Provident Royalties Charged In $485 Million Securities Fraud
Texas-based Provident Royalties LLC and three company founders have been charged with securities fraud by the Securities and Exchange Commission (SEC) for allegedly bilking thousands of oil and natural gas investors in an elaborate $485 million Ponzi scheme. The complaint charges Paul R. Melbye, Brendan Coughlin and Henry Harrison of orchestrating the scheme, as well as Provident, broker-dealer Provident Asset Management LLC, and 21 entities that offered and sold securities to investors.
According to the complaint – which was filed July 7 by the SEC – from at least June 2006 until 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 across 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 then sold the stock to retail investors nationwide.
The SEC alleges that Provident falsely promised investors yearly returns of up to 18% and misrepresented how 85% 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 reality, the SEC says that less than 50% of investor funds were used for their stated purpose. Provident allegedly used proceeds from later offerings 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 securities law firm of Maddox Hargett & Caruso P.C. currently is investigating the sales practices and due diligence of broker-dealers who solicited investors to purchase Provident Royalties investments. If you are a retail or institutional investor and sustained investment losses related to Provident Royalties, contact us at 800.505.5515. We can evaluate your situation to determine if you have a claim.