PLANO, Texas (CN) – Two Dallas men were charged in a $485 million Ponzi scheme that ripped off more than 7,700 oil and gas investors, federal prosecutors said.
Brendan Coughlin, 46, and Henry Harrison, 47, were each charged with conspiracy to commit mail fraud and ten counts of mail fraud.
They each face up to 20 years in prison.
Prosecutors said both men worked for Dallas-based Provident Royalties LLC and failed to disclose to investors that a company founder, Joseph Blimline, 36, had been charged with securities fraud in Michigan.
They also are accused of failing to disclose that old investors were being paid off with new money – the classic mark of a Ponzi scheme.
Blimline was sentencedin May to 20 years in federal prison for two counts of conspiracy.
At Blimline’s sentencing hearing, prosecutors said he and others ran the scheme in Michigan from November 2003 to December 2005, promising inflated rates of return.
“Lacking any legitimate source of income with which to make payouts to the investors, Blimline directed that later investor payments be used to pay previous investors and diverted investor payments for his own personal benefit,” prosecutors said at the time. “The Michigan scheme netted over $28 million from its investor victims before its collapse.”
Blimline moved the scheme to Texas in 2006, and he and his new co-conspirators began operating Provident Royalties. As in Michigan, Blimline lied to investors, prosecutors said.
“Blimline received millions of dollars in unsecured loans from investor funds and also directed the purchase by Provident of worthless assets from his Michigan enterprise,” prosecutors said.