Kentucky: Oil Operator Admits Role in Multi-Million Dollar Securities Fraud Scheme
Mark Cornell faces maximum of 20 years in prison
FRANKFORT, Ky. (March 10, 2015) — A central Kentucky oil operator has admitted to his role in a scheme that defrauded investors nationwide out of millions of dollars.
On March 3, Mark Cornell pleaded guilty to securities fraud before U.S. District Judge Gregory Van Tatenhove. In January of this year, John G. Westine Jr., a leader of the scheme (see appended article), was convicted by a jury of mail fraud, money laundering conspiracy, and securities fraud. A third member of the scheme, Michael Hicks, pleaded guilty to mail fraud in November 2014. Westine and Hicks are scheduled to be sentenced in May.
In his plea agreement, Cornell admitted that his role in the scheme was to act as the local operator of a series of reworked wells for which production levels were exaggerated. Cornell was paid large sums of money by Westine and his associates to rework the wells and to provide guarantees of these excessive production levels. Those fraudulent guarantees were used by Westine and his associates to sell royalty interests in the wells to investors, via high-pressure telephone tactics.
In total the defendants defrauded approximately 200 investors nationwide out of more than $3 million.
The investigation started when investors submitted complaints to the Kentucky Department of Financial Institutions, Division of Securities.
Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Dugan Wong, Inspector in Charge of the U. S. Postal Inspection Service; and Charles Vice, Commissioner of the Kentucky Department of Financial Institutions, jointly announced the guilty plea.
The investigation was conducted by the U.S. Postal Inspection Service, including Postal Inspector Roberta Bottoms, and the Kentucky Department of Financial Institutions, Division of Securities.
Assistant U.S. Attorneys Ken Taylor and Neeraj Gupta are prosecuting this case on behalf of the federal government.
Cornell is scheduled to be sentenced in June. He faces a maximum sentence of 20 years imprisonment. The court will impose a sentence after carefully considering the U.S Sentencing Guidelines and the federal statutes.
California man is convicted in $3 million Kentucky oil-well scheme
BY BILL ESTEP
TRIBUNE NEWS SERVICE, January 18, 2015
A California man has been convicted of conducting a scheme that defrauded 200 people out of a total of more than $3 million through phony oil-well investments in Kentucky.
A federal jury on Friday found John G. Westine Jr. guilty on 26 charges of mail fraud and one charge each of securities fraud and conspiracy to launder money, according to a release from U.S. Attorney Kerry B. Harvey.
Each charge carries a maximum 20-year term. The court website does not list a sentencing date for Westine.
Westine had denied wrongdoing and represented himself in the case, filing a flurry of motions in the months before the trial.
Westine was charged with his half-brother, Michael A. Hicks; Mark Cornell, who had a company called JMACK Energy in Bowling Green; and Henry Irving Ramer, who listed a California address.
Hicks has pleaded guilty, and Cornell has asked for a hearing to plead guilty, according to court records.
The scheme involved interests in oil wells in southern Kentucky and lasted from mid-2012 until August 2014, according to the indictment in the case.
The investors were from around the country. Westine and others bought contact information for potential investors and also found leads from Internet advertisements, the indictment said.
The defendants used documents that included fake geological surveys to make it appear that the wells were producing substantial amounts of oil, or were about to, and that the sites had big reserves, the indictment said.
One claim the men made was that they planned to produce 60 to 100 barrels of oil each day from each lease site, but they knew the wells wouldn’t produce anything close to that, the indictment alleged.
The indictment said the people charged in the case operated through shell companies but used legitimate, unsuspecting businesses such as accounting firms and commercial mailing companies to conduct transactions.
In June 2014, the defendants took some investors to see oil wells in southern Kentucky and gave them a bottle of oil to prove their money would start flowing in soon, the indictment said.
Westine and others allegedly siphoned off investors’ money. The indictment included a forfeiture count under which the government moved to seize bank accounts and four luxury cars.
Westine was no stranger to fraud, according to a motion filed by Assistant U.S. Attorney Kenneth R. Taylor.
The motion said Westine was convicted in 1984 in an oil-well scam in California; in 1990 for tax evasion; and in 1992 in another oil and gas fraud case, in Ohio.
When he was locked up awaiting sentencing in the Ohio case, he used a phone at the jail to try to sell fake shares in a golf course development, the motion said.
Westine had been released after more than 20 years in prison not long before he undertook the oil-well scam in Kentucky, according to a court record.