A local oil and gas investor was sentenced to 97 months in federal prison Friday for his role in a multi-million dollar oil and gas Ponzi scheme.
U.S. District Judge T. John Ward also ordered the investor, 47-year-old Richard W. McFarland Jr. of Marshall, to pay $8.8 million in restitution.
According to a press release, McFarland pleaded guilty on March 26 to mail fraud.
"According to information presented in court, McFarland was founder and President of Delta Interest, Inc., a company based in Marshall, which purportedly obtained working interests in oil and gas wells located within Texas and then offered portions of those interests for sale to the public," a press release indicates.
The press release notes from 2003 to 2009, McFarland devised a scheme in which he falsely represented to investors that they were purchasing interests held by Delta Interest in wells located on various leases, when in fact, no such wells or leases existed.
"To further facilitate the scheme, McFarland sent investors fraudulent monthly production statements, which contained fictional production and sales figures as well as supposed investor revenue amounts related to the non-existent wells," the press release states. "McFarland used a significant portion of the investor funds to make purported revenue payments on a regular basis to earlier-in-time investors. This funneling of proceeds received from new investors to previous investors induced new investors to participate and, in some instances, existing investors to contribute additional sums."
The press release goes on to say that McFarland expended the remainder of investor funds for his own business and personal use. As a result of this scheme, he fraudulently obtained in excess of $30 million from more than 350 investors who were residing in approximately 25 different states.
This case was investigated by the Texas State Securities Board and the FBI and prosecuted by Assistant U.S. Attorney Frank Coan.
