Not long after entrusting millions to a Kentucky oilman, the investors started asking questions: Where was the oil? Where was their money? And where was the oilman?
They think they got at least some answers when they turned on an episode of “My Super Sweet 16,” an MTV reality show about spoiled rich kids and their outrageously opulent birthday parties.
To their astonishment, the investors saw oilman Gary Milby on television giving his daughter a private helicopter ride, a new BMW and a shopping spree.
The cameras followed Milby to his oil fields where his daughter, Ariel, exclaimed, “I love oil! Oil means shoes and cars and purses!” Pointing to one of the drills, Milby told his daughter, “This one here will make over 20 barrels a day.”
About 60 investors who say they heard similar promises from Milby are suing him in federal court, accusing Milby of defrauding them out of at least $4.5 million.
All told, Milby raised $20 million to $25 million from investors over nearly two years, the investors’ lawyer estimates — even though officials in several states had demanded Milby stop selling securities in his Tennessee oil and gas companies. It appears no criminal charges have been filed against him.
Milby, 53, has become hard to find, which is why his investors and state regulators were so shocked in February to see him on “My Super Sweet 16.”
Calls to a family farm in Campbellsville, about 65 miles south of Louisville, went unanswered this week. The Associated Press tried unsuccessfully to reach Milby through his daughter, his ex-wife and an attorney who worked for Milby on other issues.
As of the middle of this week, Milby had not been served with the four federal lawsuits that were brought against him in April. A hearing in the case is set for June 15.
One investor, the Rev. Joseph Wheat, a 68-year-old minister at the First Apostolic Church in Bastrop, La., said he gave Milby $58,500 after seeing the oil fields. He said he first heard about Milby’s Mid America Energy Inc. through radio ads.
“It was on several times a day, saying it was a golden opportunity and that these were proven fields,” Wheat said.
When Wheat visited the Kentucky oil fields about 70 miles east of Bowling Green, one well began to shoot black oil in the air. Wheat said he now suspects the gusher was staged. He said he believes the wells — and Milby’s promises — were empty.
“I believe he’s a bald-faced liar,” Wheat said. “He hasn’t done anything he said he was going to do.”
The federal lawsuits allege that as far back as August 2005, Milby persuaded investors to purchase his securities at $18,000 each, promising at least a 49 percent return in the first year on some of the securities.
Wheat got a few small checks, less than $500 altogether, for the first three months. “It didn’t take long to figure out what was going on,” he said.
Francis Bogner, a 72-year-old retiree from Minong, Wis., invested $37,000 but never got his monthly checks. “I kept calling about the progress of the wells,” Bogner said. “He had all kinds of excuses, but he said it was progressing quite well.”
What Milby never told investors, the lawsuits claim, is that regulatory agencies in five states have ordered him and his companies to stop advertising and selling the securities. Also, Texas barred him from owning oil wells for seven years after safety violations were found at his wells.
Neither Milby nor his two companies based in Tennessee were registered to sell securities in the state.
Wynne James, a Nashville attorney for the investors, said his plaintiffs are from at least a dozen states. He said the scheme was not terribly complicated.
“In a Ponzi scheme, early investors receive large returns, the moneys for which come from later investors,” James said. “This doesn’t appear to be a Ponzi scheme because virtually no money was returned to investors.”
In September, the Arizona Corporation Commission ordered Milby to pay a $1 million penalty for selling securities despite a cease-and-desist order. He never showed for a hearing and has yet to pay a penny, said Heather Murphy, commission spokeswoman.
The commissioners were astonished and “justifiably outraged” to see Milby on MTV buying his daughter a $35,000 BMW, Murphy said.
Crystal Hedgespeth, who lives across the street from the Milby farm, said she attended Ariel’s princess-theme birthday party with her two children and saw ice sculptures, tents shaped like castles and a huge fireworks show.
“She was helicoptered in over there,” Hedgespeth said, pointing to several acres of pasture. “Then she was brought to the house in a carriage. Her carriage was like a Cinderella carriage.”
Milby’s brother Paul said that he owns the Campbellsville farm and that Gary Milby has never lived there. Paul said his brother “roams a lot,” but he thinks Gary lives in the Nashville area. As for the lawsuits, “that’s Gary’s business, not mine,” he said.
While there is no proof Milby spent investors’ money on the birthday party, James said it is pretty obvious where some of the money came from.
“To our knowledge, the only source of money that Milby had since he took bankruptcy in 2003 were his activities in raising money from investors,” James said. “He doesn’t appear to be successful in drilling oil wells.”