Oil fraud lawsuit goes to trial in OKC federal court

A contentious lawsuit in which a Tulsa couple and an energy company they formed in 2015 stand accused of fraud and securities fraud in how they obtained $1 million to buy oil and gas leases goes to trial Tuesday in Oklahoma City federal court.

U.S. District Court Judge Patrick R. Wyrick denied the motion for summary judgment by the ten plaintiffs who sued Stephen J. Merrill, his wife Karen Merrill, SMB Energy LLC, MFS trust Dated Sept. 30, 1997 and Donald F. Schnell.

The suit was filed in 2017 by Bikarka Gas Corp., Duslei Energy LLC, Jim Price Oil Co. LLC, CCJ Ventures LLC, Beckham Oil Co. LLC, Big J’s Oil Co. LLC, Garbet Investments LLC, Deborath K. Brandt, Charles R. Dozier and Margaret Dozier. The suit was labeled CIV-18-00041 PRW in Oklahoma City federal court but had originally been filed in Oklahoma County District Court.

It stems from an effort by the Merrills and Schnell to acquire 27 oil and gas leases in Kiowa County from Gary Tyhson of Tyson Oil Company for $550,000. They met with the defendants to get funding for the acquisition of the leases and the Merrills and Schnell allegedly said they needed $1 million to acquire the leases.

An amount of $1.1 million was eventually obtained from Buford and Helen Williams who later discovered the acquisition of the leases was for only $550,000. They stopped funding exploration and it led to their suing the Merrills and Schnell.  When an outside buyer purchased the Williams’ holdings and settled the lawsuit, the other investors learned of what they described as fraud.

In 2017, the plaintiffs filed suit accusing the Merrills, Schnell, SMB Energy LLC and the MFS Trust of trying “to defraud
them; to commit securities fraud in violation” of the SEC Act and the Oklahoma Securities Act and to convert their investment money for personal use.

In denying the request for a summary judgment in favor of the plaintiffs, Judge Wyrick said the case remains set for trial for February 18.