Another Ponzi Scheme Is Dismantled

Another Ponzi Scheme Is Dismantled - 7-9-2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

Another Ponzi Scheme Is Dismantled
Staff Writer

AccountingWEB.com . July 9, 2009
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EXCERPT:The Securities and Exchange Commission has obtained an emergency asset freeze in a $485 million offering fraud and Ponzi scheme orchestrated by three Dallas businessmen through a company they owned and controlled, Provident Royalties LLC. The SEC alleges that from at least June 2006 through January 2009, Provident made a series of fraudulent securities offerings involving oil and gas assets through 21 affiliated entities to more than 7,700 investors throughout the United States. Provident's entities made some direct retail sales of securities, but primarily solicited retail broker-dealers to enter into placement agreements for each offering, and those retail broker-dealers sold the stock to retail investors nationwide. According to the SEC's complaint filed in U.S. District Court for the Northern District of Texas, 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. "Provident sold ostensibly safe securities such as preferred stock to thousands of investors," said Ken Israel, Director of the SEC's Salt Lake Regional Office. "But it was actually operating 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 SEC's complaint charges Paul R. Melbye, Brendan Coughlin, and Henry Harrison for orchestrating the scheme, as well as Provident, broker-dealer Provident Asset Management LLC, and the 21 entities that offered and sold securities.

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