Provident Royalties Ponzi
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From the SEC Press Release on the Provident Royalties Ponzi
On July 2, 2009, the Securities and Exchange Commission obtained a temporary restraining order and emergency asset freeze in a $485 million offering fraud and Ponzi scheme orchestrated by Paul R. Melbye, Brendan W. Coughlin and Henry D. Harrison through a company they owned and controlled, Provident Royalties LLC. In addition to the asset freeze, the court has appointed a receiver to preserve and marshal assets for the benefit of investors.
The Commission alleges that from at least June 2006 through January 2009, Provident made a series of fraudulent offerings of preferred stock and limited partnership interests for the purpose of generating promised returns through investments in oil and gas assets.
The complaint alleges the sales were made through 21 affiliated entities to more than 7,700 investors throughout the United States.
It is also alleged that Provident Asset Management, LLC, an affiliated broker-dealer, made some direct retail sales of securities, but primarily solicited unaffiliated retail broker-dealers to enter into placement agreements for each offering, and those retail broker-dealers sold the stock to retail investors nationwide.
According to the Commission's complaint filed in U.S. District Court for the Northern District of Texas, Provident falsely promised yearly returns of up to 18 percent and misrepresented to investors that 85 percent of the funds raised through the offerings would be used to purchase interests in oil and gas real estate, leases, mineral rights, and interests, exploration and development.
The Commission alleges that, in fact, less than 50 percent of investor funds were used for their stated purpose, and the proceeds from later offerings were used to pay expenses related to earlier offerings and returns to investors in those offerings.
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Hello,
I saw your post with regard to Provident Royalties and wanted to pass along the following on behalf of Zwerling, Schachter & Zwerling in New York.
Thanks,
Mark
New York Law Firm Zwerling, Schachter & Zwerling to
Pursue Securities Fraud Claims Against Provident Royalties
NEW YORK – The New York law firm of Zwerling, Schachter & Zwerling, LLP, has been retained by clients to pursue potential claims of securities fraud involving Dallas-based Provident Royalties, LLC.
On July 7, 2009, the U.S. Securities and Exchange Commission filed suit against Provident Royalties and its three principals alleging securities fraud. Paul "Russ" Melbye, Brendan Coughlin and Henry Harrison are accused of engaging in a classic Ponzi scheme involving the sale of approximately $485 million in oil- and gas-related securities to more than 7,000 investors between September 2006 and January 2009.
Provident Royalties allegedly promised annual returns of up to 18 percent from investments in oil and gas real estate, leases, and mineral rights through its broker-dealer, Provident Asset Management. The SEC also claims that Provident Royalties and its principals misled investors about what they were buying and how the funds would be used.
According to the SEC, the bulk of new investor money went to pay promised returns to earlier investors. Authorities claim Provident Royalties used less than half the new investor money to purchase new interests in oil and gas properties.
“The last few years saw an explosion of oil and natural gas investment, especially in places like the Barnett Shale in North Texas,” says Jeffrey Zwerling, a founding partner of Zwerling, Schachter & Zwerling. “Once the price of oil and natural gas plummeted last year, it appears that the bottom fell out of Provident Royalties.”
Mr. Zwerling and his firm represent investors who lost significant amounts of money in Provident Royalties’ investments. The firm will be investigating the actions of Provident Royalties, its principals and related companies, including Provident Asset Management, LLC., Provident Energy, LP, and Shale Royalties, Inc.
Zwerling, Schachter & Zwerling, LLP represents clients nationwide in financial-related class action lawsuits. With offices in New York City, Garden City, N.Y. and Seattle, the firm currently plays a leading role in numerous major securities and complex commercial litigations pending in federal and state courts. The firm has been recognized by courts throughout the country as highly experienced and skilled in complex litigation, particularly with respect to federal securities class-action litigation. To learn more, please visit the firm’s Web site at http://www.zsz.com.
For more information, please contact Mark Annick at 800-559-4534, 214-213-1754 or mark@androvett.com, or Shaye Fuchs at 1-800-721-3900 or SFuchs@zsz.com.
Posted by: Mark Annick | August 3, 2009 2:58 PM