In the biggest crackdown ever on illegal oil investment schemes, federal and state authorities filed civil fraud complaints yesterday against 30 companies and 37 individuals from 8 states.
Federal investigators said those named in the charges allegedly have collected more than $20 million from hundreds of investors who put money into what were called "spot crude oil delivery contracts."
The contracts actually were illegal, unregistered futures contracts, and their sellers were violating federal law, according to the massive lawsuit.
The case was filed in New York City by the federal Commodity Futures Trading Commission and the New York State attorney General's office after an investigation that involved authorities in 30 other states.
The civil lawsuit asks the federal courts to issue an injunction putting the firms out of business and to issue orders attaching the firms' bank accounts and appointing a receiver to oversee the funds.
The companies -- most of them related -- were selling oil investments by telephone, using teams to sales people who called investors all over the nation, the complaint charges.
The long legal document accuses the defendants of "utilizing high-pressure sales techniques . . . making false and deceptive reports and statements concerning the expected returns and profits and . . . making false and deceptive claims regarding the risks involved."
The oil investment sellers also failed to tell customers that most of the money they paid would go for commissions and only a fraction was applied as a down payment on the oil they were buying.
The complaint charges that since last August a number of firms have been offering crude oil investment contracts from Commercial Petrolera International, S.A., a company based in Panama.
The government complaint doesn't specify whether Commercial Petrolera had any oil to deliver. To many investors, that wouldn't make any difference because the fees charged on the investment were so high that they would be unlikely to profit from any increase in oil prices, investigators said.
The oil investments meet the legal definition of futures contracts, the complaint charges, and under federal law futures contracts can be sold only on a regulated exchange by companies and salespersons registered with the federal government.
The Panamanian oil contracts aren't traded on any of the nation's futures markets, and none of the companies and individuals named in the complaint are currently registered with the CFTC, the lawsuit alleges.
Sellers of oil investments have contended in the past that their products aren't futures contracts and therefore are exempt from federal regulation.
The companies accused in the complaint filed yesterday were identified as:
Commercial Petrolera International, S.A., International Petroleum Exchange, Bartex Petroleum Corp., OPEC American Petroleum, First Eastern Corp., West American Oil Co., IDE International, Petro International, Ramco Petroleum Inc., American Petroleum & Oil Exchange, Universal Petroleum Inc., IPEC Equities Corp., Pan Eastern Petroleum Exchange, Summit Trading Systems, Domestic Oil Corp., United Petroleum, Exchange Corp., Fidelity First Capital Corp., Willard, Rooney & Williams, American Commodities Trading Systems, Diversified Oil Investment Inc., Worldwide Petroleum, Transcontintal Petroleum Corp., Mid Atlantic Oil Exchange, Pemco Petroleum Inc., E&P North American Trading Corp., Panamo Petroleum Enterprises, Karet International, Petron Company, First Fiancial Investment Group Inc. and North American Petroleum Corp.