Phony Oil and Gas Leases Leave Victims Coming Up Dry

Phony Oil and Gas Leases Leave Victims Coming Up Dry

Selling phony oil and gas leases over the phone. Con-artists have been doing it for decades and it still works. Here is what you need to know to avoid being a scammer’s next victim.
Selling phony oil and gas leases over the phone. Con-artists have been doing it for decades and it still works. Here is what you need to know to avoid being a scammer’s next victim.

“They led us to believe it was going to be a real money maker," an anonymous victim said.

She doesn’t want to show her identity, because she is still embarrassed that the promise of huge returns attracted her to Michael Smith and his family’s company, Target Oil and Gas.

“My sister and I had this land… all wooded… we weren’t doing anything with it… and he approached us about leasing it and drilling the gas wells on it," the victim said.

If they agreed to let smith drill on their land, they would get a percentage of the profits.

The victim explained, “They showed us a very impressive brochure, they had geologists. He was a smooth talker and convinced people it would make money.”

Next, Smith sought investors and he got them. More than 350 people invested more than $15 million dollars. The problem? It was all a scam.

“The delays started. They needed a new compressor, this part hadn’t come in, that part didn’t come in, they needed a bigger pipe, you know one delay after another – one excuse after another," said the victim.

Chad Harlan, Financial Examiner told us, “They would put a hole in the ground… and walk away… they didn’t do what would be industry standard for producing a commercially productive well.”

Harlan, along with US postal inspectors began looking into Target Oil and Gas after receiving questions about the company. That’s when the scheme began to unravel.

“We started getting investor inquiries to check their license status and found they continued to do business without a license," explained Harlan.

Their investigation found the Smith family had set up multiple boiler rooms soliciting consumers over the phone to invest in the scam.

“While investors were sold on the idea of high returns, once we started looking at it, it turned out that all of the wells were dry. The truth of the matter in investing in oil and gas wells is it’s a very risky investment," Harlan said.

Some advice for consumers – always research a company before giving them your money.

“You should check to see if these companies are licensed to sell these types of products. You should contact to see if the company you’re dealing with has those licenses if they are registered. That would be a clue as to whether or not there is a problem, but also they may have investigations pending," Harlan warned.

Seven people were charged in this scam. Michael Smith, the president of Target Oil and Gas, was sentenced to two years in prison for mail fraud, wire fraud and conspiracy and ordered to pay restitution to the victims.

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