“Black Gold” and a Sophisticated Fraud Scheme

Special agents from the Internal Revenue Service-Criminal Division (IRS-CI) and Federal Bureau of Investigation (FBI) arrested Christopher Faulkner at Los Angeles International Airport on June 18. Faulkner controls Breitling Oil and Gas Inc., Crude Energy, LLC and Patriot Energy, Inc., from which he allegedly operated a complex fraud scheme. Faulkner’s charges include securities fraud, mail fraud and money laundering. Faulkner allegedly ran a scheme to defraud investors out of millions of dollars.

While raising money in and of itself is not illegal, investigators say Faulkner made a huge misstep. As part of the scheme to defraud investors, Faulkner made fraudulent misrepresentations to investors. In doing so, he was able to raise over $62.6 million from investors. Faulkner structured the fund raise through the sale of working interest units in 16 drilling prospects.

Lies, Lies and More Lies 

Faulkner’s companies allegedly marketed the working interest programs using multiple forms of misrepresentations. One of the material misrepresentations was the hyperinflation of reasonable estimated costs to drill and test the well. This resulted in enormous hidden profits to Faulkner’s companies.