April Fool’s Day
But Sales Scams No Joke – Dallas Fraud Lawyer
Most of my friends would like to make “easy money” or as I call it “passive income.” Who wouldn’t. Yet invariably when this topic arises investments in securities, including oil and gas comes come to the surface. Beware. For years I have represented investors from all over the U.S. in securities. Most times after I talk with these people and provide them with some information, they begin to refer to their investments as “scams.” Unfortunately, many times they are correct. From my continued representation and research, these “scams” are not being buried, but are growing.
The people who offer to sell you these investments are very good at what they do. For example, not long ago I met with a President of a bank in the Midwest after he invested $21,000,000.00, yes you read that right….in a scam. My point is: don’t beat yourself up. If he can be “scammed”, so can you.
Here the top 3 things I hear from my clients before the invest.
* I DIDN’T ASK FOR THIS. First you get the unsolicited phone call about an investment. You agree to have the caller mail you some information. In a day or so you receive a colorful brochure with lots of fancy graphs and apparently geological statistics. Wow! Doesn’t that look pretty? Get a shredder.
* IT CAN’T MISS! This may be the “Holy Grail” of the sales pitch. If it is represented that this is a, “guarantee”, “a can’t miss with minimal risks”, “even I invested in this program”, “we’ve hit on our last 8 wells”, or “Exxon is drilling in the adjacent field.” Hang up.
* ONLY A FEW OPPORTUNITIES ARE LEFT! Oh sure. I cannot state how many times my clients have shared with me that the salesman said words to the effect that, “we have only two positions left, and we wanted to offer you one of them.” Better yet, “one of my clients in Florida was going to invest $250,000.00, but he was just served with divorce papers, so he has to back out….do you want all or a part of his investment?” Tell him not to call you again.
Therefore, prior to investing in any security or an oil and gas project I suggest that you consider the following:
Some fraudulent oil and gas deals are with an [alleged] joint venture in one state and the offerings made to prospective investors in states other than the one state. Thus there is less chance of an investor dropping by a nonexistent (or nearly impenetrable) company offices. Such a structure makes it difficult for victims to identify and expose the fraud.
You can minimize the risk of being swindled if you resist pressures to make hurried, uninformed investment decisions. There are several steps you should take before parting with your money. State securities regulators have developed a checklist of five key areas to examine before investing.
Ask if the offering is filed with the office of the state securities commission in your state or with the Securities and Exchange Commission. If so, contact that agency for any information it may be able to provide. If the salesman asserts that the offering is exempt from registration requirements, ask him to send you the documents which confirm that assertion and give it to an attorney to review. Also, contact the state securities agency to confirm that the offering is indeed exempt. If the salesman claims that he is selling is not a security , discuss that claim with an attorney to confirm whether it really is a security being offered.
Contact your state securities agency to find out if the company or salesperson has been sanctioned for previous violations of securities laws.
Get as much information as you can about the company and its principals. For example, their backgrounds and experience in the oil and gas industry; the history of the company, its capitalization, assets and retained earnings; the number of wells drilled, and the number of wells completed as producing wells. Is the tax treatment of the investments, as claimed by the company, supported by the Internal Revenue Service? All the above information should be contained in a prospectus or “offering documents” that the company will send a potential investors before they commit their funds.
Get written confirmation that any money you invest will be kept in a separate escrow account until used and that they won’t be commingled with other funds. Also, be certain the funds will not be used for purposes other than those specified.
There are many other issues you should address prior to making any investment. However, the above should help you ferret out some of the scams operating around the country.
Invest safely, my friends.