Friday August 29, 2008

Investors may lose $65 million from alleged pyramid scheme
ESTHER FUNG
esther@mediacorp.com.sg

INVESTING in oil and gas seems to be the in thing these days, but a group
of South-east Asian investors risk losing about US$46 million ($65
million) after investing in scheme offered by a United States firm which
is alleged to have engaged in fraud.

Over 2,000 investors from Singapore, Malaysia and Indonesia have fallen
victim to this alleged US pyramid scheme, said OilPods Singapore, which
claims it innocently marketed the scheme here. The bulk of the investors
come from Singapore.

The investors bought working interests in oil and gas leases offered by a
US company called Powder River Petroleum International and were expecting
to receive high yields from its operations.

But earlier this month, an initial US official receivers’ report showed
Powder River had misled OilPods and others by making monthly payments to
investors using fresh funds received from new investors - not profits
generated from oil and gas as expected.

OilPods, which marketed the leases in Singapore, is suing the Oklahoma
firm for investments made in the last four years. The petition, lodged in
the US, alleges that Powder River’s “‘programme’ … is nothing more than
an illegal pyramid scheme utterly dependent on an ever increasing number
of new investors to pay existing ones,” and that “the defendants have
employed schemes, artifices and practices of business which have operated
as a fraud and deceit”.

OilPods told Today that it did not lodge a police report in Singapore
because it had been advised by the authorities here that there were
jurisdictional issues that would be better addressed is in the US.

Powder River is currently under investigation by the Oklahoma Department
of Securities and the receiver’s report dated Aug 7 claimed that the
firm’s chief executive Brian Fox had acted in a fraudulent manner: “During
2007, a total of US$4.4 million in interest payments were made to those
investors, of which US$3.3 million came from funds received from
subsequent investors, not profits generated by the company from oil and
gas production.”

Such investment practices are called Ponzi schemes - a term used last year
to describe the alleged operations of the controversial multi-level
marketing firm Sunshine Empire here. The firm is under police
investigation and is on the Monetary Authority of Singapore’s investor
watchlist. Ponzi are dependent on an ever-increasing flow of new money
from investors in order to keep going.

OilPods chief executive Mark Chang alleges in his firm’s petition that the
Powder River made false and misleading statements about its securities in
oil and gas leases since 2003, which convinced the Singapore firm to
market these securities to investors here. When asked what it is doing to
assure investors, OilPods said, “The investors had entered into contract
with Powder River directly to purchase working interest from Powder River.
OilPods is in no position to assure investors of Powder River’s obligation
to (them).”

Mr Thong Chee Kun, a lawyer from Rajah and Tann not involved in the case,
said, “Such cases of alleged fraud of an overseas firm (either directly or
through an agent) is not unheard of, but this is one of the larger scale
ones.”

Visit TODAYonline website at http://www.todayonline.com
THIS DOCUMENT AND OTHER DOCUMENTS PROVIDED PURSUANT TO THIS PROGRAM ARE
FOR INFORMATIONAL PURPOSES ONLY.The information type should not be
interpreted to be a commitment on the part of MediaCorp Press Ltd and
MediaCorp Press Ltd cannot guarantee the accuracy of any information
presented after the date of publication. INFORMATION PROVIDED IN THIS
DOCUMENT IS PROVIDED ‘AS IS’ WITHOUT WARRANTY OF ANY KIND. The user
assumes the entire risk as to the accuracy and the use of this document.
TODAYonline newsletter e-mail may be copied and distributed subject to the
following conditions:
1. All text must be copied without modification and all pages must be
included
2. All copies must contain MediaCorp Press Ltd’s copyright notice and any
other notices provided therein
3. This document may not be distributed for profit