U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20283 / September 14, 2007
SEC v. Gary M. Milby and Mid-America Energy, Inc., Civil Action No. 1:07-cv-156-M (JHM) (W.D. Ky. September 13, 2007)
SEC Sues Promoters Who Defrauded Seniors in $19 Million Oil-and-Gas Investment Scheme
On September 13, 2007, the Securities and Exchange Commission filed a lawsuit against Gary M. Milby and his company Mid-America Energy, Inc., alleging that they operated a fraudulent oil-and-gas investment scheme that raised over $19 million from approximately 375 investors, including many senior citizens. Milby, age 53, resides in Campbellsville, Kentucky. Mid-America is based in Portland, Tennessee.
The SEC’s complaint alleges that, in 2005 and 2006, Milby and Mid-America offered and sold interests in at least 30 oil-and-gas investment programs based on false and misleading information. The defendants falsely claimed that the investments were registered with the Commission and misrepresented the returns that investors would receive. They provided baseless claims regarding oil production and falsely asserted that Mid-America investors were making huge profits. The defendants also concealed important information concerning Milby’s recent personal bankruptcy and his seven-year bar from drilling in Texas. Moreover, they did not inform investors that several state securities agencies had found the investments to be illegal and ordered the defendants to halt the offerings in those states. Instead, they claimed, among other things, that Mid-America was “leading the way in domestic oil exploration.” The complaint further alleges that the defendants misrepresented the use of the offering proceeds and the production revenues and misappropriated and misapplied approximately $12 million of the funds raised.
The SEC alleges that Milby and Mid-America violated the securities-registration, broker-registration, and antifraud provisions of the federal securities laws — specifically, Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks a permanent injunction, disgorgement with prejudgment interest, a civil money penalty, and an accounting against each defendant.
The Commission acknowledges the valuable assistance of the Tennessee Department of Commerce and Insurance, the Arizona Corporation Commission, the California Department of Corporations, the Kentucky Division of Oil and Gas, the Pennsylvania Securities Commission, and the Texas State Securities Board in bringing this case.