A one-time prominent seller of private placements in Provident Royalties is shutting its doors, with many of the reps at broker/dealer Milkie/Ferguson moving on to another firm, Berthel Fisher & Co. Financial Services.
As reported Aug. 13 by Investment News, Berthel Fisher picked up 26 of the 40 reps formerly with Milkie/Ferguson. The firm’s CEO and owner, Edward M. Milkie, has been registered with Berthel Fisher since June, according to the Investment News story. He started Milkie/Ferguson in 1986. Fisher said Milkie was not working as a manager at Berthel Fisher but was a producing registered rep.
Milkie/Ferguson filed its broker/dealer withdrawal request with the Financial Industry Regulatory Authority (FINRA) last month. In early August, the B-D lost a $25,000 FINRA arbitration claim unrelated to Provident Royalties.
According to U.S. Bankruptcy Court filings, representatives with Milkie/Ferguson sold at least $4.1 million of Provident Royalties preferred shares. The figure could be much higher, however, in that the bankruptcy filing counted only about half of the $485 million in Provident Royalties shares sold by independent broker/dealers to more than 7,000 investors.
The money raised from the Provident offerings was supposed to be used to purchase oil-and-gas interests such as real estate, leases and mineral rights. In reality, the offerings turned out to be part of an elaborate $485 million Ponzi scheme.
The Securities and Exchange Commission (SEC) filed fraud charges against Provident Royalties and three company founders in the summer of 2009 for their role in the scam.
Since then, many investors have filed arbitration claims with FINRA against the various broker/dealers that sold them the failed products. At least 23 of 60 broker/dealers that sold Provident Royalties shares have closed their doors because of impending lawsuits or other issues related to the fraud.
On July 13, 2012, two former Provident executives, Brendan W. Coughlin, 46, and Henry D. Harrison, 47, were charged by the office of the U.S. attorney for the Eastern District of Texas with one count of conspiracy to commit mail fraud and 10 counts of mail fraud, according to a statement by the Department of Justice. If convicted, each faces up to 20 years in prison.
Previously, FINRA had suspended both Coughlin and Harrison for two years from the securities industry and fined them each $50,000.