On October 10, the U.S. Court of Appeals for the Sixth Circuit issued an opinion affirming the conviction of a “land man” for the crimes of conspiracy and mail fraud in connection with a scheme to defraud investors he enticed to invest in plan to mine “blue gem coal.” The case is U.S. v. Phillips.
According to the Court of Appeals “[l]and men scout rural property for coal mining potential and negotiate leases with the landowners to mine it.” As a land man, the Mr. Phillips’ job was to search for rural properties with coal mining potential, and then to negotiate leases with the landowners. According to the Court of Appeals, blue gem coal is a very valuable commodity, but applicable state and federal environmental regulations make it difficult to mine.
New Century Coal, the company that employed Mr. Phillips, purported to own land on which valuable deposits of blue gem coal were located, and with the services of a former NASCAR driver, the defendant participated in a plan to defraud investors to invest in the company which did not, in fact, own any such valuable lands.
The Court of Appeals states in its opinion that the company “has swindled more that $14 million from more than 160 investors.” “The government accused twelve people of being in on the scheme. Most of them, including the mastermind, Brian Rose, pleaded guilty. Only Johnny Phillips went to trial. The government charged him with three crimes: conspiring to commit mail and wire fraud, conspiring to launder money, and laundering money.” In his defense, Mr. Phillips argued that he was not aware of the fact that the company had not secured the rights to mine this coal, and that he found nothing suspicious about his accomplices and their use of fake names. The case was argued on October 5, 2017, and decided on October 19, 2017.