An Oilman Entices, and Investors Cry Foul
LIKE so many of the over-the-top birthday parties that typically appear on “My Super Sweet 16” on MTV, Ariel’s celebration took the fairy-tale-princess theme to new heights.
Horse-drawn carriages delivered teenage guests to a faux-castle tent where they were met with dancing jesters and disco lights. The birthday girl, wearing a white dress and tiara, flew in via helicopter. And the evening ended with fireworks and the arrival of Ariel’s gift from her father: a brand new BMW 325i.
As viewers learned, Ariel’s dad was a successful oilman. “I love oil. Oil means shoes and cars and purses,” Ariel exclaimed to the camera as she and her father stomped around oil drilling sites in the muddy hills near her home in Campbellsville, Ky. When her father pointed to one of the sites and told viewers that it produced 120 barrels a day, Ariel asked, “How many Louis Vuittons is that?” Her father’s answer was “a bunch.”
The show typically attracts younger viewers, but this particular episode, shown in February 2007, caught the attention of an entirely different demographic: government regulators.
Ariel’s father was Gary M. Milby, a man regulators now say was bilking hundreds of investors across the country out of millions of dollars by offering fraudulent investments in nearly 30 oil and gas limited partnerships with names like “Black Gold Oil No. 6” and “Fort Knox Oil No. 8.”
Last fall, the Securities and Exchange Commission filed a complaint accusing Mr. Milby of raising more than $19 million from 375 investors over about a year and a half, starting in February 2005. At least $12 million was diverted into offshore accounts and family trusts and millions of dollars was spent on Mr. Milby’s lavish lifestyle, the S.E.C. said in its complaint. Mr. Milby denied all of the accusations against him.
“That MTV show really put Milby on the road map,” said Frank Panepinto, a fraud investigator with the Louisiana Office of Financial Institutions. “That really got people aggravated with him.”
These days, with oil prices topping $100 a barrel, investors are scrambling for a piece of the latest gusher, and schemers and con artists seem to be eager to help them out. An association of state securities regulators said there were 260 open investigations into oil and gas scams across the country in early 2007. Updated figures are not available, but regulators say complaints continue to pour in.
“I bet you right now that I have over 20 oil and gas cases that I’m looking at involving unregistered securities and unlicensed people selling this stuff,” said the Colorado securities commissioner, Fred J. Joseph. “A year or two ago, I doubt that I had five cases.”
As suspect energy investments go, Mr. Milby’s offerings are pretty standard. Through private placement offerings, he sold units in limited liability partnerships managed by two companies he owned, Mid-America Energy and Mid-America Oil and Gas, that would use the money for shallow drilling mostly in Kentucky. Investors were told that they would receive monthly checks for as much as $4,800 for 30 to 50 years, according to the S.E.C., which said Mr. Milby bragged to some investors that “no one who has invested with me has ever lost money.”
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