MORRISON WARNS AGAINST SLIPPERY OIL DEALS
Oil Patch Scams Remain Favored Ploy to Fleece Investors
Although oil prices have fallen since reaching an all-time high this summer, fraudulent oil and gas deals remain a favorite ploy of con artists nationwide, according to State Auditor John Morrison, Montana’s Securities Commissioner.
“Securities investments offering profit participation in oil and gas ventures can be legitimate for those who understand and can afford the risk,” said Morrison. “But too often we are seeing doubtful and even outright fraudulent energy deals aggressively promoted to the public.”
Skyrocketing prices of oil and natural gas in recent years have made a variety of traditional and alternative energy projects attractive to investors, Morrison said. Most of these investments are highly risky and not appropriate for smaller investors. And even where the underlying project is legitimate, any revenues realized can be absorbed by high sales commissions paid to the promoter and dubious ‘expenses’ skimmed off by the managing partner.
Businesses raising money by soliciting investors must comply with Montana’s securities laws. Scam artists tend to target individual victims and make an unsolicited contact, usually with a phone call, offering a “great” business opportunity.
The State Auditor’s Office, along with its membership organization, the North American Securities Administrators Association (NASAA), has issued an alert to investors who may be considering oil and gas opportunities.
Because these investments scams tend to be interstate in nature, NASAA has coordinated a group of representatives from state securities agencies to share information on oil and gas investment schemes. Over the past two years, state securities regulators have opened more than 260 cases involving oil and gas-related schemes and have issued 122 cease and desist orders against promoters.
Morrison said most oil and gas fraud victims don’t realize they have been swindled until after the money is gone. “As in any investment, we ask that investors investigate before they invest and call our office,” Morrison said. “An investor should do three things before buying into any limited partnership in energy or any other industry. You need to independently research the background of the promoters, get a clear explanation of the deal in writing, and carefully read all the fine print before investing.”
Morrison noted that 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,” Morrison said.
The State Auditor’s Office can tell you whether an individual and his or her company are licensed to sell securities in Montana and whether they have a history of disciplinary action, Morrison said. The State Auditor’s office can be contacted by calling (800) 332-6148 or through its website at www.sao.mt.gov.