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Two Bowling Green area men plead guilty to oil and gas fraud

As part of their fraud conspiracy in the case, Phelps and Harper made numerous false statements...
As part of their fraud conspiracy in the case, Phelps and Harper made numerous false statements to investors.(AP)
Published: Apr. 15, 2021 at 8:35 AM CDT
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BOWLING GREEN, Ky. (WBKO) - Two western Kentucky men, Stacy Scott Phelps and James Michael Harper, pleaded guilty to conspiracy to commit wire fraud and wire fraud in connection with their operation of an oil and gas drilling business.

According to plea agreements in the case, from around January 2015 to June 2016 Phelps and Harper operated Phoenix Development Drilling Corporation, acquiring drilling permits and leases for property in Hart County and Monroe County, Kentucky.  Phelps and Harper put together two drilling programs for Phoenix known as Phoenix Three Select and Phoenix Three Preferred.  They then, directly and through Phoenix’s unlicensed agents, solicited potential investors, to invest in the programs, which were unregistered securities, guaranteeing a 6% return on investment in the first year.

As part of their fraud conspiracy in the case, Phelps and Harper made numerous false statements to investors including claims that the “main focus” of the program was “to develop out the proven Lee Miles lease in Hart Co. Kentucky.”  However, no wells had been drilled on that lease before Phoenix drilled a single, non-producing well on September 17, 2015.  The defendants also demanded payments from investors for “completion costs” for the Lee Miles well before they had drilled the well.  In so doing, they falsely represented to at least one investor at least three months before they had actually drilled that well that they had drilled the well, let it sit overnight, and when they opened it up “[i]t blew nice quality oil for over 4 minutes.”

Phelps is scheduled for sentencing on July 7 at 9:00 a.m. and Harper is scheduled for sentencing on July 7 at 9:30 a.m., both in Bowling Green before Chief United States District Court Judge Stivers.

The case is being prosecuted by Assistant United States Attorneys Nicole Elver and Stephanie Zimdahl.  The case is being investigated by the FBI.

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