TEXAS MAN SENTENCED IN HALF-BILLION DOLLAR PONZI SCHEME
GRAND RAPIDS, MICHIGAN – Joseph Stanley Blimline, 36, of Dallas, Texas, was sentenced to two concurrent 20-year terms of imprisonment for a pair of complex oil and gas Ponzi schemes he operated in Michigan and Texas, announced U.S. Attorney Donald A. Davis. The sentence was imposed as the result of the defendant’s guilty pleas to mail fraud in both venues. In addition to the prison sentence, U.S. District Judge Marcia A. Crone of the Eastern District of Texas ordered Blimline to pay restitution to his victims.
At the sentencing hearing, the government presented testimony and evidence which established that between 2003 and 2005, Blimline operated a Ponzi scheme with the help of Williamston, Michigan residents Eric and Jay Merkle, both already serving 10-year sentences. Blimline promised inflated rates of return on supposed oil and gas drilling operations, but did not reveal that they lacked any legitimate source of income with which to make payouts to investors. Blimline directed that later investor payments be used to pay previous investors, and diverted investor payments for his own personal benefit.
As the Michigan Ponzi scheme was falling apart, Blimline exported it to Texas. In early 2006, Blimline and new co-conspirators began the operation of “Provident Royalties” in Dallas. Once again, Blimline made materially false representations and failed to disclose material facts to investors to induce them to make payments to Provident. Blimline received millions of dollars in unsecured loans from investor funds, and also directed Provident to purchase worthless assets from the Michigan fraud scheme. As in Michigan, the Provident used funds from later investors to make payments to early investors, resulting in the collapse of the scheme in 2009. The scheme netted over $400 million from approximately 7,700 investor victims.
U.S. Attorney Donald A. Davis praised the diligent work and cooperation of all involved and stated, “Stealing money through fraud and deceit will not be tolerated.” Eastern District of Texas U.S. Attorney John M. Bales commended the efforts of federal agents and regulators in investigating the complex schemes and cautioned potential investors, “The Michigan agents worked hand in hand with the agents in Texas and with federal and state securities regulators to untangle both of these complicated Ponzi schemes and bring the perpetrators to justice for their abuse of the trust of others to obtain criminal profits. To all potential investors, I urge you to be wary of investment vehicles that promise exorbitant rates of return. Remember: If the opportunity appears too good to be true, then it probably is.”
Andrew G. Arena, Special Agent in Charge, FBI Detroit Division, echoed these sentiments, “This sentencing comes as a result of the hard work performed by agents committed to stopping this type of fraud. Those who choose to steal money through the operation of these schemes will be arrested and brought to justice.”
U.S. Postal Inspector-in-Charge E. C. Woodson also highlighted the cooperative efforts of law enforcement, “The Michigan case is the result of the cooperation between the U.S. Postal Inspection Service, the U.S. Attorney’s Office, and the FBI in protecting the American public. Together we investigated and brought to justice those individuals who attempted to victimize the public. Know that we will continue to supply the resources necessary to investigate arrest and prosecute anyone who would utilize the mail to perpetuate a fraud against the American people.”
The Michigan case was investigated by the FBI and the U.S. Postal Inspection Service, and was prosecuted by Assistant U.S. Attorney Nils Kessler. The Texas case was investigated by the FBI and prosecuted by Assistant U.S. Attorney Shamoil T. Shipchandler.