BOWLING GREEN, Ky. – The owner of U.S. Energy Partners, Inc. of Bowling Green, Kentucky, was charged by grand jury indictment on September 9, 2015 with wire fraud and money laundering for a scheme that cost investors $1,370,000 announced U.S. Attorney John E. Kuhn, Jr. The indictment was unsealed on October 5, 2015.
Clay Shelton, 46, of Bowling Green, was charged with three counts of wire fraud and six counts of money laundering for devising a scheme that fraudulently obtained money from eleven investors.
According to the indictment, between March 2011 and September 2012, Shelton created Monterey Pipeline Partners, LLC, purportedly to purchase the Monterey Pipeline in Tennessee. Shelton also operated Escrow 2011 LP, an investment partnership he created to fund an escrow account to purchase and operate the Monterey (gas) Pipeline. Further, Shelton operated Brakaw Energy Management LLC, which was created by Shelton to manage and operate the Monterey Pipeline once he completed the purchase.
From March 2011 through September 2012, Shelton solicited $1,370,000 from eleven investors for the purchase of the Monterey Pipeline. He fraudulently represented to the investors that their funds would be held in escrow as a down payment until he was able to complete financing to purchase the Monterey Pipeline (about 60 days). Once the loan closed, investors would receive either a 25 percent return on their investment or Monterey Pipeline would buy their interest in any Tennessee well program they previously purchased through U.S. Energy Partners. Investors were, therefore, assured they would receive their investment back in at least 60 days and that their investment would be held in escrow.
According to the indictment, Shelton misappropriated $1,000,000 of investor funds, which were wired into Escrow 2011, by investing the majority in collateralized mortgage obligations. An additional $125,000 of investor funds deposited into the Escrow 2011 fund were used to pay operating and business expenses of U.S. Energy Partners. Another $245,000 of investor funds initially deposited into the Monterey Pipeline Partners LLC’s account were used to pay Brakaw and U.S. Energy Partners’ operating and business expenses and other miscellaneous expenses.
If convicted at trial, Shelton could be sentenced to no more than 20 years per count for counts one through three and no more than ten years per count, for counts four through nine. Further, Shelton could be required to pay a fine of $2,250,000 and serve a 27 year period of supervised release.
This case in being prosecuted by Assistant United States Attorney Bryan Calhoun and is being investigated by the IRS Criminal Investigation Division.
The indictment of a person by a Grand Jury is an accusation only and that person is presumed innocent until and unless proven guilty.