North Texas Man Sentenced to 25 Years in Oil Field Scam

Apr 26

Chad Michael Hays of McKinney, who was convicted of fraud and 16 other charges in connection with the sale of nearly $400,000 in fraudulent oil and gas investments, was sentenced to 25 years in state prison on April 25 in Hunt County state district court.

A Hunt County jury last week convicted Hays on one count of securities fraud and eight counts each of selling unregistered securities and acting as an unregistered dealer or agent. Judge Steve Tittle of the 196th District Court sentenced Hays to 25 years on the securities fraud conviction and ordered him to pay $372,000 in restitution. Tittle also sentenced Hays to a total of 10 years in prison on the other charges. The sentences will run concurrently.

Hays was one of five North Texas men indicted for their role in Mack Diamond Energy LLC, a company based in the small Hunt County town of Wolfe City. Hays is the first of the defendants to be convicted in the scheme, which involved the misuse of investor funds and lying to investors about Mack Diamond's earlier failed drilling projects. All told, the Mack Diamond Energy scheme raised $2.6 million from about 40 investors.

Hays failed to tell investors that money raised for a previous drilling project was diverted to other uses - including his wedding and personal expenses he and his father, Christopher Hays, incurred. Chad Hays also failed to disclose that Mack Diamond had breached a previous agreement by failing to pay a drilling contractor it had hired.

Securities Commissioner Benette L. Zivley said the case highlights the growing problem of fraudulent offerings in oil and gas investments, a situation fueled by promoters seeking to capitalize on investors who may see the opportunity for profit in rising energy prices.

"Texas, because of its long history in oil and gas production, has always been fertile ground for fraudulent energy promoters,"Zivley said. "It's important to recognize that oil and gas investments are highly speculative and not appropriate for many individual investors. It takes a tremendous amount of expertise and due diligence to determine what constitutes a legitimate investment and not a fraud."

Zivley thanked the Hunt County District Attorney's Office for its assistance in the prosecution.

"Investment fraud can take root anywhere, from the largest cities to the most rural regions of the state,"Zivley said. "Cooperative prosecutions and enforcement efforts help ensure that the citizens of Texas are protected from fraud, no matter where it occurs."