Securities Lawyer Blog | Victim of Fraud?

TAG | oil and natural gas private placements of Provident Royalties

May/12

7

Blimline sentenced in Oil and Gas Ponzi Scheme

It was announced today that a federal judge sentenced a 36-year-old Dallas man, Joseph Blimline, in connection with his role in a pair of complex, lucrative oil and gas Ponzi schemes that operated in Michigan and Texas, U.S. Attorney for the Eastern District of Texas John M. Bales announced.

Joseph Blimline was sentenced to 240 months in federal prison on each of the charges related to the Ponzi schemes on May 3, 2012, before U.S. District Judge Marcia A. Crone,who ordered the sentences to run concurrently and that restitution be made to the victims of the schemes.

At the sentencing hearing, the government presented testimony and evidence which established that Blimline and others began operating a Ponzi scheme in Michigan between November 2003 and December 2005. Blimline ordered that later investor payments be used to pay previous investors and diverted investor payments for his own personal benefit–thus creating a ‘Ponzi Scheme.’ The Michigan scheme netted over $28 million before its collapse.

According to the FBI website article, Blimline exported the Michigan Ponzi scheme to Texas, in 2006, where he and his new co-conspirators began the operation of Provident Royalties in Dallas. Blimline made  false representations and failed to disclose material facts to their investors in order to persuade the investors into providing payments to Provident. 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. In the Provident scheme, funds from later investors were also consistently used to make payments to early investors, resulting in the collapse of the scheme in 2009. The Provident scheme netted over $400 million from approximately 7,700 investor victims.

“The Michigan agents worked hand in hand with the agents in Texas and with federal and state securities regulators to untangle both of these complicated Ponzi schemes and bring the perpetrators to justice for their abuse of the trust of others to obtain criminal profits,” said U.S. Attorney Bales. “To all potential investors, I urge you to be wary of investment vehicles that promise exorbitant rates of return. Remember: If the opportunity appears too good to be true, then it probably is.”

U.S. Attorney for the Western District of Michigan Donald A. Davis praised the diligent work and cooperation of all involved and said, “Stealing money through fraud and deceit will not be tolerated.”

FBI Detroit Division Special Agent in Charge Andrew G. Arena said, “This sentencing comes as a result of the hard work performed by agents committed to stopping this type of fraud. Those who choose to steal money through the operation of these schemes will be arrested and brought to justice.”

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website at: www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

· · · · · · · · · · · · · · · · · · · · · · ·

In a November 28, 2011 article for InvestmentNews.com, Bruce Kelly writes that Next Financial Group, Inc. has agreed to pay $2 million in restitution to clients who bought oil and natural gas private placements of Provident Royalties LLC, which the Securities and Exchange Commission in 2009 accused of fraud.

In a Financial Industry Regulatory Authority Inc. letter of acceptance, waiver and consent, Next Financial sold $20 million of three separate Provident private placements from July 2008 to January 2009. Over that time, the firm’s due diligence was lacking, according to the Finra.

“Despite the fact that Next received a specific fee related to the due diligence that was purportedly performed in connection with each offering, beyond reviewing the private-placement memorandum for the offerings, [Steven Nelson, vice president of investment products and services] did not perform adequate due diligence on the [Provident] offerings,” according to the AWC, which was finalized last month.

Next Financial reported $136.1 million in gross revenue last year and has 866 affiliated reps and advisers, writes Kelly.

Next Financial and Mr. Nelson’s due diligence on Provident fell short in several areas, according to Finra. Mr. Nelson “did not travel to Provident’s headquarters in Texas to conduct due diligence on three separate offerings,” according to the AWC. He also “did not see any financial information regarding Provident Royalties, other than the information contained in the private-placement memorandum. Further, once [Mr.] Nelson had concluded that Next could sell [the three offerings], he did not conduct adequate continuing due diligence.”

The InvestmentNews.com article adds that outside due-diligence reports highlighted a number of red flags of the Provident offerings, and Mr. Nelson “should have scrutinized each of the [Provident] offerings, given the purported high rate of returns,” according to the AWC.

Next Fincancial’s $2 million in restitution to investors is part of a larger case brought by the receiver for Provident in federal court in Dallas. While at least 20 broker-dealers that sold Provident private placements have shut down or declared bankruptcy, others, now including Next Financial, have had the funds to pay the claims and remain open for business. About 50 broker-dealers in total sold Provident, which raised $485 million from 7,700 investors from 2006 to 2009.

Finra censured and fined Next $50,000, and fined Mr. Nelson $10,000 and suspended him as a principal for six months. Next Financial also failed to supervise adequately a registered rep’s sale of fraudulent life settlement products from 2007 to 2009, according to the AWC. The rep, who was not identified, sold $3.5 million in life settlement contracts to 35 clients.

Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have experienced losses with Next Financial Group, Inc., call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·

Theme Design by devolux.nh2.me