Kentucky

Jury finds Ky. brothers responsible for $3 million in fraud case

A jury determined Tuesday that two brothers found guilty of defrauding oil and gas investors are responsible for $3 million each in forfeiture charges.

Michael D. Smith, 54, 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. Smith's brother, Christopher Cello Smith, 40, of Prestonsburg, was convicted of seven counts of mail fraud.

Michael Smith is the president of Target Oil and Gas Co. in Albany and owns a controlling interest in Kentucky Indiana Oil and Gas, based in Danville.

Federal prosecutors charged that Michael Smith misrepresented his company to entice people into investing more than $12 million in Target Oil during 2003-08. The company returned about $538,000 in royalties to the investors.

In question at the forfeiture trial was $3.1 million prosecutors claimed Target Oil acquired by defrauding investors, and money found in a safe at the home of Michael Smith's father, Vernon Smith.

Investigators found $72,050 in cash bundled and sealed in bags and two cashier's checks totaling $160,649 in the safe. The jury ruled the Smith brothers were responsible for the checks but not the cash.

The U.S. Attorney's Office will try to recover the money and can seize any property or interest the Smith brothers possess to satisfy the amount of the forfeiture. Sentencing is scheduled for October. Each man could face up to 20 years in prison. It is possible Judge Joseph Hood could set a restitution amount in addition to the forfeiture that the men would have to pay.

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