Alan Todd May, Who Feds Say Ran Ponzi Scheme From Downtown, Caught in S.F.
|Some of the very generic imagery featured on Alan Todd May's company's Web site|
And then, in March, the U.S. Securities and Exchange Commission said his Prosper Oil & Gas -- HQ'd on N. St. Paul and still very much alive, as evidenced by the Web site -- was nothing but yet another scam. And this one, said SEC officials in a complaint filed on March 2, was worth approximately $6 million -- money that belonged to at least 99 people who thought they'd invested in oil wells worth a damn. Eventually, investigators would come to find that, allegedly, he had defrauded 174 people out of close to $7 million. May, says the SEC's complaint, spent that money on a Ferrari, a Mercedes, a BMW and several Dallas homes, "each valued at approximately $1.5 million."
Shortly after the SEC filed its complaint, May went on the run -- to San Francisco, as it turns out. The U.S. Attorney's Office just sent word that May was caught Friday by deputy U.S. Marshals. The narrative detailing May's deeds follows, but our sister paper in San Francisco recounts how and where authorities found May -- who was living large under such aliases as Mark Mangum, Mark Hanson, Brian Peirce and Justin Gore.
DALLAS BUSINESSMAN ARRESTED IN SAN FRANCISCO FOR RUNNING OIL AND GAS PONZI SCHEME
Alan Todd May Owns Prosper Oil & Gas - Nearly 200 Victims Have Been Identified
DALLAS - A federal criminal complaint charging Dallas resident Alan Todd May with wire fraud, was unsealed today, announced U.S. Attorney James T. Jacks of the Northern District of Texas. May, 45, was arrested on Friday, June 4, 2010, by deputy U.S. Marshals in San Francisco, and will appear later this month in U.S. District Court for the Northern District of Texas in Dallas. May is the owner of Prosper Oil & Gas, Inc., aka Prosper Energy, Inc., located on North Saint Paul Street in Dallas.
According to the affidavit filed with the criminal complaint, in late December 2009, the U.S. Secret Service field office in Dallas received a call from investigators with Texas Capital Bank in Dallas, regarding May. On December 22, 2009, a Prosper Oil & Gas employee attempted to deposit a $100,000 check, bearing May's signature, into Prosper's corporate account. That check, however, was returned because it was issued from a closed account at T. Rowe Price. May issued a second check on the same closed T. Rowe Price account and it was also returned.
An investigator with the Texas Railroad Commission advised that Prosper Oil & Gas operates 28 oil wells on seven leases and two gas wells in San Angelo, Texas. The investigator sampled one lease in Ector County, Texas, and reported that out of nine wells subject to the lease, only seven were producing oil. According to the production report, Prosper Oil & Gas produced 263 barrels of oil in September 2009, the most recent reported month. At that rate (seven wells producing 263 barrels of oil in a 30-day period), each well only produced about one and one-quarter barrels of oil per day, making them very marginal producers, and according to the investigator, not producing enough oil to generate a profit.
The criminal complaint alleges that from April 25, 2008, through early March 2010, May, with the intent to defraud, ran a scheme to cause interstate wire transfers of money from a victim's bank/brokerage accounts to bank/brokerage accounts he controlled. At May's direction, this victim wired a total of $141,500 to May's accounts to purchase oil royalties. This victim received approximately $20,000 in royalty checks that were mailed to him sporadically after he called May and demanded them. May never told this investor that part or all of the payments the investor received came from funds collected from other investors, not from oil and gas revenues.
Some of the excuses May made for non-payment of royalties included: 1) the oil and gas companies who were paying royalties were doing so erratically; 2) the oil and gas companies were cutting staff; 3) Prosper relocated and the royalty payment must have been set aside in the shuffle; 4) May had changed secretaries and she had failed to send out the royalty payment; 5) May left others in charge and they failed to send out the royalty payment; and 6) May's daughter had become terminally ill in Boston (she is alive and well in Dallas).
May solicited individuals to invest in Prosper Oil & Gas through classified ads he placed in the Wall Street Journal and Barron's. Approximately 174 investors have been identified.
The Securities and Exchange Commission (SEC) opened a separate investigation into May and Prosper Oil and Gas, and in March 2001, and filed a civil complaint against them alleging that May and Prosper raised at least $6 million from at least 99 investors throughout the U.S. in fraudulent securities offerings, consisting of fractional, undivided royalty interests in oil and gas properties. U.S. District Judge Sam A. Lindsay ordered that Prosper Oil and Gas, and any assets of Alan May, be placed in receivership. The SEC identified six accounts that Prosper Oil & Gas used to receive investor funds, receive oil and gas revenues, and make payouts to Prosper's investors. Those accounts revealed approximately $6.7 million in total incoming investor funds; approximately $441,000 of total oil and gas revenue; and approximately $1.2 million of investor distributions.
The criminal complaint alleges that Prosper Oil & Gas paid out to investors three times more than the gas and oil revenue it received, using investor funds to make up the difference between royalty income it received and the investor distributions it made. In addition, substantial payments were made to May's family members, who do not work at Prosper Oil & Gas, and approximately $648,000 was paid to purchase automobiles and airplanes. The SEC complaint states that investor funds were also used to pay $400,000 in credit card payments; $430,000 for meals, entertainment and retail purchases; $324,000 in travel expenses; and $89,000 in cash withdrawals. In addition, during the scheme, May and Prosper Oil & Gas acquired multiple houses and condominiums in Dallas, each valued at approximately $1.5 million.
A federal complaint is a written statement of the essential facts of the offenses charged, and must be made under oath before a magistrate judge. A defendant is entitled to the presumption of innocence until proven guilty. The penalty, however, for a wire fraud conviction, is 20 years in prison and a $250,000 fine, per count. The U.S. Attorney's office has 30 days to present the matter to a grand jury for indictment.
This law enforcement action is part of President Barack Obama's Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The matter is being investigated by the U.S. Secret Service and the SEC. Assistant U.S. Attorney Stephen P. Fahey is in charge of the prosecution.