Allen, Texas, Man Admits Running A Multi-Million Dollar Oil And Gas Investment Fraud Scheme
DALLAS — Brian J. Polito of Allen, Texas, appeared yesterday before Chief U.S. District Judge Jorge A. Solis and pleaded guilty to an information charging one count of mail fraud stemming from his operation of an oil and gas investment fraud scheme, announced John Parker, Acting U.S. Attorney for the Northern District of Texas.
Polito faces a maximum statutory penalty of 20 years in federal prison and $250,000 fine, or twice any pecuniary gain to the defendant or loss to the victims. However, according to the plea agreement filed, if the Court accepts the plea, the maximum term of imprisonment is 96 months. Polito also agrees to the entry of a restitution order, forfeiture order, or both, as determined and imposed by the Court, of an amount equal to the victims’ losses (restitution) or the unlawful proceeds (forfeiture) from the scheme.
According to the factual resume filed in the case, Polito was the sole owner/operator of GC Resources, LLC, an oil and gas investment firm that was located on Preston Road in Dallas. Beginning in December 2011, Polito defrauded investors by selling interests in oil and gas projects in which GC Resources had no ownership or interest.
As part of the scheme, Polito researched “Company A” on the Texas Railroad Commission’s website and determined that Company A’s wells were producing. Polito then identified Company A’s drilling permits for wells that were going to be drilled in the future. Through GC Resources, Polito began soliciting investments into Company A’s projects even though GC Resources had no control or interest in the wells.
To convince investors to invest with GC Resources, Polito told investors that GC Resources owned the oil and gas drilling leases, when, in fact, it did not have any ownership or interest in the lease. Polito also misrepresented that GC Resources had an interest in Company A’s wells, when in reality, GC Resources had zero interest in Company A’s wells. Polito informed actual and potential investors that GC Resources had a contract with Company A, which was false. Polito even supplied investors with a document purporting to be a contract between Company A and GC Resources, but that document was fraudulent, as Polito had created it using Photoshop to forge signatures of Company A employees.
Polito paid investors of Company A projects with other fraudulently obtained funds in the manner of a Ponzi scheme.
Polito solicited investments by making cold calls to potential investors and sending prospective investors a packet of materials that included the forged Company Agreement and other documents. Polito deposited investors’ money in a GC Resources bank account to which he had sole control. Over the course of the scheme, Polito raised multiple millions from victim investors, all of which was used to fund a lavish lifestyle.
When investors asked to see the well site, Polito, or a salesperson working for him, would take investors to the actual well site, which was under the control of Company A, in an effort to further deceive investors and prolong his scheme. Polito even obtained production records from the Railroad Commission’s website for Company A wells and provided that information to investors, even though neither Polito or GC Resources had any interest whatsoever in Company A’s wells.
The government has engaged in significant efforts to secure assets for potential restitution to victims. Among other things, the government has recovered $664,000 from the liquidation of the net equity in the following vehicles: a 2014 Roll Royce Wraith, a 2015 McLaren 650S Coupe, a 2014 Lamborghini, a Aventador Anniversary Coupe, a 2015 BMW M4 Coupe, a 2014 Mercedes E63 Wagon, a 2014 Ferrari 458 Speciale, a 2014 Jeep Cherokee SRT8, and one bank account subject to the entry of restitution and/or forfeiture orders.
Last month, the Securities and Exchange Commission (SEC) also filed suit against Polito and GC Resources, LLC for defrauding investors through the sale of interests in oil and gas wells the company never owned.
The FBI investigated the case. Assistant U.S. Attorneys J. Nicholas Bunch and Melissa A. Childs are prosecuting.