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BILLINGS, Mont. (AP) — Six California residents are being held on fraud and conspiracy charges for an alleged scam in which investors were promised a stake in a fictitious oil and gas project on Montana's Fort Peck Indian Reservation, authorities said Tuesday.
The first of the suspects, Mike Campa of Yorba Linda, Calif., made an initial appearance Tuesday in Great Falls before U.S. Magistrate Judge Keith Strong.
Campa did not enter a plea and said he plans to hire his own attorney, said Assistant U.S. Attorney Carl Rostad. Campa is currently detained.
An affidavit submitted by an FBI agent in the case shows that beginning in 2009, dozens of people across the country invested about $673,000 into a drilling project being promoted by the defendants.
Potential investors contacted by email and telephone were promised lucrative returns: Their initial investments were to be repaid within six months and then regular monthly checks would begin flowing thereafter.
To make the story more believable, the defendants presented a copy of a 2006 letter from the federal Bureau of Indian Affairs approving three oil and gas leases on land owned by a Fort Peck tribal member. The northeastern Montana reservation sits atop the Bakken oil patch, one of the richest oil producing regions in the U.S.
But those federal leases had been canceled for non-payment in 2007, court documents show. And authorities said the two companies created by the defendants — Domestic Energy Solutions and U.S. Oil and Gas LLC — never really pursued the oil and gas project, which was also said to include a refinery, pipelines and other infrastructure.
"Neither company has ever made any meaningful efforts to spend the money on development of oil and gas ventures at Fort Peck or anywhere else," FBI agent David Burns in Glasgow wrote in his affidavit.
The six defendants were arrested by authorities Aug. 24 in California, documents show.
Three of them — Suzette Gal and sons Andras and Krisztian Zoltan Geoge Gal — were released on bond pending Sept. 11 court appearances in Montana, Rostad said. The other defendants are Steven William Carpenter, who is currently detained awaiting a hearing in California, and Dana Yvonne Kent, who was detained and being transferred to Montana Tuesday.
Indictments have not yet been filed in the case. "We anticipate formal charges will be forthcoming," Rostad said. Rostad declined to discuss further details in the case.
The defendants could not be immediately reached for comment.
Court-appointed attorney John Barton, who represented Andras Gal following his arrest in California, said he was assigned to the case only for the detention hearing and could not speak to the allegations outlined by investigators.
Investor George Jordan, a retired veterinarian from Centereach, N.Y., said Tuesday that he invested twice with the company. That included $7,500 in 2009, according to court records, and then another $2,000 to $3,000 in recent months.
Although Jordan did not know about the criminal investigation until being contacted by an Associated Press reporter on Tuesday, Jordan said he already had decided he wasn't going to get his money back.
"They were going to drill for oil and they were going to get some kind of refinery going," he said. "But none of the promises about getting paid or money flows or staying in reasonable contact were achieved. I'm developing very little faith in the company."
Jordan said he was first approached several years ago by Campa, who touted a supposed family connection with the Fort Peck tribe that Jordan said made his tale more plausible. After nothing happened for several years, Jordan said he was approached within the last year by Carpenter, who said he was taking over the company and expected it to soon turn a profit. Jordan said he invested more money in the scheme after Carpenter assured him the project would succeed.
"He promised a contract but I never got it," Jordan said.
A criminal complaint filed by prosecutors last month detailed three alleged offenses by the defendants: conspiracy to commit fraud, which carries a maximum penalty of five years prison, and investment fraud by mail and investment fraud by wire, which carry a maximum 20 years apiece. Each of the three offenses also carries a maximum fine of $250,000.
Two of the defendants have prior federal fraud convictions, according to court records and Burns' affidavit.
Campa pleaded guilty to two counts of wire fraud in 1994 in a telemarketing fraud case targeting the elderly. Carpenter was convicted and sentenced in 1994 to 30 months in prison in California on charges including conspiracy to commit mail fraud.