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Oil and Gas Investment Fraud

If you are contemplating investing a large amount of money, oil and gas wells may be among the options you are considering. Regardless of what investment opportunities you're considering, it is wise to gather all the information you can so you can make an informed decision. And beware.

Some oil- and gas-well deals are offered by "boiler rooms," or fly-by-night operations that consist of nothing more than bare office space and a dozen or so desks and telephones. Boiler room operators employ slick telephone solicitors trained to use high-pressure sales tactics. These con artists will make repeated unsolicited telephone calls in which they follow a carefully scripted sales pitch that guarantees high profits. Some swindlers surround themselves with the trappings of legitimacy, including professionally designed color brochures.

In a fraudulent oil and gas scheme, scam artists promoting the investment often usually offer limited partnership interests to prospective investors who live outside the state where the well is located and outside the state the scam artists are calling from. This reduces chances for an investor to visit the site of a well or what may be a nonexistent company headquarters.

If you are subjected to a high-pressure sales pitch in an unsolicited telephone call, watch for the following tip-offs that you may be dealing with a swindler:

  • The oil well investment "can't miss."

  • There is very little risk involved.

  • The promoter has hit oil or gas on every other well previously drilled.

  • A lot of oil or gas has been found in an adjacent field.

  • A large reputable oil company is already operating near the company's leased property, or is planning to do so.

  • A decision must be made immediately to invest in order to assure the purchase of a one of the few interests remaining to be sold.

  • The deal is only available to a few lucky and specially chosen investors.

  • The salesperson has personally invested in the venture himself.

  • A tip from a reputable geologist has given the company a unique opportunity to make its venture a success.

You can reduce your risk of being swindled by being suspicious of any deal that promises a fantastic return at little risk. If you are unsure whom you are dealing with, check the company's reputation with your local Better Business Bureau, the U.S. Postal Inspection Service, or State Attorney General's Consumer Protection Unit. If you have been the victim of an oil and gas investment fraud in which the U.S. Mail was used, contact your local postmaster or the nearest Postal Inspector.