Oil & Gas Investment Fraud

The Oil & Gas fraud lawyers at Furgison Law Group are investigating claims agains brokerage firms that sold oil & gas stocks, high-yield bonds, Master Limited Partnerships (MLP), mutual funds and other related products. Investments in the oil and gas sector recently have suffered large losses after oil prices collapsed. Unfortunately, the investments, while providing generous yields, masked the substantial high risks of these investments.

Many stockbrokers encouraged investors, including many seniors, to invest in energy stocks, bonds, MLP’s and mutual funds as an allegedly conservative way to enjoy income and growth. Some brokers over-concentrated investors’ accounts in these investments and others may have failed to disclose the risks associated with these investments. Many of these investments were pitched to elderly and conservative investors because of the relatively high dividends and yields that the investments paid out. These losses are potentially recoverable through either FINRA arbitration claims against the brokerage firms that recommended the investments or lawsuits against the promoters of the investments.

State securities regulators around the country have been warning investors to beware of these oil and gas investment scams. High oil prices have created a heightened interest in investments in energy-related business ventures.

What are Oil and Gas investments?

Oil and gas investments take many forms, including limited partnership interests, ownership of fractional undivided interests in leases, and general partnerships. Tax consequences and investor liability vary according to the type of program. True general partnerships in which investors actively participate in the operations of the venture are not securities. A general partner, however, is personally liable for partnership debts.

In a drilling limited partnership, an oil or gas company sells partnership units to investors and uses the money it raises to lease property and drill wells. In return for managing the project, the sponsor company usually takes an upfront fee that averages about 15-16% of one’s investment (commonly referred to as tangible and intangible drilling costs) and also shares in a percentage of any revenue generated. In return, the promoter offers the investor the prospect of a substantial first year tax write-off and quarterly cash distributions from the sale of any oil and gas the partnership finds until the wells run dry.

Drilling partnerships have always been a gamble, but recently, they have proven somewhat riskier than usual. This type of investment is very speculative, is a highly illiquid investment and can have a long holding period.

Fraudulent sales techniques

Fraudulent oil and gas deals are frequently structured with the limited partnership (or other legal entity) in one state, the operation and physical presence of the field in a second state, and the offerings made to prospective investors in states other than the initial two states. Thus there is less chance of an investor dropping by a well site or a nonexistent company headquarters. Such a structure also makes it difficult for law enforcement officials and victims to identify and expose the fraud.

State securities regulators caution potential investors to beware of the following claims in a typical high-pressure sales pitch, whether through unsolicited telephone calls or e-mail messages:

  • You will have an interest in a well that cannot miss;
  • The risks are minimal;
  • A geologist has given the salesperson a tip;
  • The salesperson has personally invested in the venture;
  • The promoter has “hit” on every well drilled so far;
  • There has been a tremendous “discovery” in an adjacent field;
  • A large, reputable oil company is operating or planning to operate in the area;
  • Only a few interests remain to be sold and you should immediately send in your money in order to assure the purchase of an interest;
  • This is a special private deal open only to a lucky chosen few investors.

Specific Oil & Gas Investments under investigation:

  • Enterprise Products Partners LP (EPD)
  • Energy Transfer Partners LP (ETP)
  • Magellan Midstream Partners LP (MMP)
  • Plains All American Pipeline LP (PAA)
  • MarkWest Energy Partners LP (MWE)
  • Williams Partners LP (WPZ)
  • Buckeye Partners LP (BPL)
  • Enbridge Energy Partners (EEP)
  • Sunocologistics Partners (SXL)ONEOK Partners LP (OKS)

Investors Have the Right to Recover Their Losses

Because the Oil & Gas investment were sold by brokerage firms licensed by FINRA, they are subject to the laws that FINRA enforces. The brokerage firms are responsible for ensuring that their brokers are trading fairly, ethically and in the best interest of their clients. Ideally, they would accomplish this through careful supervision. Unfortunately, too often this supervision has been inadequate to fully protect investors. If you purchased any Oil & Gas investments through a representative of a registered brokerage firm and suffered loses through negligence or fraud, it immediately puts the brokerage firm at fault for failing to supervise their broker. FINRA law then dictates that you can hold the firm legally liable to recover your damages.

Can I recover my Oil & Gas investment losses?

Our law firm represents institutional and individual investors nationwide who have lost a substantial portion of their retirement savings or other assets. We represent securities investors in their disputes with their investment advisers or brokerage firms, related to losses caused by investments all types of Oil & Gas investments. Our securities arbitration attorneys have successfully represented hundreds of investors in broker dispute cases against large and small investment firms. We also have extensive experience working on the opposite side, defending the brokerage firms and financial advisers. We now use our knowledge of how the other side operates to get the best possible results for our clients.

Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by fraud, misrepresentation, omissions of material facts, breach of fiduciary duty, conflicts of interest, self-dealing, unauthorized trades, selling away, unsuitability, over-concentration,  or other wrongful acts, whether intentional or negligent. Whether in state or federal court, or in arbitration proceedings in FINRA or the American Arbitration Association ("AAA"), Furgison Law Group helps investors recover their investment losses.

Don't let the brokerage firms get away with loosing your hard earned money. Contact us today for a Free Case Evaluation. We will tell you if you have a case worth pursuing.

Additional Resources:

Financial Industry Regulatory Authority

Financial Industry Regulatory Authority

 Securities and Exchange Commission

 Securities and Exchange Commission