Former Cave Creek resident sentenced to four years in prison for defrauding investors

 

Date: September 29, 2020

Contact: newsroom@ci.irs.gov

Phoenix, Ariz. – On September 25, 2020, Kenneth Thomas White aka Kenneth Whyte, formerly of Cave Creek, Arizona, was sentenced by United States District Court Judge Diane J. Humetewa to 48 months in prison, followed by three years of supervised release. White was also ordered to pay $1,368,000.00 in restitution. White previously pleaded guilty to transactional money laundering.

"Mr. White raised nearly $2 million with his fraudulent scheme. He victimized clients by providing them false reports and enticing them to increase their investment by issuing royalty payments with funds from new investors," said Ismael Nevarez Jr., Special Agent in Charge of the Phoenix Field Office of IRS Criminal Investigation. "IRS-CI's financial investigation proved that White used his clients' investments to fund his lavish lifestyle."

In August 2010, White formed Marchant International Resources Inc. (hereinafter "MIR") as a for-profit domestic corporation and registered the business with the Texas Secretary of State. On its webpage, MIR was described as an oil and natural gas investment management firm and listed the President/CEO as "Kenneth Whyte."

Between about April of 2012 and June of 2015, White defrauded approximately 13 investor-victims out of approximately $1,850,000. White did so by promoting and selling interests in five fraudulent oil well drilling projects in Montana and Texas. White solicited investors to purchase shares or "investment units" for oil drilling projects for $50,000 per unit.

White mailed the prospectuses to the investors. Some investors mailed checks to White. White sent emails to the investors that included, among other things, false status reports on the various projects and the status of oil production. None of the investors' money was used to fund any oil and gas exploration and drilling project. From around April 2012 to June 2015, White paid a total of $482,014.28 to some of the original investors under the premise of the payments being royalty payments. The source of these payments was funds secured from other investors. These payments from White led the investors to believe the drilling projects were actively operating and producing oil, which resulted in some investors purchasing additional units from White.

A large portion of the remaining $1,367,985.72 was used to pay for White's personal living expenses including $19,162 for the purchase of a new 2014 Hyundai Genesis; $86,500 for a new 2014 Cadillac Escalade; and $56,707 for one year of pre-paid lease for the house he resided in Cave Creek, Arizona. White also used the money for high-end furniture, gym memberships, dental work, hair implants, restaurants, and travel related expenses. White also used a portion of the $1,367,985.72 to pay for promotional expenses such as website cost, business cards, and custom-made paper and binders used to promote and carry on his fraudulent investment scheme.

White concealed from most of the investors the following material facts, among others:

(A) He had been previously convicted of committing the felony offenses of criminal fraudulent schemes and thefts and criminal control of an enterprise in Phoenix, Arizona in 1993. These criminal convictions were in the case of State of Arizona vs. Kenneth Thomas White in Superior Court of Arizona, Maricopa County, case No. CR 87-01262 and were entered on November 19, 1993. The fraudulent schemes and thefts committed by White, in CR 87-01262, were very similar to the scheme alleged in this indictment, in that those fraudulent investments were purported oil well investments (House Ranch Well and Eva Johnson Well, among others) through an entity controlled by White called Western International Petroleum Corporation.

(B) White was sentenced on November 19, 1993 in CR 87-01262 to a term of imprisonment of 10.5 years on Counts 1-4 to be followed by a consecutive term of imprisonment of 15. 75 years on counts 5-11, 13-16 and 18-19. White was ordered in CR 87-01262 to pay restitution to victims in the amount of $4,385,500. White was in the custody of the Arizona Department of Corrections from December 6, 1993 until his release on October 26, 2009.

(C) White had also been convicted of the felony offense of theft in the case of State of Arizona vs. Kenneth Thomas White in the Superior Court of Arizona, Maricopa County, case No. CR 87-10745. On or about March 14, 1988, he was sentenced to three years of imprisonment and, as a result, was incarcerated with the Arizona Department of Corrections from June 12, 1989 until his sentence expired on October 19, 1992.

Internal Revenue Service-Criminal Investigation conducted the investigation in this case. The United States Attorney's Office, District of Arizona, Phoenix, handled the prosecution.