UPPER CUMBERLAND – The U.S. 6th Circuit Court of Appeals recently upheld the convictions and sentences of two brothers – including one from Cookeville – who defrauded thousands of investors in an oil and gas drilling scheme.
Michael D. Smith, 58, of Cookeville, and 53-year-old Christopher Cello Smith of Prestonsburg, Ky., ran a company called Target Oil and Gas. Prosecutors said the company asked investors to fund drilling projects in Kentucky, Texas, West Virginia and Tennessee but used fraudulent marketing materials and false geological surveys to persuade them, according to the Associated Press.
Michael Smith is serving a 10-year sentence and has been ordered to pay $5.5 million in restitution. Christopher Smith is serving a five-year sentence in federal prison and has been ordered to pay $1.6 million in restitution.
The case centered on how the men raised money for Target Oil. Prosecutors contend the company raised $15 million from investors between 2003 and 2008, but only paid out about $1.19 million in royalties.
Several states issued a cease-and-desist order against Target Oil and Gas that prohibited the company from practicing business in those states. Prosecutors said the Smith brothers concealed this information from potential investors.
Michael Smith was president of Target Oil and Gas in Albany, Ky., and controlling interest holder of Kentucky Indiana Oil and Gas in Danville, Ky. His brother, Christopher Smith, was the company’s vice president.