ALBUQUERQUE – A Farmington woman was sentenced in federal court after pleading guilty to charges of failing to pay royalties owed to the Jicarilla Apache Nation, the Navajo Nation, and the federal government, as well as for submitting fraudulent oil and gas extraction reports and committing wire fraud.
According to court documents, Teresa McCown, 55, the owner of M&M Production & Operation, Inc. and Shoreline Oil & Gas Company, was responsible for accounting, reporting mineral production, and paying royalties to mineral owners for extracted gas and minerals. To that end, McCown was required to submit monthly Oil Gas Operations Reports (OGOR) and royalty payments to the Department of the Interior’s Office of Natural Resources Revenue (ONRR) based on the amount and value of oil and gas produced from the leases.
On December 6, 2019, the Bureau of Indian Affairs (BIA) received a complaint letter from the Jicarilla Apache Nation alleging M&M and Shoreline’s ongoing failures to report oil and gas extraction volumes and failure to report revenue. ONRR began its investigation into McCown and her companies’ failure to pay royalties and determined that she filed over 400 incorrect reports on leases located within the Jicarilla Apache Nation, the Navajo Nation, and other federal lands. Audits of her company also revealed that she entirely failed to file approximately 1,000 reports for at least 32 leases or agreements. McCown also falsely reported gas extraction amounts and failed to pay due royalties and interest.
Despite receiving multiple notices of noncompliance and civil penalties, McCown took no corrective action. Her false and missing filings, together with accruing penalties, resulted in a loss of over $3.55 million for the tribes and the federal government.
The investigation revealed that McCown committed wire fraud by knowingly submitting inaccurate information through online reporting systems and violating numerous reporting regulations. McCown agreed to ONRR’’s Acceptable Use Policy (AUP), which warned against entering inaccurate or false information into the reporting system. The online system separately warns users that a violation of the AUP may result in criminal prosecution. By continuing to violate policy using the online reporting portal, McCown carried on a scheme to defraud the Navajo Nation, the Jicarilla Nation, and the United States of full amounts due for her companies’ operations.
McCown was sentenced to a time-served prison sentence, three years of supervised release, and is ordered to pay full restitution to the Jicarilla Apache Nation and the Navajo Nation for lost royalties. She was also ordered to pay a $20,000 fine in her personal capacity and is statutorily required to pay $900 in Court-required Special Penalty Assessments.
To meet her financial obligations, McCown was ordered to liquidate her personal property – including two pieces of real estate in Farmington and Rio Arriba Counties, two motor vehicles, and a recreational vehicle, insofar as required to satisfy these financial obligations. During her period of Supervised Release, McCown may not work as a record-keeper or reporter in any industry subject to state or federal reporting or regulatory requirements, including oil and gas companies.
As part of her plea agreement, McCown also agreed not to contest proceedings initiated by the Department of the Interior, the Bureau of Indian Affairs, and the Bureau of Land Management to cancel her oil and gas leases.
Finally, McCown also agreed to formally apologize to the Jicarilla Apache Nation and the Navajo Nation. She apologized at sentencing and appended her apology to the record, saying in part: “I have had time to reflect on my actions and now realize that there are much larger consequences… It has not only harmed the two nations but also the people of those nations. For this I am truly sorry… I apologize to this court, The Jicarilla Apache Nation as well as the BIA-Farmington Office and the Navajo Nation.”
This case was prosecuted pursuant to the Federal Oil and Gas Royalty Management Act (FOGRMA) and is the first ever federal prosecution under 30 U.S.C. Section 1720 for violations of 30 U.S.C. Section 1719(d)(1). Section 1719(d)(1) of the FOGRMA imposes civil penalties for knowingly or willfully preparing, maintaining, or submitting false, inaccurate, or misleading reports, notices, affidavits, records, data, or other written information. Section 1720 provides criminal penalties for persons who violate Section 1719.
U.S. Attorney Alexander M.M. Uballez and the Department of the Interior (DOI) Office of Inspector General made the announcement today.
The Department of the Interior, Office of Inspector General, Office of Investigations, Energy Investigations Unit investigated this case. Assistant U.S. Attorney Alexander Flores prosecuted the case.
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