Guilty Plea in Petro America Securities Fraud Case
KANSAS CITY, Mo. — An Arizona man pleaded guilty in a Kansas City federal court on Friday to his role in a $7.2 million securities fraud conspiracy that prosecutors say victimized thousands of investors across the United States and Canada who bought shares in Petro America Corporation, which was purported to be a profitable company with $284 billion in assets.
Brian Langenbach, 43, of Globe, Arizona, pleaded guilty before U.S. District Judge Brian C. Wimes to the charge contained in a June 15, 2011, federal indictment.
Prosecutors say that by pleading guilty, Langenbach admitted that he participated in a conspiracy to commit securities fraud and wire fraud. Contrary to the fraudulent representations Langenbach and others made to victim-investors, Petro America had no oil, no realistic prospects for obtaining, transporting or storing large amounts of oil, no significant assets, no revenue and no employees other than the CEO.
Langenbach was not licensed to sell securities. According to court documents, he was self-employed as a cattle rancher during this time and he has not filed a federal tax return since 2003.
Langenbach admitted that he sold Petro America stock to at least 180 investors, receiving at least $400,000 in proceeds, from Aug. 20, 2009, to March 2, 2010. Prosecutors say that although Langenbach became aware of red flags with the company, including the existence of cease and desist orders in Missouri and Kansas, he continued to sell shares anyway. When he sold shares, he relayed inflated expectations, and he did not disclose material negative information to investors, including the existence of the cease and desist orders.
Prosecutors say that Langenbach received at least $638,568 into a bank account he opened in the name LFV Management, LLC. From that amount, at least $137,127 was withdrawn in cash, $38,200 was transferred to Langenbach`s personal accounts, $115,117 was transferred to a co-defendant and $43,290 was spent on retail items.
Prosecutors also say that Langenbach personally spoke on behalf of Petro during business dealings, and he personally attended at least one investor meeting and one update meeting in Arizona.
According to court documents, Langenbach attempted to use Petro shares as collateral to fund gold mine deals. Langenbach tried to purchase interests in gold mines to ‘put assets on the Petro books.’ Any ownership interest in or option to purchase and interest in a mine was secured with Petro shares. Since Petro did not go public, those interests ended in late August to November 2010.
Several witnesses told authorities that Langenbach owned gold mines and was working in gold mines but none actually saw any gold mines that he purported to have owned or saw any that were producing anything. Langenbach`s bank records report no income from revenue associated with mining.
Langenbach is the seventh defendant to plead guilty in this case. Charles Hooker, 50, and Teresa Hill, 55, both of Kansas City; the Rev. Edward D. Halliburton, 57, of Kansas City, Kan.; Allen Collins, 55, of Raymore, Mo.; Joseph Harrell, 50, of Waco, Texas, who acted as the CFO of Petro America; and Russell Hopkins, 48, of Tuscaloosa, Ala., have also pleaded guilty to participating in the conspiracy.
Under federal statutes, Langenbach is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing is scheduled for Nov. 13, 2012.
By pleading guilty today, Langenbach must forfeit at least $400,000 to the government.