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Energy & the Law

2016 – A Bad Year For Bad Guys in Energy

Posted in Regulations, Statutes

white collar crimeLet’s look back at a cavalcade of crooks, criminals and miscreants who met up with justice in 2016.  We do it to be reminded of the others who will be lurking in the 2017 shadows.

Perp: David Kent, founder of Oilpro.com

Offense: Wire fraud by computer hacking.

How: Created a “backdoor entry” into the computer system of Rigzone  (the company he founded and sold for $51 million) and downloaded the “entire website” onto an external drive that disappeared after he left Rigzone. Then began soliciting Rigzone’s customers.

Sentence: Awaiting, if you’re talking jail time; the civil litigation will likely result in money damages against him and his co-conspirators.

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Perp: Sameer Sethi. This is an SEC civil action.

Offense: Fraudulent sale of securities. (SEC v Sethi Complaint)

How: All sorts of false and misleading statements and omissions to investors of Sethi Petroleum, LLC, to the tune of $4 million.

Result: Cease and desist order. (Memorandum Opinion and Order)

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Perps: Gregory P. Warren and Thi Houng Le.

Offense: Mail and wire fraud, conspiracy.

Sentences: After a four-week trial, Le, 84 months in federal prison; Warren, 204 months in federal prison; both, 3 years of supervised release, $25,000 fine.  5 others, including the lawyers who were given the lists, were acquitted.

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Perp: James VanBlaricum 

Offense: Mail fraud, Ponzi scheme.

How: Represented to 53 investors in Signal Oil & Gas an ‘assured’ rate of return of nine to 15 percent and full refund of their initial investment after a three to five-year investment period. $2 million of $2.6 million raised were commingled with other funds and more than half of investor funds went to payroll and day trading.

Sentence: Awaiting.

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Perps: Robert L. Baker and three others. This is an SEC enforcement proceeding.

Offense:  Sale of unregistered securities.

How: Worked for Chris Faulkner and Brietling Oil and Gas, which explains a lot. They collectively received nearly $9 million in undisclosed transaction-based commissions; none were registered with the Commission as a broker or associated with a registered broker-dealer.

Penalty: None as of this time.

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Perp: Jeffrey Wilson (See, it happens in renewables too!)

Offense: Tax and securities fraud.

How: Falsely portrayed a biofuels company as a legitimate manufacturer in order to receive federal tax incentives. All they were doing was moving the product from one state to another.

Sentence: Awaiting, after an eight day trial.

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Perp: Susan Gay Pruitt

Offense: State securities fraud.

How: Amateurish. Plugged numbers from producers’ websites into her projects, which she hadn’t invested in in the first place. Defrauded investors of $225,000.

Sentence: 22 years by a Collin County, Texas, state court. Seems overly harsh relative to others. If she knew she was risking 22 years, should she have swung for the fences …you know, steal more to make it worth her while?

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Perp: SandRidge Energy, Inc. This is an SEC enforcement proceeding.

Offense: Violated Securities Exchange Act of 1934

How: Fired whistleblower who raised concerns about the process for calculating publicly reported reserves; Then put language in the employee’s separation agreement that prohibited participating in any government investigation or disclosing information potentially harmful or embarrassing to the company.

Fine: $1.4 million and cease and desist order.

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