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Secretary of State

Securities Division > News Archive  > 2005 Press Releases > For Immediate Release: August 31, 2005 Rokita Warns of Oil and Gas Investment Scams

Contact: AJ Freeney-Ruiz
317-233-8655
Media@sos.in.gov

Indianapolis, IN - In the wake of Hurricane Katrina and with oil prices around $70 a barrel, scam artists are seeking new opportunities to pry into investors' wallets.

Indiana Secretary of State Todd Rokita warns investors to be on the lookout for oil and gas scams. "Everyone knows oil prices are up; we see evidence every time we visit the gas station," Rokita said. "But speculation in oil and gas wells is a risky business, no matter what is going on at the pumps."

The recent increase in oil prices has opened the door for an increase in "boiler room" and "fly-by-night" operations who cold-call unsuspecting Indiana investors and tout so-called "safe" investments in oil and gas drilling and extraction projects. These slick telephone solicitors are trained to use high-pressure sales tactics to allow them to prey on the elderly and those with little investment experience. Some swindlers even surround themselves with efforts to portray legitimacy, including professionally designed color brochures and the purported backing by a reputable geologist.

Many of these pie-in-the-sky opportunities never amount to anything. Often the con artist behind the scheme converts the investor's money for his own personal use, all the while giving the investor excuses for poor returns, such as equipment malfunctions and inclement weather. Secretary Rokita's office is currently investigating ten open cases involving such schemes in Indiana or involving Hoosier investors.

Rokita warns, "oil and gas scam artists promise an unsuspecting investor will become Indiana's next big oil tycoon for an investment of only a few thousand dollars. Oil and gas can be good investments, but only for those who can afford to be patient, recognize the risks involved, and invest in legitimate operators using properly registered salespeople." Rokita recommends investors take care when choosing where to invest their money, and he urges investors to take heed of the following before investing:

  • Beware of cold callers and spam e-mails. High-pressure sales tactics and "once in a lifetime" opportunities are red flags indicating something is amiss.
  • Request and carefully read written material such as brochures and prospectuses. Make sure what you are hearing from the promoter is consistent with what you read. Likewise,
  • if any claims are made about the tax-advantaged status of any oil or gas investment project, it is a good idea to confirm the information with a tax specialist.
  • Use common sense. Some things really are too good to be true. Seek a professional, third-party opinion when presented with investment opportunities that seem to offer unusually high returns in comparison to other investment options. Pie-in-the-sky promises often signal investment fraud.

Investors should always contact Secretary Rokita's office before investing to be sure both seller and investment are licensed and registered. The Secretary of State's Securities Division can be reached at 1-800-223-8791, and information can be verified online at http://www.sos.in.gov/.

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