Texas Man Found Guilty of Running Ponzi Scheme

HOUSTON (CN) - A federal jury found a man previously convicted of fraud in Texas, Florida and Louisiana guilty of running a $6 million oil and gas Ponzi scheme.

Richard Plato, 64, of Baytown, Texas faces up to 120 years in federal prison after the jury convicted him of one count of conspiracy to commit mail fraud and five counts of mail fraud, the U.S. Attorney's Office said in a statement.

Plato ran the scheme through his Baytown company Momentum Production Corp. by selling promissory notes he claimed were secured by South Texas oil and gas interests, prosecutors said.

When Plato sold the notes he was on supervised release and owed almost $30 million in restitution, according to evidence introduced during his trial.

"Following his release from federal prison in 2002, Plato began acquiring various oil and gas interests in South Texas," prosecutors said in the statement.

"Sometime thereafter, Plato formed Momentum and began directly and indirectly soliciting vulnerable persons throughout the United States to purchase promissory notes.

"Several of those investors testified at trial and described how they were assured of the investment's safety, promised a high rate of return and told that the notes were secured by the oil and gas interests in South Texas.

"Although the notes were advertised as securities, they were never registered with any federal or state agency. Between June 2005 and December 2006, Plato sold more than $6 million worth of notes."

Plato never told the investors about his previous convictions, and represented that "the oil and gas collateral was owned 'free and clear' of any claims, liens or other encumbrances and that, in the event of default in a particular fund, Momentum would substitute collateral from other funds to ensure payment. This was never done," prosecutors said.

Plato kept the scheme afloat for four years, prosecutors said, by making periodic payments on the notes with money from new investors and income from his oil and gas interests.

"In 2006, however, those interests evidently stopped generating their projected income. At the same time, Plato and his associates were spending millions of dollars that should have been paid to investors. Momentum soon began defaulting on the notes," prosecutors said.

"The money trail shows that, in total, Plato received approximately $6.2 million from investors. Of this amount, approximately $2 million was diverted to Plato's benefit."

In addition to the prison time Plato faces a maximum $250,000 on each of the six charges.

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