District of Colorado

DENVER – Franklin Thad Harris, age 57, and Merlin D. Unruh, age 51, both of Grand Junction, Colorado, were arrested today in Grand Junction for a bank fraud scheme, the United States Attorney’s Office, the Federal Bureau of Investigation and IRS Criminal Investigation announced.  Harris and Unruh were indicted by a federal grand jury in Denver on January 8, 2013, for charges of bank fraud and money laundering.  The indicted remained under seal until their arrest.  There initial appearance took place in Grand Junction earlier today, where they were advised of their rights.  The two were released on bond, and are due back in court in Grand Junction on Tuesday, January 15, 2013 at 3:00 p.m. for arraignment.

According to the indictment, on or about October 2007 through December 2008, Harris and Unruh executed a scheme to defraud First National Bank of the Rockies (FNBR) by using false and fraudulent representations and documentation, which were material to FNBR’s decision to approve requests to withdraw funds for construction expenses.  Harris engaged primarily in the business of constructing housing developments throughout the Grand Junction area.  Unruh was also in the construction business and was utilized as a general contractor for projects with Harris. 

Chatfield was a residential housing subdivision project developed by Harris and Unruh.  Chatfield IV was a proposed fourth section of the Chatfield subdivision, to be constructed on 11.75 acres located at 3152 E Road, Grand Junction, Colorado.  Harris had another project named Thunder Valley, a proposed residential subdivision with single-family detached units, to be constructed on 12.9 acres at 3079 F ½ Road, Grand Junction, Colorado.  TDSM was a Colorado real estate Company owned and operated by Harris and Unruh. 

On October 19, 2007, TDSM obtained a draw-down line of credit loan in the amount of $2,050,000.00, for the purpose of developing Chatfield IV.   Over the course of the Chatfield IV loan, from October 2007 through July 2008, Harris and Unruh made five draw requests, resulting in a total disbursement by FNBR of $1,524,112.83.  On or about April 4, 2008, TDSM obtained a draw-down line of credit loan in the amount of $2,625,000.00 for the purpose of developing Thunder Valley.  Over the course of the Thunder Valley I Loan, from April 2006 through December 2008, Harris and Unruh made nine draw requests, resulting in a total disbursement by FNBR of $2,290,474.48.

For the purpose of executing and facilitating their fraud scheme, Harris, Unruh and others committed acts and made material misrepresentations and omissions to FNBR including submitting: false and fraudulent information, altered invoices, duplicate invoices and false information concerning costs incurred for work done.  Harris and Unruh knowingly and fraudulently misrepresented to FNBR the nature of the work performed and progress made at the Chatfield and Thunder Valley development sites when in fact they diverted Chatfield IV and Thunder Valley I Loan proceeds for their personal use.  Furthermore, they conducted financial transactions to conceal and disguise the use and control of the construction draw proceeds obtained; and when confronted by representatives of FNBR about their fraudulent draw requests, Harris and Unruh either knowingly provided false information or refused to provide any information or supporting documentation.

“Individuals who defraud banks impose costs on all Americans who use our banking system, and will be held accountable,” said U.S. Attorney John Walsh.  “In this case, the defendants lined their pockets claiming to access their line of credit to develop residential housing.”

“The FBI will continue to work in collaboration with our law enforcement partners to protect financial institutions against individuals who fraudulently exploit banking practices in furtherance of their criminal schemes,” said FBI Denver Special Agent in Charge James Yacone.

“IRS Criminal Investigation will work diligently with our law enforcement counterparts to insure bank fraud is vigorously investigated and brought to justice, said Stephen Boyd, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

Harris and Unruh were each charged with thirty-five counts of bank fraud, six counts of money laundering and one count of conspiracy to commit money laundering.   If convicted of bank fraud they face not more than 30 years in federal prison, and a fine of up to $1,000,000 per count.  If convicted of money laundering they face not more than 10 years in federal prison, and a fine of up to $250,000 per count. 

This case was investigated by agents with Federal Bureau of Investigation (FBI) and IRS-Criminal Investigation.  The case is being prosecuted by Assistant U.S. Attorney Michelle Heldmyer.

The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

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DENVER – John Walsh, the United States Attorney for the District of Colorado, today announced that Yates Petroleum Corporation has paid $416,000.00 to resolve allegations that the company submitted false statements about the royalties the company owed for natural gas removed from federal leases in Wyoming.

According to the terms of the settlement, the United States contends that Yates made false statements to the Department of the Interior concerning the volume of natural gas that Yates produced from twelve leases in the Powder River Basin in Wyoming. Specifically, Yates used gas measurement devices that did not meet the gas measurement standards of the Bureau of Land Management (BLM) and were unapproved for field use. On January 20, 2009, the Buffalo Field Office of the BLM issued an Order stating that the measurement devices – also known as 1” V-Cone Meters – were not approved for use on federal leases. Yates submitted compliance plans indicating that the company would comply with the BLM’s Order.

However, Yates continued to use 1” V-Cone Meters. From May 2009, to and until April 2012, Yates used the unapproved gas meters to measure gas produced from twelve leases and may have under-reported the volume of gas collected from and the royalties owed to the United States.

“When companies lease federal lands for oil and natural gas production they must accurately measure the oil and gas that they take from federal lands and pay the American taxpayer appropriately,” said United States Attorney John Walsh. “Companies face stiff penalties if they break the rules and fail to accurately measure the natural resources removed from federal lands.”

“This settlement demonstrates the benefits of the Office of Natural Resources Revenue’s (ONRR’s) continuing efforts to further strengthen its enforcement program to ensure that energy companies report and pay all the royalties that are due to the American public,” said Paul A. Mussenden, DOI’s Deputy Assistant Secretary for Natural Resources Revenue Management. “We will continue to pursue those companies who under report production and under pay their royalties to make certain that American taxpayer assets are protected.”

“This settlement, the result of collaboration and cooperation between the OIG, DOJ, ONRR and BLM, should send a clear message to deter companies from engaging in fraudulent and noncompliant activities,” said Mary Kendall, Deputy Inspector General for the Department of the Interior.

“This is a good example of how BLM Wyoming takes seriously our regulatory duties on behalf of the American public,” said Don Simpson, BLM Wyoming State Director.

The United States Attorney’s Office thanks the Department of the Interior, Office of the Inspector General, the Bureau of Land Management and the Office of Natural Resources Revenue (ONRR) for the hard work and cooperation that made this recovery possible. The claims settled by this agreement are allegations only. There has been no determination of liability.

Assistant United States Attorney J. Chris Larson handled this matter for the United States Attorney’s Office.

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