Released by the U.S. Attorney's Office Eastern District of Texas:
PLANO, Texas - U.S. Attorney John M. Bales announced Monday that a 50-year-old Denton, Texas man has been sentenced to federal prison for his role in a multi-million dollar oil and gas scheme in the Eastern District of Texas.
MICHAEL EUGENE DANNELLY pleaded guilty on Aug. 11, 2009, to mail fraud and was sentenced to 210 months in federal prison on Mar. 12, 2010 by U.S. District Judge Richard A. Schell. Dannelly was also ordered to pay restitution in the amount of $17,730,972.46.
According to information presented in court, from 2004 to 2007, Dannelly owned and operated Oil and Gas Managing Partners and VADC, Inc., companies purportedly in the business of raising funds from investors to drill oil and gas wells in Texas and Oklahoma. Dannelly devised a scheme to defraud investors by selling fraudulent oil and gas securities. Directly and through his employees, Dannelly made false representations to over 250 victims in order to obtain almost $18 million, most of which was used for personal expenditures, including $5.3 million in gambling expenses at the Eldorado and Horseshoe Casinos in Shreveport, Louisiana. Dannelly also fraudulently obtained $250,000 from a financial institution in connection with this scheme. Dannelly was indicted by a federal grand jury on Apr. 8, 2009.
"People who create elaborate schemes that mislead others and defraud the IRS run the risk of serious jail time," said Bridget Marchetta, Acting Special Agent in Charge of the IRS Dallas Field Office. "Promoters of Ponzi schemes prey upon trusting investors and then steal their hard earned money. Investors should be wary of any program promising unbelievable returns on investment. Remember the old cliché, 'If it seems too good to be true, it probably is.' IRS Criminal Investigation will continue to aggressively pursue these types of schemes."
U.S. Attorney Bales added, "I could not agree more with SAC Marchetta. Obviously, Michael Dannelly must be held accountable for his criminality and with this sentencing, he has been. We are not only pleased with the substantial sentence handed down by the Court but hope that Dannelly's sentencing sends a chilling message to fraudsters of his ilk. When you are caught, whatever temporary riches you have enjoyed will not be worth the cost of the crime and punishment."
President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
U.S. Attorney Bales also said, "Investors must be cautious and utilize the vetting tools that are there for their benefit – consulting with the Texas State Securities Board, the SEC, and the IRS are very good ideas. Similarly, insuring that there are certified public accountings for the investment and using the services of a knowledgeable attorney will save an investor untold grief and a lot of money. I commend the hard work of the agents – they have done an exemplary job."
This case was investigated by the Internal Revenue Service, U.S. Secret Service and the Texas State Securities Board. This case was prosecuted by Assistant U.S. Attorney Shamoil Shipchandler.
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