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Howard Ain, Troubleshooter: Oil Pumping Scheme
CINCINNATI (Howard Ain) -- Could you ever imagine hundreds of investors would get scammed by con artists?
Well in this case the Kentucky con-men knew exactly how to outsmart their victim.
Gary Milby pitched his company, Mid-America Oil and Gas, to potential investors.
"We guarantee production. These wells that I'm offering you folks today are going to last longer than I m going to live."
Milby provided a detailed prospectus, as well as what seemed like a strong argument on why investors should trust him.
"How many of those wells have productive? All of them? You re batting 100%? That's great. Yes sir. That sounds phenomenal in the oil business."
The man asking Milby questions is Robert Buechner, a lawyer, who had invested in similar projects with other companies.
"He basically guaranteed the wells would be productive and investors would make money."
Buechner was intrigued and did his due diligence including visiting the the oil wells to see them first-hand. Buechner witnessed oil gushing out of the wells and was impressed.
"He would say, 'Oh my gosh this is going to be 60 barrels a day, this looks like a real winner, 90 barrels a day.'"
The truth: it was all a show.
"What we find is that they pumped that oil in and staged it for the investors to make an impression on them. Postal inspectors say the presentations and the demonstration at the oil wells were all part of a scam. It's another tactic they used to try and make people make a decision quickly and it plays on the investors emotions.
Gary Milby, along with attorney Brian Coffman, lured more than 260 victims into his scam. Total losses were more than $36 million.
"Brian Coffman was the wizard in the Wizard of Oz movie; you pull back the curtain he was the one always pulling the strings."
Inspectors found Kaufman was depositing investors funds into accounts he and his family controlled. The money bought condos and luxury items.
"He bought a yacht that was named For Your Eyes Only. This yacht was purchased with investors funds and valued at 1.5 million dollars."
The scam began to unravel when investors starting asking questions about their statements.
"The big problem was we were not getting the money we were promised."
Buechner says he did everything he could to research the investment. The problem was the con-artists in this case outsmarted the victims.
"This isn't a case of inadequate due diligence done, the due diligence was flawed, because you didn't get the right answers. I don't know how you get right answers, when you ask the right questions when people purposely give you the wrong answers."
Bryan Coffman and Gary Milby were both charged with 8 counts of mail fraud and 9 counts of wire fraud. Milby was sentenced to 20 years in prison and Brian Coffman received 25.