FBI and US tax officials interview Irish investors
12 November 2012
Posted by: SAIT Technical
By Maeve Sheehan (Irish Independent)
Executive summary (SAIT Technical)
Irish people who invested in Armadillo Energy oil fund in the US have been interviewed by the FBI and US tax authorities as part of an investigation into the company. The fund promised "potentially unlimited" returns. The fund targets individual investors as well as pension funds. According to its website, the investment does not require licensing, authorisation, or registration with the Financial Regulator.
IRISH people who invested tens of thousands into a US oil fund have been interviewed by the FBI and the US tax authorities as part of an investigation into an American company linked to the scheme.
Officials from the US Internal Revenue Service (IRS) and the FBI were in Ireland last month as part of an ongoing investigation into Armadillo Energy, an oil enterprise based in Oklahoma.
The garda fraud bureau also assisted with the investigation, as the American authorities do not have the jurisdiction to conduct inquiries here. However, Armadillo Energy has assured its Irish investors that the inquiry is merely "routine".
The oil fund -- which was sold to investors here through a Clontarf-registered business called Black Gold -- promised "potentially unlimited" returns on an initial investment of $55,000 (€43,000).
Dozens of Irish investors -- believed to include business people, pension funds and a prominent journalist -- bought into the scheme. While many have been received regular monthly returns on the minimum investment of $55,000, it is understood that a number have not been paid since last April.
It is believed that Black Gold is not implicated in any way in the investigation. The company has been assisting the US authorities with their inquiries there and is working to help investors who are due payment.
Mark Forman, of Black Gold, declined to comment while the investigation into Armadillo is under way.
The American tax authorities have said that they are precluded by law from commenting on its investigations. The Irish investors were informed of it by Armadillo Energy last month.
A letter from the company's communications director, Margaret Barr, informed them that tax authorities were investigating the company's "business processes" in Ireland. It said the letter was "routine" and a positive action for investors.
Contacted by the Sunday Independent, Ms Barr released a copy of the letter which she said was sent by the company to investors.
It said: "A routine investigation of Armadillo's business processes is currently under way in Ireland. Because the company's interests are located in the United States, the investigation will be steered by the US Internal Revenue Service and the FBI, with the assistance of the Irish police."
The letter continued: "It is highly probable that you may be contacted and asked to meet with one or more of the agencies involved. We wish to stress that should you receive such a request, you are under no legal or moral obligation to attend an interview. Your presence would be requested only on a 'volunteer' basis.
"You are completely free to decline participation, as we are cognisant that this is of no true value to you personally. Of course, you are also free to attend an interview if you choose to do so.
"Whatever your decision, we apologise in advance for any inconvenience, and trust you will understand that this investigation is a positive action as it will result in alleviating the concerns of some investors who may have been involved in, or have notice of, one of the numerous investment scams recently uncovered in Ireland."
The letter concluded: "In other news, some clients have requested more details regarding the recent changes at Armadillo. To that end, we have contracted an outside provider to furnish clients with a current Due Diligence Report. The report is on schedule for distribution by mid-November, 2012.
"At this time, we would also like to take the opportunity to remind you that should you plan a buy-out of your Armadillo investment, Stoney Plains will purchase your contract for its original value, minus production payments you have already received."
Although Ms Barr is listed as Armadillo's communications director, she indicated that she was not in a position to respond to formal questions submitted to the company by the Sunday Independent. She did she say she was not aware of any problems at the company, and said that the tax authority's investigation was entirely routine.
She said she was retained by the firm to help with the planned buy-out of Irish investors by Stoney Plains. She acknowledged that some investors were waiting for payments, but was assured that all payments would be honoured by November 15. The delays were caused when the oil drilling was shut down for 28 days last spring.
Black Gold is described in Irish company documents as representing an "oil-based fund from Oklahoma". The firm invited investors to "forward purchase" West Texas sweet crude oil at what it calls "discount rates".
The brochure says an initial investment of $55,000 buys 1,000 barrels of west Texas intermediate sweet crude oil. It promises a minimum return of $75,000 over seven years, a "reasonable expectation" of $100,000 and claims the potential returns are "unlimited", should oil prices rise.
The fund targets individual investors as well as pension funds. According to its website, the investment does not require licensing, authorisation, or registration with the Financial Regulator.
Armadillo Energy Inc is based in Tulsa, Oklahoma, and specialises in "purchasing and developing high value and exploitable oil fields across the state of Oklahoma." It says it has "a significant land bank in production and [is] committed to continuing to develop proven oil reserves".
The firm also came to the attention of the British Columbia Securities Commission in Canada. The securities commission will hold a hearing next year into allegations that Armadillo Energy is not licensed to trade in securities in Canada. According to the commission website, Armadillo partnership agreements were allegedly sold without being officially registered.