Fraudster Who Ran Oil and Gas Investment Scheme is Sentenced to 60 Months in Federal Prison on Money Laundering Conviction
FORT WORTH, TX—A Lipan, Texas, man who pleaded guilty in May 2014 to one count of money laundering stemming from an oil and gas investment scheme he ran, was sentenced today, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.
James M. McConathy, 62, was sentenced by U.S. District Judge John McBryde to 60 months in federal prison, and he was ordered to pay $112,746 in restitution. Judge McBryde ordered McConathy to surrender to the Bureau of Prisons on September 26, 2014. According to documents filed in the case, McConathy admitted that in October 2010, he wired $75,000 in funds he derived as a result of wire fraud from his account at First National Bank Lipan to Southlake Energy’s account at Bank of Texas.
In April 2010, McConathy purchased rights to an oil and gas lease known as the “T.W. Martin Lease,” which is located in Navarro County, for approximately $20,000. In late September 2010, McConathy placed a call from Lipan, Texas, to an individual, “S.H.” in Evanston, Wyoming, and told S.H. that he could purchase a 50 percent interest in the lease for $125,000. During that call, McConathy falsely represented to S.H. that the T.W. Martin Lease was producing an amount of oil significantly greater than it was actually producing. In early October 2010, McConathy traveled to Evanston and met with S.H. Agreeing to buy one-half stake in the lease, S.H. gave McConathy a check for $125,000.
Less than a week later, McConathy loaned $75,000 of that money to Southlake Energy, in Southlake, Texas. S.H. did not know McConathy loaned the money. As directed by McConathy, Southlake Energy repaid the $75,000 loan by sending a $75,000 wire transfer to a bank account held by McConathy’s wife, and by doing this, was able to conceal the funds’ origins.
In late December 2010, McConathy sent S.H. a check for approximately $4,500, purported to be S.H.’s portion of the proceeds of the sale of 146 barrels of oil produced in October 2010 at the T.W. Martin Lease to a third party. In fact, McConathy had not sold any oil to a third party, and the lease had not produced 146 barrels of oil in October.
In late January 2011, S.H., believing the T.W. Martin Lease was generating revenue as promised, sent McConathy an additional $7,500 for an oil rig. The following day, McConathy sent S.H. a check for $5,358, purported to be S.H.’s portion of the sale of 174.4 barrels produced in November 2010 at the T.W. Martin Lease to a third party.
Similar representations and transactions occurred in March and May 2011. After May 2011, McConathy stopped sending checks to S.H.
These periodic payments McConathy made to S.H. were designed to convince him that the T.W. Martin Lease was productive and profitable. In fact, the payments were funded with money unrelated to the T.W. Martin Lease oil sales.
The Internal Revenue Service Criminal Investigation and FBI investigated the case.