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By CASEY KNAUPP
Staff Writer

The CEO of two Tyler oil and gas corporations, who bilked investors in a drilling venture of more than $800,000, was sentenced Thursday to two years and nine months in federal prison.

Kenneth William Elgin, 39, pleaded guilty Nov. 27 to wire fraud and was sentenced by U.S. District Judge Michael Schneider, who also ordered him to pay $805,000 in restitution to the victims.

Elgin, president and chief executive officer of Trinidad Exploration Inc., formed in Tyler in February 2001, and West Coast Resources Inc., formed in Tyler in April 2004, began the corporations to conduct oil and gas exploration and development. But Elgin's operator's license expired Jan. 28, 2003, so he was not authorized to engage in oil and gas production in Texas, the seven-count indictment states.

Beginning in early 2004 and through 2005, Elgin devised a scheme to defraud individuals and businesses of money. The indictment states that Elgin and others made false representations to induce people to invest in projects or purchase interests in projects that Trinidad, West Coast and Elgin did not own or control.

In the wire fraud charge, Elgin admitted that on Sept. 8, 2004, he transferred $1,000 from a Washington bank, donating the funds to the Muscular Dystrophy Telethon in Texas. The money was obtained from investors intended for the oil and gas exploration.

Schneider said he received victim impact statements and letters from Elgin's family.

Assistant U.S. Attorney Alan Jackson said none of the victims live close to Tyler and they were unable to attend Thursday's hearing. Jackson said Elgin had "get rich easy ideas" with little or no consideration for the investors and his actions had a devastating effect on them.

It began as an honorable scheme with proper intentions that went south, U.S. Public Defender Ken Hawk said. Elgin immediately acknowledged what he did was wrong, he added.

Elgin told the judge that there were no words to fully express his remorse.

"I'm just truly sorry for what I did and the sorrow I put those people through," he said.

He said he knew he caused emotional pain and financial strain to the victims. Elgin started out with intentions for success for them but then made wrong decisions, he said, adding that he would do anything to go back in time and not have it happen.

"This is a sad case," Schneider said.

The victims lost a substantial amount of money; some lost $150,000 in savings, retirement and college funds for their children. The judge said it was something the law couldn't cure and he regretted that the court couldn't do more to help the victims.

Schneider ordered Elgin to report to prison in California by June 9. He allowed him to remain out on bond until then.

THE SCHEME

Elgin solicited Michael Brandt, of Washington, to work with him in oil and gas exploration in Texas, telling Brandt he had been successful and had wells in production.

The men agreed that Elgin would be responsible for drilling new wells on leases he owned or controlled, while the other man would solicit others to invest in the drilling operations, the indictment states. Elgin allegedly directed the man to establish Snap B Corporation, formed in Washington in May 2004, to transact business with the investors.

In April 2004, Elgin showed the man two working wells in Shelby County, so the man wired Elgin $55,000 to pay for the leases, licenses and permits to drill. The man then solicited additional investors, the indictment states.

Investors gave $750,000 to Elgin's drilling venture. Elgin and his companies did not own, control or have the right to acquire oil and gas leases.

He used the investor funds on himself, buying expensive meals, lavish purchases, at least two vehicles, extensive vacations and more than $200,000 at a luxury hotel and casino in Las Vegas.

Elgin told his investors that there was a problem with the well that could not be fixed, so another well would need to be drilled at a different location. He showed his partner another working well he said was theirs and promised to send payments to the investors, but he didn't have any ownership interest in it, the indictment states.

None of the victims ever received return funds on their investments.

Elgin was also charged with committing wire fraud on May 10, 2004, and March 1, 2005; as well as transporting stolen goods, securities and monies in April 2004 and on Jan. 2, 2005; and engaging in a monetary transaction with criminally derived property on May 6, 2004, and June 16, 2004, in Smith County.