A Lexington lawyer took part in a long-running scheme to fleece investors of more than $34 million selling fraudulent investment programs to drill oil and gas wells, a federal grand jury charged Friday.
Bryan S. Coffman and his wife, Megan, both 46, were named in the 30-count indictment along with Gary Milby, 55, of Campbellsville and Vadim "Victor" Tsatskin, 36, of Ontario, Canada.
Brian Coffman, Milby and Tsatskin are charged with mail fraud and wire fraud. The Coffmans also face 11 counts of laundering money from the alleged scam.
The fraud raked in money from hundreds of investors in several states and countries by promising big returns from wells in south-central Kentucky that were actually "dry holes" in many cases, or which had little potential to produce as pledged, according to the indictment and a motion in a related lawsuit.
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Coffman apparently is the same person who ran for 6th District U.S. representative in the Republican primary in 2004, and also ran for the Urban County Council in 2006, both times unsuccessfully.
That candidate listed the same home address as the Bryan Coffman named in an affidavit related to the new criminal charges. The affidavit is included in a lawsuit the government filed last year in an attempt to seize money and property — including a yacht — in Lexington and Charleston, S.C., from the Coffmans.
A man who answered the phone at a number listed for Coffman refused to comment Friday.
In a 2004 response to a Herald-Leader endorsement of another candidate, Coffman said he was a man of vision, courage, values and integrity. He promised that if elected "I will never place myself in a compromising situation or bring shame to the office." A magistrate judge ordered the Coffmans and Milby to appear in court Dec. 16. He issued an arrest warrant for Tsatskin.
The four face up to 20 years on the wire- and mail-fraud charges if convicted, while the Coffmans also face up to 20 years on the money-laundering charges, according to a news release from U.S. Attorney James Zerhusen.
Friday's indictment in Lexington was the second this week for Milby. He was charged Wednesday in Nashville with fraud and money laundering in relation to bogus oil and gas investments, The Associated Press reported.
Milby reportedly drew attention that ultimately came back to haunt him when he was featured on an MTV reality show lavishing birthday gifts on his daughter, including a helicopter ride, a shopping spree and a new BMW, about the same time he was soliciting investments that left customers empty-handed.
Friday's indictment said that the Coffmans, Milby and Tsatskin sold investments in oil and gas drilling programs through a company called Mid-America Energy Inc. from 2004 until early 2008, taking in $19.2 million, and through another called Global Energy Group from mid-2007 until now, taking in $14.7 million.
Global was a continuation of Mid-America after investors began suing that company and authorities opened a criminal investigation, the indictment said.
The participants in the alleged scheme told investors that Global Energy was operated from the Bahamas, when in fact Bryan Coffman operated Global from Lexington, the indictment said.
The company's physical address was a "rented, virtual office with a mail drop" next to Coffman's law office, but sales agents for Global made telephone solicitations to potential investors from a "boiler room" in Canada, the indictment charged.
The Coffmans, Milby and Tsatskin allegedly lied to investors on a number of fronts, saying the wells being drilled would produce guaranteed income for years, that investors would quickly recoup their money and that Milby had a long track record of successful oil and gas production.
In reality, Milby had produced few successful wells, and every investor in Mid-America lost money, the indictment said.
Investors in Global Energy were told they could expect $4,000 to $6,000 a month, though wells in the area being drilled generally produce little oil, and no investor made anything close to that, the indictment said.
None recouped their investment, the indictment said.
The suspects told investors all their money would go to develop wells, but the four diverted large amounts for parties, vehicles, boats, helicopters, real estate, jewelry, travel, entertainment, personal expenses and their own investments, the indictment said.
Even as they were selling the investments, the people involved in the scheme hid the fact that Milby faced sanctions in Kentucky, Texas, Alabama, Arizona, California, Pennsylvania and elsewhere, the indictment said.
Prosecutors will try to recover $34 million from the defendants, according to the indictment.
It lists several properties in Lexington and a 63-acre tract in Green County the government wants to take from defendants.