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5 convicted in Kansas City stock fraud case


May 15, 2013 04:51 PM EST | AP


KANSAS CITY, Mo. — A jury on Wednesday convicted the founder of a Kansas City company and four associates of cheating investors by selling them millions of dollars of worthless stock and spending the money on themselves.

Petro America Corp. founder Isreal Owen Hawkins and his associates were accused of illegally selling unregistered stock in Petro America from 2008 through 2010, much of it to poor investors. Prosecutors said investors were told the company had $284 billion in assets and that they'd be rich once it went public.

Hawkins was convicted of conspiracy, securities fraud, aggravated currency structuring, money laundering and two counts of wire fraud. He could be sentenced to up to 20 years in prison for the most serious charge, wire fraud.

Hawkins, who had been out of jail on bond, was taken into custody immediately after the hearing and the government moved to have his bond revoked. The court set a bond hearing for next week to rule on the government's motion.

Hawkins' co-defendants – Teresa Brown, Johnny Heurung, William Miller and Martin Roper – each were convicted of conspiracy to commit fraud, which carries a maximum sentence of five years in prison. All were released pending sentencing.

The five were accused of selling $7.2 million worth of unregistered stock and targeting poor investors who weren't qualified to purchase shares. Under federal securities law, a person must have a net worth of at least $1 million or an annual income of $200,000 for the last two years to qualify as an accredited investor and be allowed to take part in high risk investments such as Petro America.

Hawkins called Petro America "The People's Company," and told investors his goal was to win a Nobel Prize for creating massive wealth.

Prosecutors said much of the stock was sold through a group of pastors called the Minister's Alliance, or "White Hat Guys" because of the white fedoras Hawkins gave them. They say the ministers also served as Hawkins' personal security force.

Hawkins, who represented himself at the trial, told jurors the company was legitimate and had real assets, and the only reason it didn't go public was because the federal government wanted to destroy it.

Attorneys for some of his co-defendants expressed disappointment Wednesday in the verdicts and vowed to appeal the decision to the 8th Circuit U.S. Court of Appeals.

"We have strong issues for an appeal to the 8th Circuit, but at this time it's really not about Miss Brown and the results," one of Brown's attorneys, Willie Epps Jr., told The Associated Press. "It's about the thousands of Petro America victims who lost significant resources. For that, Miss Brown is sorry and we hope in time she will be seen as another Petro America victim and not a Petro America leader."

Lance Sandage, who represented Heurung, said his client also plans to appeal.

"We're disappointed in the jury's verdict, but we respect the process," Sandage said.

Attorneys for Miller and Roper didn't immediately return calls for comment.

Attorneys for all of the co-defendants told jurors Hawkins had duped their clients. They said the four didn't know that the stock sale was a scam because they said Hawkins was the primary source of information about the company. With no real corporate structure, the co-defendants said they relied on what they were told by Hawkins – including that the Missouri cease and desist order had been resolved – when promoting and selling the stock.

Prosecutors, however, said all five defendants knew that Kansas and Missouri regulators had sent cease-and-desist orders barring the sale of Petro America stock, but that they chose to ignore them.

On Wednesday, Brown also was convicted of securities fraud and six counts of wire fraud, Miller was convicted of money laundering and wire fraud, and Heurung was convicted of one count of wire fraud. Nine others who were charged in the case pleaded guilty to conspiracy and are awaiting sentencing.

   
doj.gif

NEWS RELEASE

OFFICE OF THE UNITED STATES ATTORNEY

WESTERN DISTRICT OF MISSOURI


 

BETH PHILLIPS


 

Contact Don Ledford, Public Affairs ? (816) 426-4220 ? 400 East Ninth Street, Room 5510 ? Kansas City, MO 64106

www.justice.gov/usao/mow/index.html


 

OCTOBER 27, 2010

FOR IMMEDIATE RELEASE


 

KCK MAN CHARGED IN $7.2 MILLION FRAUD SCHEME THAT TARGETED THOUSANDS OF INVESTORS NATIONWIDE


 

            KANSAS CITY, Mo. – Beth Phillips, United States Attorney for the Western District of Missouri, announced today that a Kansas City, Kan., man has been charged in federal court for his role in a $7.2 million securities fraud scheme that victimized thousands of investors across the United States.

            “A federal criminal complaint alleges that Petro America was an empty facade of a business run by deception and false promises,” Phillips said. “Petro’s founder is charged with defrauding unwary investors by selling them worthless stock in order to support his lavish lifestyle.”

            Isreal Owen Hawkins, 55, of Kansas City, Kan., was charged in a two-count criminal complaint filed in the U.S. District Court in Kansas City, Mo. Hawkins is the president and CEO of Petro America Corporation. A related civil forfeiture was filed against Petro America on Friday, Oct. 22, 2010.

            The criminal complaint charges Hawkins with securities fraud and with structuring financial transactions in order to evade federal reporting requirements. Hawkins founded Petro America, which bills itself as a holding company for crude oil and gold mines (among other claimed assets) in 2007.

 

Count One: Securities Fraud

            According to an affidavit filed in support of the criminal complaint, Hawkins began selling shares of unregistered stock to investors in 2008. At the time, the affidavit says, Petro America had no oil, no realistic prospects for obtaining, transporting or storing large amounts of oil, no significant assets, no revenue and no other employees. The government is aware of no evidence that Petro America has seriously pursued any opportunities to acquire oil fields or conducted oil trading operations. Nevertheless, the affidavit says, Hawkins and others have touted excellent prospects for Petro’s rapid growth in the oil industry.

            According to the affidavit, more than 9,000 victims have invested in excess of $7.2 million since August 2008, but instead of using that revenue for legitimate business-related purposes, Hawkins and his co-conspirators allegedly withdrew investors’ funds from Petro America’s bank accounts in cash, which they spent on personal expenditures such as a house by the lake, luxury cars, a $5,700 fur coat, a $37,000 boat, a $5,200 piece of Louis Vuitton luggage purchased in Switzerland, expensive jewelry and travel.

            Hawkins, the only full-time employee of Petro America, paid himself an annual salary of $595,000 under a contract that also granted him a $175,000 bonus, 500 million shares that are immediately exercisable, a company car, a company apartment in Missouri, and a dining card. Hawkins drew his salary in cash, in random amounts at inconsistent times, and the company did not withhold taxes.

            Conspirators often recruited investors through churches and used religious language in their pitches, the affidavit says, including promoting Petro America as a once-in-a-lifetime opportunity to “share the blessing.” Petro America cultivated a relationship with the African American Ministers Alliance Group, the affidavit says, and according to its records made large payments to multiple Kansas City-area pastors, religious leaders and a local civil rights activist.

            Investors lost from $100 to $100,000 each. Initially, many of the investors were drawn into the scheme with the promise that $100 would buy 100,000 shares of Petro America stock, the affidavit says, which Hawkins claimed was “book valued” at $2 per share. As the scheme progressed, conspirators raised the price to invest and claimed an ever-higher “book value” for the shares. The affidavit alleges that this allowed conspirators to unload shares to new investors at an increasing profit. To date, the affidavit says, the stock has never been properly registered or listed on any exchange.

            Hawkins allegedly promised “meteoric returns” on investments. At the height of the scheme, the affidavit says, up to $700,000 flooded into the company each month.

            Hawkins claimed that Petro America would be “the first African-American holding oil company to go public in the United States,” according to the affidavit. Investors were frequently told that they would be rich when the company “goes public.” Going public, the conspirators allegedly have said for over two years, is just weeks away. In reality, the affidavit says, the company has no significant assets or revenue stream (other than investor proceeds).

 

Alleged False Claims

            Today’s affidavit alleges that Hawkins and co-conspirators provided materially false information to investors. For example, Petro America’s Web site includes a prominent photograph of the luxury office building at Two Pershing Square, ostensibly Petro’s “world corporate headquarters.” In reality, the affidavit says, Hawkins contracts with Regus Management Group LLC, a secretarial service that provides such services as telephone answering, fax and mail handling, use of the address and 16 hours of office usage for an initial monthly fee of $225.

            According to the affidavit, conspirators have touted Petro America acquisitions in gold and rock mines as valuable holdings worth hundreds of billions of dollars. In reality, the affidavit says, Petro America’s interests in the gold and rock mines are essentially worthless. Petro America allegedly adopts wildly high valuations for the mines, most or all of which are not producing anything. Many or all of the mines are not actually mines at all, but mining claims. A mining claim is merely a plot of government-owned land upon which a person or corporation has filed a claim of rights to a mineral deposit, which may or may not actually exist.

            Based on these representations, Hawkins and others claim that Petro’s assets are worth more than $284 billion. According to the affidavit, if this valuation were accurate, Petro America would be the second-largest company in the United States by market capitalization, larger than Wal-Mart, Apple or Microsoft. America’s largest company is Exxon Mobil, which has a market capitalization of $312.28 billion.

 

Count Two: Structuring Financial Transactions

            Under federal law, banks are required to file Currency Transaction Reports for financial transactions that exceed $10,000 in one day. It is illegal to conduct multiple cash withdrawals in amounts less than $10,000 for the purpose of evading that federal reporting requirement.

            The affidavit alleges that Hawkins and others made large cash withdrawals from Petro America’s bank accounts, which were structured to avoid bank reporting laws. For example, according to the affidavit, Hawkins and an unidentified co-conspirator visited Mazuma Credit Union several times each week. Sometimes they made big deposits of multiple checks into the company’s bank account; on most visits, the affidavit says, they withdrew $7,500 to $9,800, often on consecutive days. In this manner, Hawkins obtained at least $537,515 in cash from Petro’s account at Mazuma. The affidavit also alleges that Hawkins structured currency withdrawals out of Petro America accounts at U.S. Bank and Bank of America.
 

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 http://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 http://www.justice.gov/usao/mow/petro.html

            Phillips cautioned that the charges contained in this complaint 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.

****************

This news release, as well as additional information about the office of the United States Attorney for the Western District of Missouri, is available on-line at

http://www.justice.gov/usao/mow/index.html

 

 

NEWS RELEASE

OFFICE OF THE UNITED STATES ATTORNEY

WESTERN DISTRICT OF MISSOURI


 

BETH PHILLIPS


 

Contact Don Ledford, Public Affairs ? (816) 426-4220 ? 400 East Ninth Street, Room 5510 ? Kansas City, MO 64106

www.justice.gov/usao/mow/index.html


 

NOVEMBER 22, 2010

FOR IMMEDIATE RELEASE


 

PETRO AMERICA


 

FOUR 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 four 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 who bought shares in Petro America Corporation, which was purported to be a profitable oil trading company.


 

            Isreal Owen Hawkins, 55, of Kansas City, Kan., Teresa Brown, 52 of Bandera, Texas, Johnny Heurung, 56, of Saint Paul, Minn., and Clarence Moore, 62, of Atlanta, Ga., were charged in an 14-count indictment returned by a federal grand jury in Kansas City, Mo. Today’s indictment replaces a federal criminal complaint that was filed against Hawkins on Oct. 26, 2010, and includes additional defendants and charges.


 

            Today’s indictment alleges that, since Sept. 1, 2008, Hawkins, Brown, Heurung and Moore have participated in a conspiracy to commit securities fraud and wire fraud. Hawkins, Brown and Heurung were among those who promoted Petro America and sold shares to investors. Moore did accounting work, including tax preparation, for Petro America.


 

            According to the indictment, Hawkins and Brown – who have never been licensed to sell securities – began an unregistered offering of shares of Petro America to investors in August 2008. In the first four months, the indictment says, Petro America raised about $1 million by selling stock through its Web site and presentations to church congregations, and continued raising money afterwards.


 

            According to an affidavit filed in support of the original criminal complaint, more than 9,000 victims have invested in excess of $7.2 million since August 2008.


 

            The defendants used religious language in their pitches and often recruited through churches, the indictment says. They allegedly gave payments to church figures, who recruited members of their congregations to invest.


 

Alleged False Claims


 

            The federal indictment alleges that the sale of Petro America stock was accomplished by making fraudulent material 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 interests in gold mines, for example, and by claiming that Petro America had conducted “reverse mergers” with two other companies.


 

            The indictment also cites false and misleading statements made by Heurung during a series of conference calls in which he stated, “this stock is forecasted to do better than Microsoft ... right now we’re larger than Coca-Cola ... I am looking at a room of more millionaires in one place than I’ve been in a long time ... there’s gonna be some major billionaires in here.”


 

Alleged Personal Expenditures


 

            From September 2008 through April 2010, Hawkins received nearly $2 million from Petro investors into accounts he controlled. Very little of these funds were reinvested into the company. Instead, Hawkins used investor money to purchase such items as a Chrysler 300, a Hummer H3, a 2004 Mercedes S430, 16 designer suits totaling $8,709 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.


 

            Hawkins allegedly distributed at least $303,200 of investor money to at least 36 friends and shareholders of his choosing; in addition, Hawkins allegedly made cash payment totaling $217,859 to 21 “vendors and consultants.”


 

            From June 2009 through April 2010, Brown 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.


 

Additional Charges


 

            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.


 

            Today’s indictment also contains a forfeiture allegation, which would require Hawkins, Brown and Heurung to forfeit to the government any property derived from the proceeds of the alleged offenses.


 

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/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.


 

****************

This news release, as well as additional information about the office of the United States Attorney for the Western District of Missouri, is available on-line at

http://www.justice.gov/usao/mow/index.html

 

 

 

 

Copies of the Affidavit and Complaint filed by the U.S. Attorney's Office against Petro America Corp:


http://media.kansascity.com/smedia/2010/10/22/22/Affidavit.source.prod_affiliate.81.pdf

http://media.kansascity.com/smedia/2010/10/22/22/Complaint.source.prod_affiliate.81.pdf

 

 Federal prosecutors have set up two websites for victims of the alleged scheme.

http://www.postalinspectorsurvey.com/PetroAmerica

http://www.justice.gov/usao/mow/petro.html (this will be to follow the legal proceedings with the DOJ as they develop)

 

39 page criminal complaint against Owen Hawkins:

http://media.kansascity.com/smedia/2010/10/27/19/hawkins_complaint__1_.source.prod_affiliate.81.pdf

 

 

More charges for Petro America founder, others

http://economy.kansascity.com/?q=node/8975

 Doc 16 PDF file
http://viewer.zoho.com/docs/qEbjW0

 

 

 

Copy of the certificates used by the perpetrators of this alleged scam:


 

PostSubject
#10754  Sticky Note Copies of the Affidavit and Complaint filed by nodummy 01/01/11 05:35:20 PM
#9207  Sticky Note Link to Grand Jury Indictment for Owen Hawkins, nodummy 11/22/10 02:45:06 PM
#9196  Sticky Note More charges for Petro America founder, others Old Hillbilly 11/22/10 01:03:33 PM
#8067  Sticky Note Two websites for victims of the Petro America nodummy 10/27/10 06:30:12 PM
#13192   Imagine an investor leading them to Windsong. dhrr06 10/14/13 02:02:49 PM
#13191   Old Hillbilly, the whole story was told starting here; flaflyersfan 10/14/13 12:41:48 PM
#13190   Well nodummy you nailed it on Friday, 08/27/10 Old Hillbilly 10/14/13 10:01:21 AM
#13189   Second Petro America figure gets lengthy prison term 1manband 10/09/13 04:22:04 PM
#13188   Petro America founder is sentenced to 30 years Old Hillbilly 10/09/13 04:06:23 AM
#13187   Here is the link to the article: Old Hillbilly 10/09/13 04:03:51 AM
#13186   Ohh I hope so! DrHarleyboy 10/08/13 03:48:38 PM
#13185   Roper, Heurung and Brown must be shaking in flaflyersfan 10/08/13 03:45:14 PM
#13184   Owen Gets 30 Years!! DrHarleyboy 10/08/13 02:15:23 PM
#13183   Owen Hawkins is looking at a possible 30 flaflyersfan 10/08/13 11:06:36 AM
#13182   Today is the day, waiting on the news DrHarleyboy 10/08/13 10:51:02 AM
#13181   dhrr06, no more trials; Owen Hawkins is a flaflyersfan 09/29/13 11:05:13 PM
#13180   Why does Owen need another trial. He dhrr06 09/29/13 07:35:59 PM
#13179   I can't believe anyone would still believe that dhrr06 09/29/13 07:15:08 PM
#13178   Owen Hawkins and thirteen others convicted of fraud DrHarleyboy 08/28/13 08:31:04 AM
#13177   And we know Teddi Berkowitz was the center 1manband 07/13/13 05:14:39 PM
#13176   Return address showed it came from Teddi Berkowitz. Way up north 07/13/13 04:56:16 PM
#13175   There is absolutely no possibility this could "work 1manband 07/13/13 04:44:39 PM
#13174   I posted something similar awhile back.... godfather8 07/13/13 04:41:22 PM
#13173   Hmmm, that was a long time ago. Let Way up north 07/12/13 03:45:16 AM
#13172   Look at this BS that got sent to Way up north 07/12/13 03:29:38 AM
#13171   The fact that you don't know this, is DrHarleyboy 07/01/13 07:41:37 AM
#13170   I will say that the end of the godfather8 06/29/13 02:24:42 AM
#13169   As soon as you make an hour long DrHarleyboy 06/28/13 07:19:06 AM
#13168   Same with greed. Which is definitely what powered 1manband 06/27/13 02:13:06 PM
#13167   Never underestimate the power of stupidity...NEVER. DrHarleyboy 06/27/13 01:30:40 PM
#13166   These people are even more stupid than I 1manband 06/27/13 10:29:39 AM
#13165   Ridculous yet sad at the same time; flaflyersfan 06/27/13 08:58:30 AM
#13164   I guess Owen missed Voir dire! The story 1manband 06/25/13 10:54:41 PM
#13163   Petro America CEO Owen Hawkins wants a new DrHarleyboy 06/25/13 11:47:56 AM
#13162   Hawkins, who founded Petro America in 2007, called scion 05/20/13 11:15:20 AM
#13161   Petro America chief's suit hurt by guilty verdict flaflyersfan 05/20/13 11:07:00 AM
#13160   Slim_2006, Petro America was not a real investment flaflyersfan 05/20/13 01:11:38 AM
#13159   How can we write this off on Taxes Slim_2006 05/19/13 03:01:08 PM
#13158   As true as I spoke it the first DrHarleyboy 05/16/13 02:04:26 PM
#13157   Not compared to the time he will be Old Hillbilly 05/16/13 01:53:25 PM
#13156   That didn't take long at all, did it! DrHarleyboy 05/16/13 12:45:20 PM
#13155   Petro America: guilty verdicts all around Old Hillbilly 05/16/13 09:35:38 AM
#13154   trial is over luckymjp 05/15/13 07:13:27 PM
#13153   Attorneys make closings in Petro America trial scion 05/15/13 08:49:46 AM
#13152   Current Trial News: godfather8 05/14/13 08:01:24 PM
#13151   Petro America trial nears end of 3rd week, scion 05/09/13 08:31:25 PM
#13150   Well, with closing arguments expected to start early godfather8 05/09/13 06:29:17 PM
#13149   Petro America trial nears end of 3rd week, flaflyersfan 05/09/13 04:51:36 PM
#13148   I talked to Tina at US attorney office luckymjp 05/09/13 04:16:39 PM
#13147   Any news on the trial? It should be godfather8 05/08/13 07:02:25 PM
#13146   received this email today from another shareholder: godfather8 04/25/13 06:16:36 PM
#13145   Hasn't he had YEARS to hire a competent dhrr06 04/22/13 02:27:08 PM
#13144   You sure did...and that due diligence paid off too! dhrr06 04/22/13 02:20:25 PM
#13143   Are you really serious? How much evidence dhrr06 04/22/13 02:17:40 PM
PostSubject