When Beverly Hills chiropractor Farazah Rabbany invested $12,000 in an Oklahoma oil well at the urging of one of his patients, the returns were good for the first few months.
But by the time Rabbany had sunk several thousand dollars more into two other oil wells through Gates Oil & Gas and Oklahoma Energy Exchange LLC, the first well he had invested in had run dry and the rest of his money had vanished.
“They are very deceptive in the way they approach investors,” Rabbany said. “They have these very nicely prepared brochures that show very nice returns — and that's how they gain your trust.”
$7 million in red ink
Duncan-based Gates Oil & Gas Ltd. and three affiliated companies filed for bankruptcy the day before Thanksgiving. The companies' dozens of investors from across the United States — including Rabbany — are owed nearly $7 million.
State securities regulators moved to have a court-appointed receiver take control of the companies in October, after alleging the companies' owners used investor money for personal expenses, including to purchase vehicles and pay country club dues.
Both Gates Oil & Gas and Oklahoma Energy Exchange have ties with Duncan oilman Jimmy W. Gray, who has a history with state securities regulators. He previously ran a Duncan-based oil and gas company called Jasmine Inc., which was fined by the Oklahoma Securities Department in 1999 for selling unregistered securities. Jasmine also was cited by state regulators in Wisconsin and Pennsylvania in 2009 for selling unregistered securities after it sold working interests in at least six oil wells to investors.
Jimmy Gray's new business interests, Gates Oil & Gas and the Oklahoma Energy Exchange, marketed themselves to investors as third-generation oil and gas companies, although they had been in business in Duncan only since late 2009, according to court documents.
In a bid to wrest control of Gates Oil & Gas and its associated companies out of the hands of a court-appointed receiver, Jimmy Gray and son Michael Gray signed court documents to file for Chapter 11 bankruptcy last week for Gates, Oklahoma Energy Exchange, and two other associated investment funds, the Harrisburg Prospect Lease Funds I and II.
Receiver seeking assets
Oklahoma City attorney L. Vance Brown, who was appointed receiver for Gates Oil & Gas and its affiliated companies in October at the behest of the Securities Department did not authorize the bankruptcy filings. As receiver, Brown will try to recoup money for investors from the companies' remaining assets.
The balance of the money for the most part has disappeared. It's a financial mess — money from all investors was commingled across the board.”
L. Vance Brown,