Like the 1,000s of other pages of evidence uncovered and descriptions of crimes on this site, this web page is only one part of a massive multi-state entanglement of government corruption and cover-up. See size
This is beyond irresponsible government!
According to Oklahoma officials, there is "nothing illegal involved" in a program that uses public funds to pay 200% profits on an investment, all paid in tax credits. 200% profits for investments before the investments receive a dime, and regardless if an investment fails. And, every sizeable investment has failed, and the investors kept the tax credits. Tax credits are handed out the same day the investment is supposedly made and can immediately be sold for cash. Or, more often, have a middleman, known as a Capco, in this scheme, sell the tax credits, and pay off in cash.
If this program was legitimate, then why did state lawmakers create the program to operate in secrecy? Why has Oklahoma Tax Commission's Tony Mastin resorted to falsifying reports by underreporting two tax credits by 95% and failing to report two other tax credit programs, preventing the public from learning the cost?
First, we will show how Oklahoma's current tax revenue shortfall goes back to fraudulent events that transpired in late 2005 and 2006 and continued funneling tax revenue off at a mercurial rise. A scheme that allowed selling tax credits for cash in 2005 and later has a stealthy insidious ramping effect that allowed stealing now and not be noticed for several years, when the cause could be deflected to other excuses.
Secondly, we will show, using one of many cases, how Altus Ventures and Chaparral Energy's fraudulent scheme left an evidential trail of unmistakable clarity, revealing how Chaparral received $30 million in tax credits by merely investing $15 million. $2,000 for each $1 invested, and didn't impact tax revenue up until this fiscal year.
Next, how the state's tax credit program was structured to allow "at arm's length" passive investors providing the "I knew nothing defense" for state officials. Passive investors are not expected not to play an active role in a business and may not know specifics, claiming they had no knowledge. For the record, Oklahoma law allows state officials to own an interest and profit from entities receiving public funds, including tax credits. State officials claim there is "nothing illegal occurring" in this program. State officials also claimed there was "nothing illegal occurring" when Tony Mastin, Oklahoma Tax Commission, allowed Altus Ventures and Affinity Ventures $192 million in tax credits for $643 million in fake counterfeit loans were investments. When fake loans, false claims, and false reports are not illegal, then pigs will fly.
Who received tax credits for years 2006, 2007, 2008, 2009 View or download .xlsx file
Note: Receiving and using tax credits are not necessarily the same and are addressed elsewhere on prowlingowl.com.
We will also show one way, but only one of the many ways, kickbacks can be funneled back to state offici2als. This will be done using evidence uncovered showing Chaparral Energy received $2 for each $1 invested. There is nothing magic about $2 for each $1. It could be $10 for $1 or $1 million for $1. In reality, any pretense of investing is merely a disguise for fraud.
Lastly, we will show how fake loans are used to obtain tax credits. Tony Mastin, head of the Oklahoma Tax Commission OTC, had/has sole and absolute authority to accept fake loans without question. Here are links to Mastin's false reporting to hide tax credit fraud.
Circa late 2005. Paul Doughty, president of Altus Ventures, seeking investors to invest $32 million in Quartz Mountain Aerospace, promised investors $2 in tax credits for each $1 they invested. Doughty needed $64 million in tax credits to fulfill the promise.
Later, on July 31, 2009, FDIC seizure of First State Bank Altus would reveal, Paul Doughty, while president, in late 2005, issued six fake counterfeit loans totaling $643 million. These loans were used by Altus Ventures, where Doughty was president, and Affinity Ventures to document false investment claims to qualify for $192 million in tax credits. Tony Mastin allowed these claims in spite of the obviously disproportionate amounts and the fact Mastin had been interviewed by reporters regarding the subject of Altus Ventures' questionable loans and investments. This gave Doughty $64 million to pay the investors, $30 million for Chaparral, and lots of money left over to take care of a lot of people.
Note: Affinity Ventures belonged to Robert McDonald, who at the time was head of Capital West Securities. CWS was involved in: 1) selling the investments and 2) lobbying lawmakers and Tony Mastin for things like the so-called "determination letters," another key element of the scam.
Now let's return to February 2006 when the Senate introduced Senate Bill 1577, ostensibly to close a bogus loophole. A loophole was conjured up as an excuse not to investigate, which at that time was referred to as tax credit abuses. At the time, it came out that Mastin was allowing tax credits for borrowed money left in a bank account and never used. What was not publicly known was the fake loans. Answers Mastin provided reporters were flawed with illogical claims and comments, that clearly shows, Mastin was hiding a lot. Lawmakers parroted those same flawed cover-ups.
During the process of pretending to close this phantom loophole, the unexpected put a chink in the amount of the scheme. A chink that would later turn out to be a huge window into how one scheme played out.
March 30, 2006, the Tulsa World reported Altus Ventures had received tax credits for loans that were not invested. A connection only those involved would know was Chaparral Energy, had recently launched a $345 million IPO but had not disclosed it had paid $10 million (later changed to $15 million) to buy a 30% general partner interest in a venture Capital, Altus Venture Capital Fund V, LLC.
The exposure of Altus Ventures, or any undisclosed investment, was more than enough to suddenly send any IPO company into a panic. Failure to disclose an investment for an IPO has the potential of destroying not only the (in this case) $345 million IPO, and the entire company.
Later that same day, March 30, 2006, Chaparral shot off an SEC IPO amendment to get the Altus Ventures investment on record. More concerned with the potential for the IPO imploding in self-destruction and potential lawsuits and maybe the boss out of the office, but this you don't delay. The amendment included the name Altus Ventures. An oversight Chaparral would spend over a year in a series of SEC filings trying to disguise by covering the March 30, 2006, amendment under stacks of more up to date filings, that would replace investing in a fund to having purchased an interest in two venture capital companies.
A significant difference because the venture Capital company Altus Ventures had at least five funds. Altus Venture Capital Fund IV was the fund used for the 2005 investment claim, still in play and likely what was now reported as a venture Capital company to confuse. Changing funds to companies were not the only changes by Chaparral. Chaparral managed to increase the amount invested to $15 million and received $30 million in tax credits. In spite of all their efforts, there was that one mental lapse that tries as they might, Chaparral could not bury. Maybe in the past, but not in the Internet age.
With no reason for anyone other than those involved to know something like this even occurred and a few lines buried in some 125 pages of one of a stack of SEC filing, this went unnoticed. At the time, having no way to know of Chaparral's involvement, other evidence was still buried under the SEC's previous search capabilities. The SEC gradually improved its search capabilities, eventually producing better content search results. Continued searching various databases, including, SEC filings finally produced results in early summer 2009, when a search found Altus Ventures, buried back in that March 30, 2006, Chaparral filing. Retrieving all later SEC filings and using a combination of various software, the entire trail was extracted and reconstructed.
Key parts of Chaparral filings extracted.
Links to Chaparral Energy SEC (Securities Exchange Commission) filings.
Chaparral would only use $2.8 million of the $30 million in tax credits through December 2008., It would be Chaparral's June 2009 SEC filing before Chaparral reported using all $30 million. With extensions factored into estimates, the actual impact against expectations likely came in the late summer of 2009.
As always, it was only a matter of time until another screw up would surface, and persistence would catch and expose that.
Now let's jump forward to July 31, 2009, the FDIC seizure of First State Bank Altus. Note: For some unknown reason, the auditors failed to catch the fake loans.
Shortly before the audit was completed a savvy banker walked me through the process of locating and interpreting FDIC quarterly call reports filed by each bank. The purpose was to determine if there was any basis for another previous claim by state officials: that the loans used by Altus Ventures were backed by CDs at risk. There were CD loans, but for less than 10% of the claimed loan amounts. Again that showed state officials had generated another bogus coverup: like the bogus loophole to avoid an investigation, and equally important for a reason to tinker with the law. The tinkering was to add new language to the law to prevent the state from ever recovering any tax credits taken in violation of any laws. Oklahoma Statutes Title 68. Chapter 1 - Article 23 Section 2357.74B Par G.
Now regardless of whatever occurred, state officials had a reason to avoid trying to recover stolen money, including what they had stashed away. The law also limits maximum punishment for any found guilty of violating the law to merely the loss of eligibility to use the program again.
If this starts to seem confusing, remember that was the intent by those creating the scheme. You don't pull off successful frauds by pandering to those who feel entitled to having everything simplified for them!
Although there was at least $643 million in fake loans, going back to late 2005, this discussion is limited to $189 million of the fake loans claimed to have been invested by Altus Ventures in Quartz Mountain Aerospace. For this $189 of the fake loans, Mastin handed out $66.3 million in tax credits, on $9.6 million was earned. $56.7 million in fraud.
There are two classes of investors involved in this discussion. The only meaningful purpose for two is to allow some to receive profits such as $2,000 for each $1 invested, or whatever. Oklahoma Statutes Title 68. Chapter 1 - Article 23 Section 2357.73 Par. B and G
One class, we will call "kickback investors." "Kickback investors" invest their money to buy an interest in the Capco (pass-through entity), or in this case, Altus Ventures.
The other class, we will call "front investors." Most people naturally assume the only investors are "front investors." "Front investors" invest in a business venture but have to pass the investment through a Capco (pass-through entity) for the investment to qualify for tax credits. This is normally accomplished through a fund. What is important to note is the Capco (pass-through entity) controls the tax credits.
Now comes the little shell game. See what this opens the door to? The law specifies the tax credits go to those owning an interest in Capco (pass-through entity) or what is referred to here as the "kickback investors." The Capco (pass-through entity) has sole discretion in determining how to divide the tax credits up. The Capco is not bound by what percentage of the Capco (pass-through entity) a "front investor" invested or a "kickback investor" owns. With the ability to use false loans to obtain $100s million in tax credits that can be used to buy officials, the sky is the limit. Once state officials were lured into one deal, they had sold their soles, became subject to blackmail and totally out of control.
Back to Chaparral. Chaparral was a "kickback investor," allowing a Capco like Altus Ventures can give "kickback investors" the sweetest, sweetheart deals. $1 could get you $millions depending on your value to the fraud.Disclosure: The basic story of fraud is based on evidence. Where exact information on how some scenarios played out was not available, best-effort interpretations based on what was known and possibilities were used to fill in the gaps.