The SEC filed a suit against the CEO of US-based Powder River Petroleum International Inc., accusing him of participating in a US$43 million Ponzi scheme and other securities fraud.
Brian D. Fox’s creative accounting saw Powder River, an oil and gas producer, misstate its revenues by more than 2,400 percent, the SEC claimed.
Powder River operated out of an office in Tulsa, Okla., during the alleged scheme, according to the SEC. Using an Asian intermediary, the company sold investments in oil and gas interests in the U.S., the SEC says. Because Powder River promised investors repayment of their principal and guaranteed 9 percent annual returns, the investments were really loans, but Fox booked the money as revenue and made the same claim in SEC filings, the SEC says. When oil production revenues were no longer enough to cover promised payments to investors, Fox allegedly tapped new investments and used it to pay off old investors, according to the SEC. By early 2008, old investors were paid entirely with new investors’ money, the SEC claims. Because of the accounting fraud, the company overstated its revenues by up to 2,417 percent, its income by up to 465 percent and its assets by up to 48 percent, the SEC says.
Law360: SEC Sues Ex-Oil Co. CEO Over $43M Ponzi Scheme, 11 Apr 2011
P.13, PCAOB Auditor Report, 8 Apr 2011
Powder River: Annual Report 2006