eight more defendants indicted in $7.2 million securities fraud conspiracy
scheme targeted thousands of investors nationwide
KANSAS CITY, Mo. – Beth Phillips, United States Attorney for the Western District of Missouri, announced that eight more defendants were indicted by a federal grand jury today for their roles in a $7.2 million securities fraud conspiracy that victimized thousands of investors across the United States and Canada who bought shares in Petro America Corporation, which was purported to be a profitable company with $284 billion in assets.
Martin Roper, 45, of Kansas City, Kan., Charles Hooker, 49, and Teresa Hill, 54, both of Kansas City, Mo., William Miller, 40, of Independence, Mo., Curtis White, 55, of Grandview, Mo., Allen Collins, 54, of Raymore, Mo., Russell Hopkins, 47, of Tuscaloosa, Ala., and Brian Langenbach, 42, of Globe, Ariz., were charged in a 20-count superseding indictment. Today’s indictment replaces a Nov. 22, 2010, federal indictment which charged four defendants – Isreal Owen Hawkins, 55, of Kansas City, Kan., Teresa Brown, 53 of Bandera, Texas, Johnny Heurung, 57, of Saint Paul, Minn., and Clarence Moore, 63, of Atlanta, Ga. – and includes additional charges against the new defendants.
Today’s superseding indictment alleges that, since Sept. 1, 2008, all 12 of the defendants participated in a conspiracy to commit securities fraud and wire fraud. They allegedly promoted Petro America and sold shares to investors, despite cease and desist orders from both Missouri and Kansas, although none of them had ever been licensed to sell securities. Moore did accounting work, including tax preparation, for Petro America.
In an attempt to enable Petro to continue selling its stock after the Missouri cease and desist order was issued on Nov. 12, 2008, and to enable the conspirators to continue to profit, Hawkins allegedly gifted billions of shares to Brown, Collins, Hill, Hooker, Hopkins, Langenbach, Miller, Roper, White and others. These secondary sellers agreed to sell the stock, the indictment says, and they often returned some of the proceeds as kick-back payments to Hawkins and others. According to the indictment, the secondary sellers often represented that they were merely investors selling their own shares; in most cases, they did not disclose that cease and desist orders had been issued, nor did they disclose that most or all of the shares had been gifted to them. Almost no investor proceeds were being reinvested by Petro, the indictment says; instead, conspirators allegedly were spending investor proceeds on personal expenditures.
The defendants used religious language in their pitches and often recruited through churches, the indictment says. Hawkins allegedly cultivated relationships with numerous ministers, whom he dubbed the Ministers Alliance. He gave them white fedora hats and millions of Petro shares, which he encouraged them to sell secretly, according to the indictment, accepting kick-backs from the proceeds.
According to court filings, more than 12,000 victims have invested in excess of $7.2 million in Petro America.
Roper, a member of the Ministers Alliance, has been involved with Petro since at least 2008. Hawkins allegedly gifted Roper a large amount of shares. According to the indictment, other persons sold shares for Roper, who was named in the Missouri cease and desist order, and split the proceeds with him; he also continued to sell shares himself. Roper allegedly spent $111,296 from his bank account and gave some of the proceeds to Hawkins. In April 2007, the indictment says, Roper bought a Hummer H2 for $20,970 and put on a vanity license plate “PETRO2.”
Hooker became a director of Petro America Corp. in April 2007 and frequently spoke at the early shareholders meetings. He was part of the Ministers Alliance. Hawkins allegedly gifted Hooker 80 million shares of Petro stock, which Hooker sold to at least 12 investors between September 2008 and November 2010; the indictment alleges that others also sold shares for Hooker. Hooker allegedly received at least $25,000 in proceeds from those sales.
Hill allegedly sold Petro stock from at least September 2008 to November 2010 to at least 25 investors. According to the indictment, Hawkins gave Hill 80 million shares of Petro stock. Hill received as much as $52,000 in proceeds from the sale of Petro stock, the indictment says. She allegedly attended and helped to run the weekly shareholder meetings, where her role was to take information and investment cash for Hawkins. Hill also helped to keep track of shares sold by her boyfriend, Hooker. When Hill stopped paying her mortgage payments and allowed her house to go into foreclosure, the indictment says, Hooker bought the property (where he had also been living) on the courthouse steps with proceeds from Petro investors.
Miller allegedly sold Petro stock to at least 43 investors from Aug. 18, 2009, to Nov. 8, 2010, receiving at least $104,375 in proceeds. Miller allegedly accepted 50 million shares from Hawkins for bringing his multi-level marketing contacts to Petro.
White allegedly sold Petro stock to more than 130 investors from April 1 to Nov. 5, 2010, receiving at least $39,750 in proceeds. He was part of the Ministers Alliance. In August 2010, the indictment says, White bought a 2000 Mercedes S430 with those proceeds.
Collins, a member of the Ministers Alliance, allegedly sold Petro stock from Sept. 8, 2009, to Oct. 20, 2010, to at least 56 investors. Hawkins gave Collins 100 million Petro shares, the indictment says, and Collins made at least $97,225 from the sale of Petro stock.
Hopkins allegedly sold Petro stock to at least 61 investors from July 3, 2009, to Oct. 26, 2010, receiving at least $673,465 in proceeds.
Langenbach allegedly sold Petro stock to at least 131 investors from Aug 20, 2009, to March 15, 2010, receiving at least $691,406 in proceeds. He obtained Petro shares from Brown, the indictment says, and he wired her a percentage of his proceeds. He had no regular employment during this time, according to the indictment, and he has not filed a federal tax return since 2003. He allegedly deposited $741,873 into a bank account, from which he paid Brown $105,117.
Alleged False Claims
The federal indictment alleges that the sale of Petro America stock was accomplished by making innumerable false misrepresentations and omissions to investors. For example, the indictment says, defendants falsely claimed that Petro America was worth $284 billion and Petro America stock was worth $24 per share in order to induce people to invest. There was no basis for those numbers, the indictment says.
Hawkins allegedly approved a series of press releases that were materially misleading and failed to disclose material facts related to investing in Petro America.
Heurung and Brown allegedly sent e-mails to investors in June 2009, falsely claiming that Petro America had gone public and its stockholders had become millionaires. In reality, the indictment says, Petro America had not been publicly listed on any exchange, nor had it merged with any company that was publicly traded.
The indictment alleges that defendants fraudulently attempted to create the appearance that Petro America had tangible assets. This was allegedly done by swapping stocks for speculative, unvested, future interests in mining claims (which they called mines), non-producing oil fields, and other so-called assets, in order to falsely claim that Petro presently had tangible assets.
Alleged Personal Expenditures
From September 2008 through April 2010, Hawkins received nearly $2 million from Petro investors into accounts he controlled. Hawkins allegedly made large withdrawals of investor proceeds for personal expenses whenever he wished. Very little of these funds were reinvested into the company, the indictment says. Instead, Hawkins allegedly used investor money to purchase such items as a Chrysler 300, a Hummer H3, a 2004 Mercedes S430, 19 designer suits totaling $10,303 that were purchased on eBay and a $5,700 fur coat. In October 2009, Hawkins attempted to purchase a lakefront house in Kansas City, Kan. The purchase fell through, but Hawkins continued to make monthly rental payments of $3,025, which totaled at least $42,815. In addition, Hawkins paid himself a salary of $595,000 and had a contract that provided a guaranteed bonus of $175,000, a company car and a dining card.
From June 2009 through April 2010, Brown allegedly spent at least $542,197 of Petro America investor proceeds on personal expenditures, including a boat, an SUV, travel to Switzerland, Cape Cod, Europe, Panama and elsewhere, several expensive handbags, designer luggage, home design items, more than $81,000 worth of jewelry and the mortgage on a timeshare in Virginia Beach.
In addition to the criminal conspiracy, Hawkins is charged with one count of money laundering, two counts of wire fraud and one count of structuring financial transactions in order to evade federal reporting requirements. Hawkins and Brown are charged together in one count of securities fraud. Brown is also charged with six counts of wire fraud. Heurung is also charged with two counts of wire fraud.
Hooker and Hill are also charged together in one count of money laundering. Hill is also charged with two counts of wire fraud. Miller is also charged with one count of wire fraud and one count of money laundering. Collins is also charged with one count of mail fraud.
Today’s indictment also contains a forfeiture allegation, which would require all of the defendants to forfeit to the government any property derived from the proceeds of the alleged offenses, including money seized from various bank accounts, several vehicles, jewelry and a 13-piece set of Louis Vuitton luggage.
Web Site Support For Fraud Victims
Two Web sites have been established to collect information from the victims of the alleged securities fraud scheme and to provide updated information about the status of the case. Investors of Petro America are encouraged to provide information via an online form at www.postalinspectorsurvey.com/PetroAmerica. Due to the volume of expected responses, this process has been automated and placed online; all communication from potential victims regarding the case should be made via this Web site. Updates about the status of the case will be posted at www.justice.gov/usao/mow/divisions/petro.html
Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
This case is being prosecuted by Assistant U.S. Attorney Daniel M. Nelson. It was investigated by IRS-Criminal Investigation, the U.S. Postal Inspection Service and the Office of the Missouri Securities Commissioner.