San Antonio-area man pleads guilty in oil and gas scheme

A Bulverde man on Monday entered a guilty plea for his role in an oil and gas scheme that defrauded investors.

Paul Russell Montgomery Jr., 45, pleaded guilty to a one count of mail fraud and one count of filing a false tax return during a hearing conducted via Zoom by U.S. Magistrate Judge Elizabeth “Betsy” Chestney in San Antonio.

“After much reflection and time consulting with his family and attorneys, Mr. Montgomery accepts full responsibility for his actions,” Derek Hilley, an attorney for Montgomery, said in an email. “He looks forward to making things right for the investors involved.”

A federal grand jury in San Antonio had indicted Montgomery in February 2020 on three counts of mail fraud, two counts of filing a false tax return and one count of failing to file an income tax return for 2016.

Montgomery faces up to 20 years in federal prison, up to three years supervised release and a maximum fine of $250,000 on the mail fraud charge. Filing a false tax return carries a maximum sentence of three years in prison, one year of supervised release and a $250,000 fine.

Montgomery also will be required to make restitution and forfeit interest in certain property, Chestney said.

The guilty plea comes about three months after U.S. District Judge Fred Biery ordered Montgomery to pay nearly $3.7 million in civil penalties, ill-gotten gains and interest in a civil case brought by the Securities and Exchange Commission.

The SEC had sued Montgomery and two others, Michael David Fischer, 41, of Canyon Lake, and James Hurst Willingham Jr., 73, of Cedar Park, for securities fraud.

The complaint, filed in May, alleged the trio raised at least $2.7 million from 15 investors in two fraudulent securities offerings re

lating to oil and gas leases.

The SEC said Willingham and a partner hired Montgomery’s company to drill four new wells and rework existing wells.

Sales representatives solicited investors using “pop-up” advertising on websites, followed by emails with attached promotional videos. Individuals identified in a nearly 12-minute Youtube video as “potential investors” were actually Fisher’s sister-in-law and her parents, the suit said.

Biery ordered Montgomery to pay nearly $3.7 million and Fisher to pay more than $3.3 million after they didn’t defend themselves in the case. The judge granted the SEC’S motion for final judgment by default in January.

The judge also permanently enjoined Montgomery and Fisher from committing any future violations of federal securities laws.

The judge found their “fraudulent conduct permeated the projects from start to finish.”

Biery previously had permanently restrained Willingham, but had not determined how much he would have to pay in the case. In a March 12 court filing, the SEC asked the court to order Willingham to pay almost $3.3 million.

In Montgomery’s indictment, prosecutors alleged he had raised funds through a company called Energon3 LLC. He presented investors misleading information and omitted other material, prosecutors added.

Rather than utilize the funds as Montgomery represented, prosecutors allege he paid 40 percent of the amount as commissions and converted some for his personal use.

Montgomery filed a 2014 tax return that reported total income of $108,019, though his total income was in excess of that amount, prosecutors said.

Montgomery is scheduled to be sentenced June 14 by Senior U.S. District Judge David A. Ezra.