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Carl Royse and daughter Jeanette Riley fraudulently offered and sold oil and gas investments in the form of undivided fractional working interests in well projects then ordered to pay restitution totaling nearly $4.3 million and sent to prison.

St. Louis Journal 02/23/09

A father and daughter from Illinois were both sentenced Monday to prison for participating in a conspiracy to engage in fraudulent interstate transactions and the sale of unregistered securities, said A. Courtney Cox, U.S. Attorney for the Southern District of Illinois.

Carl Royse, of Fairfield, Ill., was sentenced to five years imprisonment, and his daughter, Jeanette Riley, of Olney, Ill., was sentenced to 18 months imprisonment.

Both were ordered to pay restitution totaling nearly $4.3 million.

Through their Hughes Energy Inc., the pair fraudulently offered and sold oil and gas investments in the form of undivided fractional working interests in well projects to the general public nationwide from 2003 to 2007.

The pair told investors that they employed new techniques of secondary oil and gas recovery, to produce oil and gas from proven properties and to enhance secondary recovery operation from producing properties the defendants already owned, prosecutors said.

But Royse and Riley operated a Ponzi scheme, using new investor funds to pay off old investors, prosecutors said. The two also failed to disclose to investors that their companies had a history of being the subject of regulatory actions, including from the Securities and Exchange Commission.

Hughes Energy is now under the control of a special court-appointed master.

The corporation previously pleaded guilty to the conspiracy and awaits sentencing.