More than a dozen investors who put up between $4 million and $5 million have settled a lawsuit with a bankrupt company in southern Kentucky over accusations that the oil drilling business they invested in scammed them with big promises and no results.
Whether the investors ever see any money is not clear.
U.S. Bankruptcy Judge Joan Lloyd must still approve the agreement between the plaintiffs and Mammoth Resource Partners, a Cave City, Ky.-based oil and gas company. Under the terms of the settlement, one third of each claim by the investors’ claims will fall behind creditors who have collateral. The remaining two-thirds of each claim would be paid only after all other creditors are paid and if there were any funds left.
Lloyd has set a late February deadline for creditors of Mammoth Resource Partners to object.
Joseph Woodruff, an attorney for the investors, declined to comment because the judge had not approved the settlement. Neither Roger Cory, president of Mammoth Resource Partners, nor a company spokesman returned several messages by The Associated Press.
The settlement stems from a suit brought in 2007 by a group of investors in Mammoth Resource Partners. The investors, individuals and companies in California, Colorado, Florida and Illinois, bought in to oil and gas drilling with investments ranging from $1.35 million to $34,750. The plaintiffs say Mammoth wasn’t licensed to sell securities in oil and gas drilling projects in Kentucky. They claim in one case, the company used a man as a “drill consultant” to sell the investment securities with a pitch of “You put five or six well programs together in this area and there’s going to be at least one winner. This is absolutely the best lease in the country.”
Mammoth Resource Partners didn’t disclose that Steve Burchett, the “drill consultant,” had been ordered to stop all drilling operations in Missouri and Pennsylvania and had reached an agreement in Kentucky to stop offering and selling securities, the lawsuit alleges.
The plaintiffs also alleged that Mammoth Resource Partners misrepresented how the money would be spent, with promises of funds being used for drilling and exploration going unfulfilled.
In the midst of the lawsuit filed, Mammoth filed for bankruptcy protection in 2010. Mammoth listed $1 million to $10 million in assets and between $500,000 and $1 million in liabilities at the time of the filing, but also listed each of the plaintiffs as a creditor with the amount owed as “unknown.”
The company is still in business, pitching on its web site the idea that “It Takes Energy To Make Energy.”
Mammoth Resource Partners and Cory ran afoul of Kentucky regulators in 2004, when the state sought to sanction the company for violating the Securities Act of Kentucky. The company and regulators reached a settlement in 2007, requiring compliance with the law and imposing a $20,000 fine, of which $15,000 was suspended.