The Securities and Exchange Commission announced today that it has halted another Ponzi Scheme, charging three Dallas businessmen for allegedly conducting a $485 million fraud through a Provident Royalties LLC. The scheme was allegedly orchestrated by the owners of oil & gas focused Provident Royalties, Paul R. Melbye, Brendan Coughlin and Henry Harrison. The SEC is also charging an affiliated broker-dealer, Provident Asset Management LLC, as well as 21 other “entities” that offered and sold fraudulent securities. Ken Israel, who is the Director of the SEC’s Salt Lake Regional Office, stated that the scheme operated as “a Ponzi-like shell game in which assets were shuttled from one entity to another and investors were paid ‘returns’ from whatever money was available — usually that of the most recent investors.”
The scheme was perpetrated from mid 2006 through January of 2009. It is alleged that the defendants made a string of fraudulent offerings that involved oil and gas assets. It has been estimated that up to 7,700 investors from across the United States were victimized by the operation. Provident sold some securities directly to individual investors, but the majority of the securities were sold through retail broker-dealers.
According to the SEC’s press release “Provident falsely promised yearly returns of up to 18 percent and misrepresented to investors that 85 percent of the funds raised through the offerings would be used to purchase interests in oil and gas real estate, leases, mineral rights, and interests, exploration and development. In fact, the SEC alleges that less than 50 percent of investor funds were used for their stated purpose, and the proceeds from later offerings were used to pay expenses related to earlier offerings and returns to investors in those offerings.”
The official SEC complaint “charges the defendants with violations of the antifraud provisions of the federal securities laws. The complaint seeks a temporary restraining order and preliminary and permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest and financial penalties. Officer and director bars are sought against Melbye, Harrison and Coughlin.”
With the addition of Provident Royalties, HedgeTracker.com’s infamous “Hall of Fraud” list now includes 66 firms that have allegedly taken nearly $85 billion dollars from unknowing investors. For the complete listing, please see the right column of this page.
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