Dallas Businessman Admits Running Oil and Gas Ponzi Scheme
Alan Todd May Owned Prosper Oil and Gas Fraudulently Raised Approximately $7 Million from Investors
|U.S. Attorney’s Office December 10, 2010|
DALLAS—Alan Todd May, 45, pleaded guilty yesterday afternoon before U.S. District Judge Jane J. Boyle to one count of mail fraud, admitting that he raised approximately $7 million in investor funds under false pretenses, announced U.S. Attorney James T. Jacks of the Northern District of Texas. He faces a maximum statutory sentence of 20 years in prison and a $250,000 fine. Restitution could be ordered. He is scheduled to be sentenced by Judge Boyle on March 31, 2011.
May has been in custody since his arrest in June 2010 in San Francisco on a related federal criminal complaint filed in the Northern District of Texas. A few weeks later, he was indicted on one count of wire fraud and two counts of mail fraud. Per the terms of his plea agreement with the government, the government will dismiss the remaining mail and wire fraud counts at sentencing.
May formed Prosper Oil and Gas, Inc. and was its president. Prosper purported to own and operate oil and gas leases in several states, including Texas, Oklahoma, Colorado and Arkansas. According to plea documents filed in the case, beginning in July 2008, and continuing through the beginning of March 2010, May ran a scheme to obtain, by false and fraudulent pretenses, obtained approximately $7 million from investors to purchase royalty interests in oil and gas leases.
To sell these royalty interests, May, along with others, made various false and misleading statements to investors. For example, May and others told investors that the royalty interests for sale had yielded, or would yield, annual returns greater than 25 percent. As a result of these representations, Prosper sold purported royalty interests to more than 170 investors.
In fact, in operating their massive Ponzi scheme, May and others were: selling mineral interests that Prosper didn't own; overselling mineral interests that Prosper did not own; wildly overstating the production revenue for Prosper's leases in order to sell mineral interests; and making Ponzi payments, disguised as "royalty" payments, to investors.
May admitted using investor funds for extravagant personal expenses and to make payments to his mother, daughter, brother, and ex-wife.
The Securities and Exchange Commission (SEC) opened a separate investigation into May and Prosper Oil and Gas, and in March 2001 filed a civil complaint against them alleging that May and Prosper raised at least $6 million from at least 99 investors throughout the U.S. in fraudulent securities offerings, consisting of fractional, undivided royalty interests in oil and gas properties. U.S. District Judge Sam A. Lindsay ordered that Prosper Oil and Gas, and any assets of Alan May, be placed in receivership. The SEC identified six accounts that Prosper Oil & Gas used to receive investor funds, receive oil and gas revenues, and make payouts to Prosper's investors. Those accounts revealed approximately $6.7 million in total incoming investor funds; approximately $441,000 of total oil and gas revenue; and approximately $1.2 million of investor distributions.
This law enforcement action is part of President Barack Obama's Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The case is being investigated by the U.S. Secret Service and the SEC. Assistant U.S. Attorney Stephen P. Fahey and Special Assistant U.S. Attorney Robert B. Long of the SEC are prosecuting.