Man Pleads Guilty In Washington County Land Fraud Case

PITTSBURGH - A resident of Allegheny County, Pennsylvania, pleaded guilty in federal court to one count of mail fraud, United States Attorney David J. Hickton announced today.

Derek A. Candelore, aka Dan Kun and Kevin Kelly, pleaded guilty before United States District Judge Arthur J. Schwab.

In connection with the guilty plea, the court was advised that Candelore was employed by Penn Star Energy, LLC of Butler County (Penn Star) as a landman. Candelore worked at Penn Star with William Ray, who was another landman who previously pleaded guilty to related charges. A landman contacts mineral rights owners on behalf of natural gas production companies to arrange for leases of mineral interests for oil and gas production. Penn Star arranged for mineral rights leases on behalf of Range Resources Corporation. The mineral rights for four separate blocks of land in Washington County consisting of one hundred or more acres were stolen by Candelore using forged signatures, fake companies and forged notary signatures and stamps. These frauds began in February 2010 and ended in June 2012. During the scheme Candelore set up several post office boxes and bank accounts in the names of companies he created. He hired others to file deeds and other documents at the Washington County Recorder of Deeds Offices to make it appear that the true mineral rights owners had transferred their mineral rights to Candelore's fake companies. These deeds had forged signatures of several true owners and forged notary signatures and stamps. Candelore's companies thereafter leased and/or sold the mineral rights to others. Candelore used the names of Dan Kun and Kevin Kelly to shield his involvement in the fraud. The indictment seeks the forfeiture of $1,856,998.27 of proceeds from the scheme. Candelore received the proceeds from each of the four blocks of mineral rights, while Ray received proceeds from two of the four. The victims include Range Resources Corporation, several mineral rights owners, Pecos Bend Royalties, LP, of Midland, Texas, and Buffalo Royalties business entities in Texas. The schemes were discovered when a mineral rights owner discovered that her rights had been sold to Clark Lumber Company, a shell company owned by Candelore.

Judge Schwab scheduled sentencing for Jan. 31, 2014. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based upon the seriousness of the and the criminal history, if any, of the defendant.

Pending sentencing, the court continued Candelore on bond.

Assistant United States Attorney Nelson P. Cohen is prosecuting this case on behalf of the government. The U.S. Postal Inspection Service conducted the investigation that led to the prosecution of Candelore.