Two more are sentenced in Kentucky oil and gas scheme

They took part in $13.4 million fraud

rclemons@herald-leader.comJuly 1, 2011 

The former vice president of a Kentucky oil and gas company and a former geologist were sentenced Thursday for defrauding hundreds of investors nationwide out of millions of dollars.

Christopher Cello Smith, 50, of Prestonsburg, was sentenced to five years in prison after being convicted by a federal jury of seven counts of mail fraud last July, according to a news release from the U.S. Attorney's Office. Smith served as vice president of Target Oil and Gas Co. in Albany from 2003 to 2008. He also was sentenced to three years supervised release and a $500 mandatory assessment. U.S. District Senior Judge Joseph M. Hood imposed a a forfeiture judgment in the amount of $3 million.

Former Barrackville, W.Va., geologist Ray Garton, 60, was sentenced to five years probation, and six months community confinement followed by six months home incarceration and a $100 mandatory special assessment. Garton pleaded guilty to charges of conspiracy to commit mail and wire fraud in September 2009.

Both men were involved in luring $13.4 million from hundreds of investors in Kentucky, California, New Jersey and other states by distributing false information about oil and gas investments, according to the release.

Smith gave investors false reports that drilling programs had hit oil and gas, and collected money from those investors.

Garton worked with Smith's brother, Michael Smith, former president of Target Oil and Gas, to prepare brochures for potential investors containing false information with geological reports falsely denoting adequate drilling sites.

Six people, including the Smiths and Garton, were indicted in December 2008 for their roles in fooling investors into buying shares in drilling programs through fraudulent marketing materials and false geological surveys.

Michael D. Smith, 55, of Lancaster was convicted of one count of conspiracy to commit mail fraud and 11 counts of mail fraud in U.S. District Court in Lexington last July after a monthlong trial. In addition to being president of the company, he owned a controlling interest in Kentucky Indiana Oil and Gas, based in Danville. He was sentenced Wednesday to 10 years in prison and three years of supervised release. Michael Smith also was ordered by Hood to forfeit $3.2 million.

Michael Smith's son, Shaun Michael Smith, 29, of Cooke ville, Tenn., was the first of six people accused in the case to be sentenced. He was sentenced to 2½ years in prison Monday in federal court in Lexington. He mailed brochures to potential investors in Kentucky, California, Arizona, New Jersey and other states, according to the U.S. Attorney's Office.

Joshua Scott Harris, 25, of Hustonville, a sales supervisor for Target Oil and Gas, was sentenced to a year and a day in prison Tuesday. He also must pay a $2,300 mandatory special assessment and undergo three years of supervised release. Harris entered a guilty plea after the trial started last year.

Mark Irwin of Cookeville, who worked for the companies, is still to be sentenced. Garton and Irwin both pleaded guilty before the trial.

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