Shaun Michael Smith of Cookeville, Tenn., one of six people accused of cheating investors of two gas and oil companies out of millions of dollars, was sentenced to 2½ years in prison Monday in federal court in Lexington.
Smith, 29, was the first to be sentenced in the case involving Target Oil and Gas in Albany and Kentucky Indiana Oil and Gas in Danville, two interlocking, family operated companies. Smith and the five others, including his father, Michael D. Smith, and uncle, Christopher C. Smith — Target Oil and Gas president and vice president, respectively — were accused in a December 2008 indictment of fooling investors into buying shares in drilling programs through fraudulent marketing materials and false geological surveys.
According to the U.S. Attorney's Office, the six helped lure about $14.6 million from investors from 2003 to 2008. Only a fraction of the investments were returned through royalty payments.
Shaun Smith, who began working full-time for the businesses in 2005, mailed brochures to potential investors in Kentucky, California, Arizona, New Jersey and other states, according to the U.S. Attorney's Office.
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Senior U.S. District Judge Joseph M. Hood said Shaun Smith's sentences — 30 months each on one count of conspiracy to commit mail and wire fraud, two counts of wire fraud and 19 counts of mail fraud — would run concurrently. After prison, Smith will be on supervised release for three years. He also was ordered to pay a $2,200 special assessment. The judge said restitution would be decided within 90 days.
"I think you're young, you're impressionable and you just got caught up in a scheme," Hood told Smith before sentencing him. But, the judge said, "There has to be some element of punishment."
Hood noted that Smith had no criminal history — a positive — and said he didn't think he would ever see Smith in court again.
Smith's lawyer, David Guarnieri, said his client "inherited" procedures and practices used by the companies and did not directly deal with investors.
Smith, who pleaded guilty last year after more than a week of trial, tried unsuccessfully to withdraw his plea in May.
Joshua Scott Harris of Hustonville, an employee of the oil and gas companies who also entered a guilty plea after the trial started last year, is to be sentenced Tuesday. Michael D. Smith of Lancaster is to be sentenced Wednesday. Christopher C. Smith of Prestonsburg and geologist Ray Garton of Barrackville, W.Va., are to be sentenced Thursday. Mark Irwin of Cookeville, who worked for the companies, is to be sentenced in July. Garton and Irwin pleaded guilty before the trial.