KC-Area Brothers Plead Guilty to $4 Million Investment Fraud Scheme
KANSAS CITY, Mo. – Two Kansas City-area brothers have pleaded guilty in federal court this week to their roles in a multi-million dollar investment fraud scheme.
Phillip Hudnall, 49, of Lenexa, Kansas, waived his right to a grand jury and pleaded guilty today before U.S. District Judge Roseann Ketchmark to a federal information that charges him with conspiracy to commit money laundering. His brother, Brian Hudnall, 43, of Kansas City, Missouri, pleaded guilty on Wednesday, June 17, to the same charge in a separate but related case.
Phillip Hudnall was one of the owners of BirdDog Business Group, LLC. Brian Hudnall owned and operated a business called DonDon LLC.
Phillip Hudnall and his co-conspirators proposed an opportunity to high net worth individuals to invest in the purchase, refurbishing, and sale of used oil equipment. Phillip Hudnall informed investors that their principal would be returned within nine months along with 20 to 30 percent interest.
Phillip Hudnall informed the investors that BirdDog had completed two successful transactions – a $244,000 loan and a $490,000 loan, both of which had been repaid with an interest rate of 30 percent. In fact, no prior completed transactions occurred and no monies were received from the sale of any oil equipment including any principal or interest. To support the false claim, Phillip Hudnall requested that Brian Hudnall create documents as proof of the prior successfully completed transactions. Brian Hudnall wrote two checks on a DonDon bank account that was closed. Brian Hudnall also created a fraudulent memorandum to support the false claim.
Phillip Hudnall informed the investors that the monies raised would be used to purchase specific pieces of oil equipment for refurbishment and resale. Persons invested approximately $3.6 million for the purpose of purchasing specific pieces of oil equipment. Phillip Hudnall and another person also obtained a loan from a bank in Pittsburgh, Pennsylvania, for approximately $1.3 million to finance the oil equipment scheme.
From February through June 2019, Phillip Hudnall transferred approximately $4.1 million from the BirdDog Oil Equipment bank account to the DonDon bank account. Thereafter, Brian Hudnall transferred approximately $4 million from the DonDon account to the bank account of Kansas Oil Reserve 2, another company owned by Phillip Hudnall and operating at the same address as BirdDog Oil Equipment.
Phillip Hudnall used approximately $925,000 of that money to purchase “used oil equipment.” He used the remainder of the investor funds to purchase mineral rights in Weld County, Colorado, for $1.7 million, a BMW for $99,000, and transfer approximately $1.6 million to his other business and personal bank accounts.
Brian Hudnall retained approximately $58,000 of the investor monies in the DonDon account. Brian Hudnall transferred $34,000 to other accounts, paid over $15,000 in credit card charges, and withdrew approximately $6,000 in cash.
Under the terms of their plea agreements, Phillip and Brian Hudnall must pay restitution to the victims of the fraud scheme, in an amount to be determine by the court. They must also forfeit to the government an amount to be determined by the court. The government believes a money judgment in the amount of at least $3,848,067, representing the proceeds Phillip Hudnall received as result of the criminal conspiracy , is supported by the evidence. Phillip Hudnall must forfeit his 2019 BMW X7 and his mineral and royalty rights.
Under federal statutes, Phillip and Brian Hudnall each are subject to a sentence of up to 10 years in federal prison without parole. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendants will be determined by the court based on the advisory sentencing guidelines and other statutory factors. Sentencing hearings will be scheduled after the completion of presentence investigations by the United States Probation Office.
These cases are being prosecuted by Assistant U.S. Attorneys Kathleen D. Mahoney and Paul S. Becker. They were investigated by the FBI and the Securities and Exchange Commission.