U.S. Department of Justice

United States Attorney
Eastern District of Texas

Marshall, Texas Man Sentenced for Ponzi Scheme

Oil and Gas Investor ordered to pay over $8.8 million in restitution

MARSHALL, Texas - A 47-year-old Marshall, Texas man has been sentenced to federal prison for his role in a multi-million dollar oil and gas Ponzi scheme in the Eastern District of Texas announced U.S. Attorney John M. Bales today.

Richard W. McFarland, Jr., pleaded guilty on Mar. 26, 2010, to mail fraud and was sentenced to 97 months in federal prison today by U.S. District Judge T. John Ward. McFarland was also ordered to pay restitution in the amount of $8,861,160.34.

According to information presented in court, McFarland was founder and President of Delta Interest, Inc., a company based in Marshall, Texas, which purportedly obtained working interests in oil and gas wells located within Texas and then offered portions of those interests for sale to the public. From 2003 to 2009, McFarland devised a scheme in which he falsely represented to investors that they were purchasing interests held by Delta Interest in wells located on various leases, when in fact, no such wells or leases existed. To further facilitate the scheme, McFarland sent investors fraudulent monthly production statements which contained fictional production and sales figures as well as supposed investor revenue amounts related to the non-existent wells. McFarland used a significant portion of the investor funds to make purported revenue payments on a regular basis to earlier-in-time investors. This funneling of proceeds received from new investors to previous investors induced new investors to participate and, in some instances, existing investors to contribute additional sums. He expended the remainder of investor monies for his own business and personal use. As a result of this scheme, McFarland fraudulently obtained in excess of $30 million from more than 350 investors who were residing in approximately 25 different states.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case was investigated by the Texas State Securities Board and the FBI and prosecuted by Assistant U.S. Attorney Frank Coan.

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What is Financial Fraud?
What is Financial Fraud?

Financial Fraud encompasses a wide range of illegal behavior - from mortgage scams to Ponzi schemes, credit card theft to tax fraud. Everyone is affected by financial fraud.