a pool table, giant fish aquariums with exotic fish, a hot tub, a pool, and a tennis court.”

    Among the exotic fish were  “miniature sharks,” according to the SEC.

    More investor money was used to pay “for the defense of Jerry Aubrey’s criminal securities fraud case in Florida,” the SEC charged. Meanwhile, there were “family vacations, which included two trips to Maui, Hawaii,” and other trips for associates to “Las Vegas, Palm Springs and Big Bear.”

    Jerry Aubrey also bought a “Lexus car and jewelry” for his girlfriend. Other money was directed at the purchase of “[t]rucks, cars, and Harley Davidson motorcycles, the SEC charged.

    Two PEP pitchmen — Brian S. Cherry and Aaron M. Glassser — also were charged civilly alongside the Aubrey brothers.

    Jerry Aubrey now is listed as an inmate at the Tomoka Correctional Institution, a state prison in Daytona Beach.

  • Father, 3 Sons Plead Guilty In Massive Texas Fraud And Ponzi Swindle; Members Of The Tony Rand Family Potentially Face Decades In Prison

    Five people — including a father, three sons and a pitchman who doubled as an executive — have pleaded guilty to their roles in orchestrating a $68 million securities-fraud and Ponzi scheme involving fraudulent Texas oil-and-gas investments, federal prosecutors said.

    The father — William Anthony “Tony” Rand, 69, of Plano — is a recidivist felon who previously had spent nearly seven years in prison for money-laundering, bank fraud and other crimes, prosecutors said.

    Tony Rand was the financial manager and bookkeeper for Aspen Exploration Inc., which prosecutors described as corrupt from top to bottom. Sons Gregory Keith “Greg” Rand, William Nicholas “Bill” Rand and Mark Albert “Mark” Rand were Aspen’s owners and principals.

    Greg Rand, 46, pleaded guilty last week to conspiracy to commit mail fraud and securities fraud and three counts of securities fraud. Under a plea agreement, he faces up to 216 months in prison.

    Bill Rand, 41, pleaded guilty to three counts of securities fraud. His plea agreement exposes him to up to 168 months in prison.

    Mark Rand, 45, pleaded guilty in October 2010. Details about his plea were not available immediately.

    Tony Rand, meanwhile, faces up to 78 months in prison after pleading guilty last week to conspiracy to commit mail fraud and securities fraud and one count of securities fraud.

    A fifth Aspen employee — Joel William Petersen, 54, of Frisco — also faces up to 78 months in prison after pleading guilty last week to conspiracy to commit mail fraud and securities fraud and one count of securities fraud. Peterson was an Aspen vice president and pitchman.

    The Rands “will be required to forfeit substantial money judgments and property to the government, including real estate, boats and other personal water craft, luxury vehicles, artwork, including an original Picasso, furniture, antiques, musical instruments, jade, expensive jewelry and wine,” prosecutors said.

    Despite the fact Aspen was insolvent, investors were told “they could receive profits equal to the return of their cash investment within three years with potential production revenues lasting up to 20 years and multi-fold returns on their investment funds,” prosecutors said.

    The case was brought by elements of the Financial Fraud Enforcement Task Force.

  • SEC: Oil-And-Gas Scammer Paid Belize Company For Ad That Ran On CNBC, Fox Business News; Offer Proved To Be Fraudulent; Jon C. Ginder Charged In Emergency Action

    A Texas man paid a Belize company to produce ads that ran on CNBC and Fox Business News for his oil-and-gas venture, but the offer proved to be fraudulent and the SEC has filed an emergency court action to stop the scheme, the agency said.

    Jon C. Grinder of Houston used “at least” $210,000 of investor funds to pay the offshore firm to launch the TV ads, which claimed investors could earn annual returns of up to 40 percent from “low risk producing wells.”

    Ginder personally called prospects who responded to the ads. The SEC described the scheme as multilayered, saying Ginder “fraudulently raised approximately $3.5 million from over 50 investors nationwide through three unregistered oil and gas limited partnership offerings.”

    Investors were told their money would be used to purchases leases and renovate existing wells to enhance production, amid claims that “historical oil and gas data” suggested production would surge once the properties were improved.

    The SEC described the claims as “wildly optimistic” and “fraudulent on their face” because “the historical oil and gas production from the partnership leases was very poor” and “many of the wells had no recent production history.”

    In one of the offerings, annual production was estimated at 91,000 barrels even though the wells had produced a total of only 67,000 barrels in the preceding 15 years.

    “There were no reserve reports or any other credible basis upon which he could form a reasonable belief that the wells could be reworked to yield a production rate in a single year that would exceed over 135 percent of the prior combined 15 years[‘] worth of productivity,” the SEC said.

    During the first year of the venture (2008), total production after several wells “purportedly” were reworked topped out at only about 3,522 barrels — a far cry from the projection of 91,000 barrels, the SEC said.

    In 2009, the agency said, production topped out at about 3,986 barrels.

    Ginder continued to raise funds based on the same “false and misleading” projections through March 2010, while also failing to disclose the venture was operating at a loss, the SEC said.

    But production misrepresentations were only part of the scheme, the SEC said.

    Ginder, according to the agency, also used investor funds to provide an unauthorized, interest-free loan of $300,000 to a penny-stock company “founded by his friend and in which Ginder owned stock.”

    The penny-stock firm “failed to repay the loan,” the SEC said.

    Ginder also did not disclose that $800,000 in investor funds were used to purchase leases from a private company he controlled, netting him a cash profit of $700,000 and 10 “partnership units” worth $60,000 each, the agency charged.

    All in all, Ginder netted $1.3 million from self-dealing, the SEC alleged.

    The SEC has asked a federal judge to freeze Ginder’s assets, along with the assets of two related companies: Northamerican Energy Group Inc. (NEG) and Northamerican Energy Group Corp. (NEGC). The agency alleged that the scheme operated between February 2008 and May 2010.

    Read the SEC complaint.

  • U.S., German, British, Canadian Provincial Regulators Cooperate In Probe Of Alleged ‘Oil And Gas’ Fraud Scheme Operating In Florida, Texas And Aruba; SEC Sues Justin Solomon And Affiliated Firms

    A Florida man selling “joint ventures” in oil-and-gas businesses in Texas to overseas clients through corporate arms in the United States and Aruba has been accused of fraud by the SEC.

    Named defendants in the case were Justin Solomon of Deerfield Beach, Fla., and three affiliated companies: Seisma Oil Research LLC of Boca Raton, Fla., Seisma Energy Research AVV and Permian Asset Management AVV of Aruba.

    Seisma Oil Research LLC also is known as Seisma Energy Research LLC, and Seisma Energy Research AVV also is known as Seisma Oil Research AVV, the SEC said.

    The case is notable for reasons beyond fraud allegations and the number of companies with similar-sounding names. Indeed, the SEC said the agency was assisted in the probe by the Financial Services Authority of the United Kingdom, the Federal Financial Supervisory Authority of Germany, the Ontario Securities Commission and the Nova Scotia Securities Commission.

    Also assisting internationally was the London Police Department. On the U.S. domestic front, the Division of Securities of the Florida Office of Financial Regulation also assisted.

    The defendants have consented to a preliminary injunction and to repatriate “any remaining investor assets” to the United States.

    Solomon and the companies raised “at least” $25 million in the scheme by using “high-pressure sales tactics” on “more than 400 non-U.S. investors,” drawing them into the scheme, the SEC said.

    “The ventures were supposed to purchase undivided working interest in oil and gas projects owned and operated by two unrelated Texas companies,” the SEC said.

    Investigators, though, said “Seisma never acquired any working interest for two of the six ventures and has expended only $9.5 million of the funds raised toward acquiring interests on behalf of the ventures.”

    At the same time, the SEC said, “Seisma misrepresented or omitted material facts about the profitability and prospects of the oil and gas opportunities.”

  • Michigan Men Who Urged Victims Not To Cooperate With FBI Sentenced To Prison In Oil-And-Gas Ponzi Scheme

    ponziblotterTwo Michigan brothers who urged investors in their oil-and-gas Ponzi scheme not to cooperate with the FBI have been sentenced to prison.

    Eric Riley Merkle, 55, and Jay Vernon Merkle, 53, both of Williamston, Mich., were sentenced to 10 years in federal prison for conspiracy, securities fraud, mail fraud and wire fraud. They also were ordered to pay their victims nearly $21.6 million in restitution.

    U.S. District Judge Robert Holmes Bell said the crime was deplorable because the Merkles traded on faith to recruit church members into their scheme.

    Prosecutors said they created a firm known as Platinum Business Industries (PBI), telling investors PBI would use their money to fund oil and gas exploration in Oklahoma. The company advertised returns of 6 percent a month or 300 percent over three to five years.

    Despite their claims that the money would be invested in oil and gas exploration, the Merkles instead “put the investors’ money in high-risk schemes unrelated to oil and gas in the United States and overseas, and lost it,” prosecutors said.

    A substantial amount of the funds was used “to pay off their previous investors in another oil-and-gas Ponzi scheme involving more than a dozen fraudulent shell corporations,” prosecutors said. “The Merkles perpetuated the illusion that their sham corporations were profitable by using new investors’ funds to pay ‘earnings’ to earlier investors.”

    The scheme ensnared more than 600 victims, many of whom lost their life savings, prosecutors said.

    Even after state and federal investigators opened a probe into the business affairs of the brothers, the Merkles “continued to raise money under false pretenses,” prosecutors said.

    The brothers then blamed the government for their predicament, lying to investors by telling them their money “was being ‘held up’ by U.S. and foreign government agencies,” prosecutors said.

    That’s when an already-underhanded scheme turned took a turn for the worse, with the Merkles instructing investors to “wire a total of over $1 million to Nigeria, Ghana, and other countries for ‘fees’ associated with releasing their money,” prosecutors said.

    Investors then were urged not to cooperate with the FBI, with the Merkles “suggesting that such cooperation would jeopardize their repayment,” prosecutors said.

    “Judge Bell noted that the crime was especially serious in that the Merkle brothers abused their affinity with church members and extended family to gain their confidence,” prosecutors said.

    U.S. Attorney Donald A. Davis said the FBI and the U.S. Postal Inspection Service played important roles in the case.