Aug. 24, 2006                                                         Contact:Lucas Hamilton

MORRISON HALTS UNREGISTERED ACTIVITY OF TEXAS-BASED MDM ENERGY Texas Oil and Gas Promoters Charged With Securities Law Violation

      Montana State Auditor John Morrison ordered the shut-down of an alleged oil and gas scam circulating in the state. This week Morrison issued a Cease and Desist and Notice of Proposed Agency Disciplinary Action against Texas corporation MDM Energy and its principals Sam Furo and Michael Rafael alleging that they have violated the anti-fraud, registration, and licensing provisions of the Montana Securities Act in connection with their marketing and promotion of interests in oil and gas joint ventures.
      “High oil prices have increased consumer interest in energy-related investments,” Morrison said. “Whenever there is a situation that creates a legitimate opportunity for money-making, con artists follow in the shadows to take advantage of the situation."
      An investigation by the State Auditor’s Office confirmed that Furo and Rafael solicited Montana investors for an oil and gas venture by offering units representing a fractional working interest of 5% in three oil wells to be drilled in Crawford County, Illinois. MDM was attempting to sell 20 units at a price of $24,000 per unit for the drilling and testing of three wells plus $13,500 per unit for “completion costs”. MDM was attempting to raise a total of $750,000. In turn, investors were promised 75% of the net revenue from the wells, which represents a 3.75% net revenue interest in the project.
      Morrison’s order alleges that the investment opportunity offered by MDM was never registered with the Securities Department in any capacity. The order also alleges that Montana promoters Sam Furo and Michael Rafael offered securities to participants without specific authority.
      In addition to violating Montana securities laws by offering unregistered securities, the Auditor’s Office alleges that MDM, Furo and Rafael violated Montana law by misrepresenting material facts or making misleading statements relevant to the securities being offered. Rafael represented that he was a past president of the Kentucky Independent Petroleum Producers Association without disclosing that the organization had been defunct for over a decade. The promoters also failed to disclose that MDM’s bond had been forfeited and no other permits would be issued to MDM or Rafael in Kentucky for their violation of Kentucky laws. In addition, it was never disclosed to Montana investors that MDM and Rafael are permanently banned from doing business in the state of Arkansas due to similar securities violations.
      “Anyone solicited to invest in oil or gas or any other so-called investment offers should call the Securities Department of the Montana State Auditor’s Office to ensure that the offering is registered and that the salesperson is licensed,” said Morrison. “Scam artists usually tell prospective victims that they are licensed and their investment is registered — and they can be quite convincing. But unless you can afford to lose your money, don’t take them at their word; find out for sure.”
      Montanans who may have been solicited by or may have information concerning Texas-based MDM Energy or its principals Sam Furo and Michael Rafael are asked to immediately notify the State Auditor’s Office by calling toll-free at 1-800-332-6148 or in Helena at 444-2040.