The Duncan Banner

Local News

March 16, 2014

Duncan family leaves tangled legal mess in oilpatch

DUNCAN — A Duncan oilman, his two sons and a financial officer are  implicated in a series of questionable oil-field investment ventures in which more than $5 million is unaccounted for, court records show.

The accusations against Jimmy W. Gray, his two sons and a chief financial officer for  five oil companies connected to the family are revealed in an affidavit filed  by a court-appointed receiver.

No criminal charges have been filed and at least one attorney who has represented the Gray family in the past denied any wrongdoing has been committed, court records show.

Even so, a bankruptcy judge on Feb. 19 rejected a request for bankruptcy protection by the Gray family oil interests.  U.S. Bankruptcy Judge Sarah A. Hall has retained jurisdiction over the company’s questionable financial transactions.

Those transactions have been scrutinized by court-appointed receiver L. Vance Brown, an Oklahoma City attorney, and other lawyers who spent nearly 300 hours sorting through thousands of  business records associated with the Gray family’s oil ventures.

“The simple story is they raised a whole lot of money and spent very little of it drilling for oil and gas,” Brown said in an interview with The Banner.

About $5.7 million cannot be accounted for, records show.

“I’m going to be looking for that money,” Brown said.

Jimmy W. Gray, patriarch of the family, his sons Greg and Michael, and Lance Bowman, chief financial officer for five of the companies under suspicion, either could not be reached or declined comment on the investigation.

“I don’t want to talk about it,” said Michael Gray.

Bowman said, “I’m outta there. I don’t have anything to say.”

The court-appointed receiver’s affidavit alleges Jimmy Gray and one or more of his sons promoted oil and gas drilling ventures to non-industry investors during a two-year period, then sold nearly all of the company’s assets in 2011 without telling investors or giving them any sale proceeds.

The assets of that company, known as Jasmine, were then taken over by a different company called Oklahoma Energy Exchange (OEE) in order to avoid regulators in Pennsylvania and Wisconsin, which had consent orders with Jimmy Gray to stop illegally selling unregistered securities, according to the court-appointed receiver’s affidavit.

OEE then raised about $5.7 million to acquire oil and gas leaseholds in Stephens County, where 91 percent of the money was supposed to be spent to buy leases selected with “proprietary seismic data owned by Jimmy Gray,” documents state.

The seismic data apparently was phony but was “sold” to two of Jimmy Gray’s companies to swindle investors, in the opinion of the court-appointed receiver.

“In actuality, OEE spent $256,020.27, or approximately 4.5 percent of the invested capital to acquire leases,” the affidavit states. “The remaining money was used to fund the purchase of a drilling rig; to purchase various trucks and vehicles used by the principals and their family members; to purchase real property for family members; and/or was simply misappropriated by the principals, Jimmy Gray and Greg Gray,” the court affidavit stated.

OEE’s transactions included 10 checks totaling $69,000 payable to Greg Gray.

“Jimmy Gray then forged Greg Gray’s signature, endorsed and cashed the checks ... Jimmy Gray blamed Greg Gray for absconding with OEE’s cash, but the records the Receiver reviewed demonstrate and document that such statements by Jimmy Gray were misleading. It further appears that Jimmy Gray, who has outstanding federal and state tax liens against him in excess of $1 million, intended to avoid income tax obligations on money he received from OEE by claiming the money was paid to Greg Gray.”

Jimmy and Greg Gray did not dispute they used illegal means to attract investors and that promoters received undisclosed 30 percent commissions despite assurances to investors that no commissions would be paid on money raised, documents state.

Most of OEE’s financial records are missing or destroyed, Brown wrote in his court affidavit. Jimmy Gray and Greg Gray blame each other for the missing records and the missing $5 million in investors’ money, Brown wrote.

OEE was shut down in July 2012 and its remaining cash was transferred to a new company, Gates Oil & Gas, Ltd., which was managed by Jimmy Gray and Bowman and which used the same illegal investor promotional activities, court documents say.

It was the Gates company that failed to win bankruptcy protection from creditors last month.

“In the opinion of the receiver, Gates was formed for the purpose of separating itself and its principals from both OEE and Jasmine in order to effectively start with a ‘clean slate’ and continue ‘business as usual.’ The purpose being to continue to solicit funds from unwitting investors to enable a continuous stream of investor funds in the face of substantial financial improprieties and mismanagement by the principals of OEE and Jasmine,” the Receiver’s affidavit concluded.

The court-appointed receiver wrote that the U.S. Attorney should review bank records of OEE to determine if criminal charges should be filed and that the Gates company misappropriated between $1.3 and $1.9 million of invested funds.

Moreover, more than $1.6 million of investor money “have been distributed to Jimmy Gray, Greg Gray and/or, to a lesser degree, Lance Bowman and other insiders, in the past 24 months,” the receiver’s report said.

Despite the legal turmoil, Gates Oil & Gas, LTD maintains a company blog on the Internet, where it promotes the oil patch roots of the Jimmy Gray, one of his sons and  their erstwhile chief financial officer.

“Jimmy W. Gray was born in Duncan, Okla., in the ‘Heart of Oil’ Country. His is the third generation to live on the family’s homestead. When growing up, Jimmy literally had Halliburton Industries as a neighbor, which piqued his interest in the oil industry. Jimmy drilled and completed his first well at the age of 23...

“Michael K. Gray, was born in Duncan, Oklahoma during the oil boom of 1964. Throughout his high school years, he worked as a roustabout, pumper and roughneck...

“Lance Bowman has over 26 years of experience in the financial services and banking industry with 10 years being an Executive Manager...”

1
Text Only
Local News
  • 7-24 Rotary Mike Nelson 0087.jpg Nelson discusses Duncan’s water supply during Rotary meeting

    Duncan Vice Mayor Mike Nelson doesn’t think Duncan residents need to worry about the city’s water supply.
    Despite Stage 3 water rationing, which limits outdoor watering to midnight to 9 a.m. Wednesdays and Saturdays, Nelson said the forethought of Duncan’s forefathers, who were also Duncan Rotary members, have created a backup system for the city.

    July 24, 2014 1 Photo

  • 7-24 Douglass Pool Update 0081.jpg What’s dug up at cemetery goes down at spray pad project

       Dana Stanley knew just where to go to get fill dirt for the Douglass Park spray pad project -- the local cemetery.
       The city is building a splash pad on top of what used to be Douglass Pool, but  before that happens  a fairly large hole has to be filled.

    July 24, 2014 1 Photo

  • Traffic stop leads to drug arrest for Duncan man

    Bail was set at $250,000 Wednesday for a Duncan man who was allegedly found to have two bags of methamphetamine and two bags of marijuana in his home.
    Duncan Police Officer Suzannahe Weir said she stopped Steven Fontinott, 62,  for a traffic violation on Saturday.

    July 24, 2014

  • Man drives drunk, rolls truck in the process

    A felony warrant was issued for a Marlow man who was allegedly found to have been driving drunkenly following a rollover accident on Nabor Road.
    Oklahoma Highway Patrol Trooper Darin Carman said William Waller, 33, was pinned under the steering wheel of his truck and smelled of alcohol.

    July 24, 2014

  • Hard year for peaches doesn't dampen summer tradition

    A rusting, silver-colored water tower tells visitors to this rural town between Muskogee and Tulsa that they've come to the “Peach Capitol of Oklahoma.”
    Residents of Stratford, the state’s other self-proclaimed peach capital, might beg to differ. Even so, Porter is known for its peaches, and every year thousands of people flood this town of about 600 residents to taste and celebrate the local crop during the three-day Peach Festival.

    July 24, 2014

  • Gun and drugs found in man’s car as he flees

    Bond was set at $10,000 Wednesday for a Duncan man who allegedly left a pistol, four bags of methamphetamine, a bag of marijuana and paraphernalia in a car after running away from the vehicle.
    Duncan Police Officer Anna Van Dyck said Jahmar Sullivan, 31, opened the passenger door of the car he was riding in and fled while she was conducting a traffic stop on July 6.

    July 24, 2014

  • 7-24 WaterColor.jpg Artistic expression colors her world

    Sixteen-year-old Darien Vassella is a painting prodigy.
    The Duncan native took part in a two-day watercolor class at the Chisholm Trail Heritage Center to further hone her talents.
    Vassella said her family realized she could paint when she took her first art class at 13. Since then, the young artist has sold three paintings.

    July 24, 2014 1 Photo

  • Nighttime run to benefit fight against exploitation

    Duncan’s second annual She Is Safe Run to the Dark 5K will be held at 9 p.m. on Friday.
    The run will be begin and end at Duncan Regional Hospital.
    She Is Safe is a non-profit organization committed to globally  preventing, rescuing and restoring women and girls from abuse and exploitation.

    July 24, 2014

  • That's kind of hot!

    Unexpected isolated thunder storms moved through Stephens County on Wednesday evening with areas receiving less than one-tenth of an inch of precipitation.

    July 23, 2014

  • City Council Water rationing specter suddenly produces a crowd

    The Duncan Council met again on Tuesday, as it does twice a month, but there was something different about the latest gathering -- there were more than a handful of people in the audience.

    July 23, 2014 1 Photo

Poll

Should the date for The World's Largest Garage Sale be changed from the third weekend in July to sometime in October to take advantage of cooler weather like we had this past weekend?

No. It's better in the summer cause kids are out of school.
Yes. More shoppers would come during nice fall weather.
Either time is fine.

     View Results
AP Video
Raw: Gunmen Attack Iraqi Prison Convoy Plane Leaves Ukraine With More Crash Victims The Rock Brings Star Power to Premiere Raw: Families Travel to Taiwan Plane Crash Site Arizona Execution Takes Almost Two Hours Gen. Odierno Discusses Ukraine, NATO at Forum Gaza Fighting Rages Amid Cease-Fire Efforts Mint Gives JFK Coin a Face-lift Creative Makeovers for Ugly Cellphone Towers Ariz. Inmate Dies 2 Hours After Execution Began Crash Kills Teen Pilot Seeking World Record LeBron James Sends Apology Treat to Neighbors Raw: Funeral for Man Who Died in NYPD Custody Migrants Back in Honduras After US Deports Israeli American Reservist Torn Over Return