3 Guilty Pleas in $485 Million Ponzi Scam

DALLAS (CN) - Three Texas oil executives pleaded guilty in a $485 million oil and gas Ponzi scheme that swindled 7,700 investors nationwide.

Pleading guilty were Brendan W. Coughlin, 46; Henry D. Harrison, 47, both of Dallas; and W. Mark Miller, 59, of Plano, the U.S. Attorney's Office in Plano said.

The men pleaded guilty to their roles in the Provident Royalties scheme.

Coughlin and Harrison founded and controlled Dallas-based Provident and Miller was its CFO and president.

Coughlin and Harrison conspired with others to defraud investors of $2.3 million by failing to disclose that they used their money to pay earlier investors - a Ponzi scam.

Miller was aware of the crime but failed to notify authorities and authorized lulling payments to conceal the crime, prosecutors said in a statement.

Two other Provident executives also have pleaded guilty.

Joseph Blimline, 35, pleaded guilty in September 2010 and was sentenced to 20 years in federal prison.

Provident CEO and co-founder Paul R. Melbye, 47, pleaded guilty in November 2012 and faces up to 5 years in federal prison; he awaits sentencing.

"Melbye, acting on behalf of Provident, made materially false representations and failed to disclose material facts to investors in order to induce the investors into providing payments to Provident," prosecutors said at the time.

"Among those omissions of material fact were that another Provident founder, Joseph Blimline, had received millions of dollars in unsecured loans; that Blimline had been previously charged with securities fraud violations by the state of Michigan; and that funds from investors in later oil and gas projects were used to pay individuals who invested in earlier oil and gas projects."

The SEC sued Melbye, Couglin and Harrison in July 2009 and froze their accounts.

"Provident sold ostensibly safe securities such as preferred stock to thousands of investors," SEC spokesman Ken Israel said at the time. "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."

Coughlin and Harrison each face up to 5 years in federal prison. Miller faces up to 3 years.

Follow @davejourno

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