Robert R. McClanahan

Litigation Release No. 18079 / April 9, 2003

United States v. Robert R. McClanahan, 03 CR 33-ALLl (PB) (E.D.Tex.)

SECURITIES FRAUD PLEA AGREEMENT ENTERED AS TO PRESIDENT AND CHAIRMAN OF FIDELITY PETROLEUM CORPORATION

The Commission announced today that, on March 26, 2003, the United States District Court for the Eastern District of Texas accepted a plea agreement between Robert R. McClanahan and the United States Attorney for the Eastern District of Texas, Matthew D. Orwig. McClanahan was the Chairman and president of Fidelity Petroleum Corporation ("FPC"). McClanahan pled guilty to a violation of the antifraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933. McClanahan admitted that he falsely informed FPC investors that their funds would be pooled with other investors who had designated their funds for a similar, specific oil project, and that their funds would only be used toward that one specific oil project. However, rather than segregate the investor funds based on oil project, McClanahan admitted to commingling all investor funds into one bank account to be used on several other FPC oil projects. Sentencing is scheduled for August 8, 2003. Under the statute, McClanahan faces a maximum of five years in prison.

The Commission previously filed suit against FPC and McClanahan in August 2002. The Commission's complaint alleges that between January 1, 2000 and August 1, 2001, McClanahan and Fidelity conducted an unregistered offering of over $4 million in oil and gas securities via the use of cold-call telemarketing. Using information supplied by McClanahan, Fidelity's telemarketers promised investors that they would be able to recoup their initial investment within the first five to fifteen months. Furthermore, the defendants falsely represented that an investment in Fidelity wells would yield a yearly return of between 65% and 113% of the original investment. The defendants had no reasonable basis for these projections at the time they made them. Furthermore, contrary to the defendants' representations, the yield from an investment in Fidelity's commercially productive wells never exceeded 20% and was, on some wells, below six percent.

The Commission charged FPC and McClanahan with securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act. The Commission further charged Fidelity and McClanahan with securities registration violations pursuant to Sections 5(a) and 5(c) of the Securities Act. The Commission seeks an injunction against Fidelity and McClanahan to prevent future violations of the above provisions, disgorgement of all money raised by Fidelity and civil penalties against McClanahan. See SEC v. Fidelity Petroleum Corp., et al., Civil Action No. 3-02 CV 1796K (N.D. Tex.) (Litigation Release No. 17698)