Second man charged with selling fake mineral rights
Forged signatures, fake companies and phony deeds were the tools that two men used to siphon some $1.7 million from gas companies, according to federal charges filed Thursday and last month, in a case that industry experts called very unusual.
Charged Thursday was William J. Ray, 29, of Monroeville, who is accused of mail fraud and wire fraud in connection with six-figure checks from Range Resources of Fort Worth, Texas, and Nashville, Tenn.-based Buffalo Royalties LLC. In addition to seeking a criminal conviction, U.S. Attorney David J. Hickton's office is seeking the forfeiture by Mr. Ray of $543,146 in what was characterized as the proceeds of fraud.
The charge against Mr. Ray follows the indictment last month of Derek A. Candelore, 33, of Jeannette, who also faces mail and wire fraud charges and from whom prosecutors want $1.18 million. His attorney said Thursday that he was duped by Mr. Ray.
Federal prosecutors accused both of ginning up documents indicating that they had mineral rights to Washington County properties, and then selling the faux rights to real drillers.
"This is highly unusual in my experience," said Lou D'Amico, president and executive director of the Pennsylvania Independent Oil and Gas Association. Extraction firms try hard to ensure that they're buying legitimate leases, and send registered landowners copies of applications for permits to drill, so the sale of fake mineral rights isn't likely to go unnoticed for long.
"When the rig shows up, somebody's going to come to the realization, 'Hey, what's this rig doing on my property?' " Mr. D'Amico said.
Mr. Candelore and Mr. Ray portrayed themselves as "landmen" who secured mineral rights and sold them to drillers, according to federal prosecutors. They created firms or opened bank accounts in names including Clark Lumber Co., McComb Hines & Beggs Trust, Davis Minerals LLC, Marcellus Land Services, Stallion Oil and Gas, and Blue Bell Minerals LLC, according to filings in the cases against them.
By forging the signatures of property owners and the signatures and stamps of notaries on leases and deeds, they created a paper trail to back up claims that they had mineral rights to properties, prosecutors allege. Drillers accepted the paperwork.
In 2011 and 2012, according to the charges, Mr. Ray fraudulently obtained checks of $250,958 and $452,095 from Range Resources and of $381,051 from Buffalo Royalties. The wire fraud charge alleges a $416,500 transfer from Blue Bell Minerals to Stallion Oil and Gas.
Range Resources discovered "oddities" in the leases and reported them to authorities, according to the company's spokesman, Mark Windle. He said the firm is working with the landowners to release the mineral rights back to the landowners.
"Mr. Candelore did not defraud these landowners," said his attorney, Steve Stallings. "In fact, he was himself defrauded by William Ray."
Mr. Stallings said his client was "a dupe" who provided cash and signed papers at Mr. Ray's direction.
Mr. Ray and his attorney could not be reached for comment. He is scheduled to plead guilty Sept. 18. A November filing in a civil forfeiture case filed by Mr. Hickton's office indicated that Mr. Candelore turned over $679,263 to investigators.
"When [Mr. Candelore] learned that the mineral rights had apparently not been signed over, he returned that money immediately, which is of course what any law-abiding citizen would do," Mr. Stallings said. "He did not forge any deeds and is looking forward to his day in court, where he fully expects to be exonerated."
Mr. Candelore is scheduled to be arraigned Tuesday.
First Published September 5, 2013 9:46 am
