Business Crimes Hotline

Fortenberry founded Premier Investment Fund LP (Premier) in March 2010 to invest in a company started by country music manager and promoter, Jim Halsey. The latter is well-known in the country music industry, having worked with personalities like Ricky Nelson, Roy Orbison, and Reba McEntire. Fortenberry emailed Halsey after hearing him on a radio show discussing a new company he formed with his son offering to raise funds for the new venture. In pitching himself to Halsey, Fortenberry falsely claimed to have raised $25 million for projects in the past. In June 2010, Halsey and his son signed an agreement with Premier whereby Fortenberry promised to invest $3.5 million in Halsey's company.

Using his newly formed relationship with Halsey, Fortenberry convinced a friend, Dr. Allen Anderson, to invest in Premier. Dr. Anderson was persuaded based on Halsey's involvement that the venture was legitimate, and agreed to invest $100,000 in Premier. In the agreement, Fortenberry promised to use generally accepted accounting principles and to provide Anderson with profit and loss statements every year. Fortenberry did neither, and later admitted that he did not know what it meant to use GAAP and had never prepared a profit or loss statement for any investors. Likewise, he had never prepared a balance sheet or income statement for Premier. When questioned about this at his SEC hearing in October 2014, Fortenberry stated there was no need for any financial records beyond bank statements because “[i]n today's world you plug in a piece of software like Quicken, and in about 20 minutes you have a statement that would have rivaled an accounting office of 20 men just 15 years ago.” The SEC alleged that this and other statements made by Fortenberry at the hearing were false and misleading.

Fortenberry did, however, periodically send Dr. Anderson letters and invoices in which he falsely stated that Premier was earning money. He misrepresented what projects Premier was working on and what additions he had made to its portfolio. He also encouraged Dr. Anderson to reinvest his profits. Moreover, Fortenberry convinced a second investor, Michael Nasti, to invest $200,000 in Premier.

Premier never actually made any money. Out of the $297,700 invested by Dr. Anderson and Mr. Nasti, Fortenberry sent only $151,500 of the promised $3.5 million to the Halseys. He siphoned off the rest for his own groceries, child support payments, plane tickets, hotel rooms and Netflix accounts.

After the SEC began investigating Fortenberry for misuse of Premier investor funds, he launched a new company in his son's name, Wattenberg Energy Partners (WEP). Fortenberry used his son's name in order to avoid the SEC and state securities regulators in two states — Texas and Pennsylvania — who had issued cease and desist orders against him in 2004 for selling unregistered oil well securities without a license.

WEP was ostensibly engaged in the business of raising funds for oil and gas projects in Northern Colorado. Fortenberry used a network of independent sales people to solicit investors through cold calling. He sold WEP to investors as an oil operator that developed oil projects, bought land, hired drillers, and oversaw projects. In phone calls and WEP marketing materials, he referred to individuals in the oil business as employees of the company. In reality, these individuals had no association with WEP and the company was merely a fundraiser with no control over the projects in which it invested.

As with Premier, Fortenberry sent investors false and misleading updates and invoices describing the progress on projects. He invested a portion of investors' money in various oil projects, but pocketed the vast majority of it. For example, Fortenberry raised $603,750 for WEP and lost investors $591,211. At the October SEC hearing, Fortenberry falsely testified about his involvement with WEP, stating that “No, I don't run that company. That is my son's company. I don't work for this company at all.”

In August 2016, Fortenberry was indicted for both schemes with three counts of mail fraud, two counts of wire fraud, and one count of obstructing an official proceeding. He pled guilty in November 2016 and was sentenced to 78 months in prison on March 3, 3017. Fortenberry admitted that the total loss to his victims was $887,311.

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Business Crimes Hotline was written by Dennis Mahoney, an associate at Mayer Brown in Washington, DC.

TEXAS

Texas Man Sentenced to 78 Months for Fraud

On March 3, Stanley Jonathan Fortenberry was sentenced to 78 months in prison for operating fraudulent investment companies and obstructing a Securities and Exchange Commission (SEC) investigation. United States District Judge Sam R. Cummings of the Northern District of Texas also ordered Fortenberry to pay $890,310 in restitution and to forfeit $311,254.

Fortenberry founded Premier Investment Fund LP (Premier) in March 2010 to invest in a company started by country music manager and promoter, Jim Halsey. The latter is well-known in the country music industry, having worked with personalities like Ricky Nelson, Roy Orbison, and Reba McEntire. Fortenberry emailed Halsey after hearing him on a radio show discussing a new company he formed with his son offering to raise funds for the new venture. In pitching himself to Halsey, Fortenberry falsely claimed to have raised $25 million for projects in the past. In June 2010, Halsey and his son signed an agreement with Premier whereby Fortenberry promised to invest $3.5 million in Halsey's company.

Using his newly formed relationship with Halsey, Fortenberry convinced a friend, Dr. Allen Anderson, to invest in Premier. Dr. Anderson was persuaded based on Halsey's involvement that the venture was legitimate, and agreed to invest $100,000 in Premier. In the agreement, Fortenberry promised to use generally accepted accounting principles and to provide Anderson with profit and loss statements every year. Fortenberry did neither, and later admitted that he did not know what it meant to use GAAP and had never prepared a profit or loss statement for any investors. Likewise, he had never prepared a balance sheet or income statement for Premier. When questioned about this at his SEC hearing in October 2014, Fortenberry stated there was no need for any financial records beyond bank statements because “[i]n today's world you plug in a piece of software like Quicken, and in about 20 minutes you have a statement that would have rivaled an accounting office of 20 men just 15 years ago.” The SEC alleged that this and other statements made by Fortenberry at the hearing were false and misleading.

Fortenberry did, however, periodically send Dr. Anderson letters and invoices in which he falsely stated that Premier was earning money. He misrepresented what projects Premier was working on and what additions he had made to its portfolio. He also encouraged Dr. Anderson to reinvest his profits. Moreover, Fortenberry convinced a second investor, Michael Nasti, to invest $200,000 in Premier.

Premier never actually made any money. Out of the $297,700 invested by Dr. Anderson and Mr. Nasti, Fortenberry sent only $151,500 of the promised $3.5 million to the Halseys. He siphoned off the rest for his own groceries, child support payments, plane tickets, hotel rooms and Netflix accounts.

After the SEC began investigating Fortenberry for misuse of Premier investor funds, he launched a new company in his son's name, Wattenberg Energy Partners (WEP). Fortenberry used his son's name in order to avoid the SEC and state securities regulators in two states — Texas and Pennsylvania — who had issued cease and desist orders against him in 2004 for selling unregistered oil well securities without a license.

WEP was ostensibly engaged in the business of raising funds for oil and gas projects in Northern Colorado. Fortenberry used a network of independent sales people to solicit investors through cold calling. He sold WEP to investors as an oil operator that developed oil projects, bought land, hired drillers, and oversaw projects. In phone calls and WEP marketing materials, he referred to individuals in the oil business as employees of the company. In reality, these individuals had no association with WEP and the company was merely a fundraiser with no control over the projects in which it invested.

As with Premier, Fortenberry sent investors false and misleading updates and invoices describing the progress on projects. He invested a portion of investors' money in various oil projects, but pocketed the vast majority of it. For example, Fortenberry raised $603,750 for WEP and lost investors $591,211. At the October SEC hearing, Fortenberry falsely testified about his involvement with WEP, stating that “No, I don't run that company. That is my son's company. I don't work for this company at all.”

In August 2016, Fortenberry was indicted for both schemes with three counts of mail fraud, two counts of wire fraud, and one count of obstructing an official proceeding. He pled guilty in November 2016 and was sentenced to 78 months in prison on March 3, 3017. Fortenberry admitted that the total loss to his victims was $887,311.

*****

Business Crimes Hotline was written by Dennis Mahoney, an associate at Mayer Brown in Washington, DC.