- quote -

What I was trying to say was that I don't know enough to accuse either the
company issuing the debt, or the law firm which is supposedly "asserting
the whole thing is legitimate" of doing something fraudulent. We simply
don't have enough information. Obviously, it is theoretically possible the
law firm could make such strong assurances in the letter that it amounts
to what attorneys call "fraud in the inducement." But no lawyer worth his
salt is going to do that. If the uncle insists on a letter from the law
firm, I'll bet $100 that it will be *very* carefully drafted and contain
so many weasel words that the law firm would never ever be on the hook if
the company failed to repay the debt.

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Not a malpractice suit, because the uncle isn't the firm's client.
Hypothetically, if the firm really truly did vouch for the company, the
cause of action would like be one for fraud.

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Especially not one paying 17+ percent on a one year loan. If it sounds too
good to be true . . .

"Paul Michael Brown" <pmb[at]his.com> wrote
Someone wrote:
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Just curious: Why don't you think the law firm, if it makes a guarantee as
described, is guilty of fraud or something similar?

Sure sounds to me like this law firm is opening itself up to at least a
malpractice suit if it insists this deal is a bona fide, guaranteed slam-dunk
investment, and the investor subsequently loses money.

No bond or debt offering is a guaranteed slam-dunk investment.

- quote -

As an attorney myself, it pains me to say this -- But a letter from a
"reputable law firm asserting the whole thing is legitimate" is not worth
the paper it's printed on. Going back to the days of the S&L scandal we
have often seen investors get burned because supposedly "reputable" law
firms and accounting firms vouched for crooked businessmen.

I'm not saying this oil company is crooked. Nor am I saying the law firm
seeks to perpetrate a fraud. I'm just saying that before this guy's uncle
commits $2.55 *million* on a *single* debt offering by a *single* company
his due diligence should be WAY more thorough than asking for a letter
from some law firm. Unless the uncle is sophisticated enough to dig into
the company's accounting and intelligently question the management
personally regarding the company's business plan he should run the other
way. Unless the uncle is truly knowledgeable about the oil business, he
should invest elsewhere.

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I realize the original poster is not the guy trying to decide whether to
loan this oil company $2.55 million. So I'll give him the benefit of the
doubt and assume he's just posting here trying to learn something. But
with oil prices as high as they are it concerns me that the only way this
company can raise capital is to promise to pay an astronomical 17.6
percent per year. That suggest to me that something is seriously wrong.

If the "uncle" is a Thurston Howell III type with $100 million in liquid
assets and he wants to invest two or three percent of that in this very
speculative corporate debt that's fine. But I'll bet the uncle's net worth
is *far* less. I'll also bet the uncle is an older gentleman who (like
many fixed income investors these days) is desperate for yield. I
sympathize with his plight. But so far I've read nothing here that
suggests this is anything other than a scam.

In article <c572e633.0404082004.2aed62fc[at]posting.google.com> , knipster
<knipster8[at]yahoo.com> wrote:

- quote -

This is an ultra high risk venture. The bonds might be
guaranteed, but likely only by the company. If the company
goes toes up, so goes the bonds. This is not something for
the every day person to get involved in. This is more of
a JR Ewing type of thing. Even if the company checks out
legit, it could still be a scam. Just ask anyone who invested
in gold mining stocks over the past few years.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

Well, this friend is actually my uncle. We were talking and he just
mentioned this deal. He didn't give me much information, so I thought
I'd go to the newsgroups to find out more about this deal because like
you I thought it sounded "too good to be true." Anyway, he's having
the company have a reputable law firm write him a letter asserting
that the whole thing is legitimate. I'm not doing his due diligence
to put your minds to rest.

Anyway, the oil company it turns out is raising a lot more than $3
million--I think the number is like $60 million or around that. The
$3 million is what they're trying to get from my uncle. I was also
told that the company has several million barrels of untapped oil in
reserve. Apparently, banks won't lend money to the company because of
something to do with them not being able to use the oil as collateral.
I forget the explanation because I didn't quite understand it in the
first place.

Again, if anyone has an insight... feel free to post.



pmb[at]his.com (Paul Michael Brown) wrote in message news:<pmb-3003040925220001[at]max1ka-20.his.com> ...
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