Con artists may seek to exploit fears over Mideast, oil supply
WASHINGTON (March 6, 2003) - With oil prices near $40 a barrel because of supply shortages and Mideast war fears, state securities regulators anticipate an increase in oil and gas scams. Regulators in at least seven states — Kansas, Kentucky, Ohio, Oklahoma, Texas, Washington and Wisconsin — have recently taken actions against investment promoters pushing oil and gas schemes and they worry that news of high oil prices could make investors more vulnerable to crooks.
“Con artists always use the headlines as a way to get into investors’ wallets — and everyone knows oil prices are up because they can see it at the gas pump and in their heating bills,” said Christine Bruenn, Maine’s securities administrator and president of the North American Securities Administrators Association (NASAA), an umbrella organization for state securities regulators.
Regulators are concerned that a desire to cash in on rising oil prices may lure investors into unsuitable or fraudulent oil and gas ventures. Oil prices were recently near $40 a barrel. Heating oil prices are up 50% over the past year, according to the U.S. Department of Energy.
In Kentucky, regulators recently shut down a promoter for Albany, Ky.-based Vision Oil Company who claimed that God, not geology, was the key to finding oil. “God gave me a vision of three oil wells,” Linda Stetler said in a letter sent to potential investors. Regulators allege that over the course of several years Stetler and her company engaged in illegal practices, including inadequate disclosures of risks and selling to unsuitable investors. Vision Oil Co and its agents were fined by the state and ordered to pay restitution to investors.
In Texas earlier this year David M. Phillips, III, of Dallas, was sentenced to 34 months in jail and ordered to pay over $1 million in restitution in connection with an oil scheme that spanned 17 states. Phillips admitted, in papers filed in U.S. District Court, that none of the invested funds were used to develop oil wells. Instead he and his associates used much of the money for personal expenses.
James Ropp, Delaware’s Securities Commissioner and chair of NASAA’s Enforcement Section, said, “Speculation on oil and gas wells is risky business no matter what is going on in the rest of the world.” Ropp urged investors to do the following:
- Beware of cold callers. High-pressure sales tactics and “once in a lifetime” opportunities are signals to hold onto your wallet.
- Read carefully any written material provided. Make sure that what you are hearing from the promoter is consistent with what you have read.
- Before investing, call your state securities regulator to determine if the investment and the promoter are properly licensed and registered in your state. If they aren’t, don’t invest.
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Bob Webster, Director of Communications