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Industry   Ten fraudsters sent to prison

FBI uncovers coal mining fraud: Investors bilked out of millions

New Century CoalBrian C. Rose ran a Tennessee company that claimed to be mining and processing a highly profitable type of coal used to manufacture silicon and computer electronics.

On the basis of that claim, Rose and his employees raised more than $14 million from more than 160 investors—knowing all along that the only thing they were mining was their victims’ cash, FBI reports.

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For more than three years beginning in 2011, Rose and his co-conspirators at New Century Coal sold shares in limited partnerships by convincing investors the company owned mines that produced high-quality Blue Gem coal—a scarce commodity that commands premium prices in the marketplace because of its use in computer semiconductors.

“They sold the idea that they had Blue Gem coal,” said Special Agent Brian O’Hare, one of the agents who investigated the case from the FBI’s Knoxville Division. “But there were never any high-quality mines, and there was never any high-quality coal,” he said. “Our investigation led us to the conclusion that this was envisioned as a fraud from the outset.”

Thanks to sophisticated marketing brochures and presentations and a persuasive sales force that often traveled to meet with investors, the money started rolling in to New Century Coal.

And Rose and his employees—including Rose’s father—were spending it as fast as they could on luxury lifestyles that included buying multiple homes, sports cars, thoroughbred horses, expensive trips to Las Vegas, and other extensive travel.

“The salespeople were very talented and very convincing,” O’Hare said. “Unfortunately, they knew they were involved in a scam and continued doing it.”

New Century Coal fooled some savvy investors, too, many of whom asked to see the mining operation in person before they put up as much as $2 million.

As of last month, a federal judge in Tennessee had sentenced 10 individuals to a collective 284 months in prison for their roles in the New Century Coal scam. Rose, the ringleader, received a nine-year term.

Read the original FBI story here.

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