Minnesota man gets 10 years for housing fraud involving North Dakota fracking workers

A Minnesota man will spend the next 10 years in prison after being convicted of stealing more than $2.1 million from investors by promising them he planned to build and develop alternative housing for oil workers during the height of the shale drilling boom in North Dakota and Montana.

Throughout the last decade, an oil and gas boom has led to rapid development and explosive growth in areas that rest on top of shale formations.

Hydraulic fracturing, or fracking, is the practice of injecting a mixture of water and chemicals into underground rock formations to release previously inaccessible oil and gas reserves that were trapped within the rock.

The development of horizontal fracking has enabled homeowners to lease their mineral, or subsurface, rights to oil and gas companies for mountains of cash.

With all of that money to be made, gas wells became more common in Texas, Pennsylvania, West Virginia and North Dakota.

The areas that saw an explosion of gas drilling also saw an explosion in real estate, both in prices and development, as workers flooded the areas to fill the oil companies’ staffing demands.

According to the U.S. Attorney’s Office for the District of Minnesota, Ronald Johnson sought to take advantage of the hot real estate market by presenting an offer to a series of investors – building indoor RV parks for the oil workers.

But his investment idea was too good to be true. In fact, as shown at Johnson’s trial, the whole idea was a fraud.

According to court documents, Johnson promised to build indoor RV parks that would allow oil workers in the Bakken Shale in North Dakota and Montana to avoid the more common barracks-style housing in favor of more “comfortable” accommodations.

Specifically, Johnson planned to build large climate-controlled warehouses where oil workers could park their RVs and have access to shared amenities like on-site storage, laundry and vending machines.

Johnson promised his investors that the workers would become “members” of the indoor RV parks, which would generate cash flow for the investors.

As part of his scheme, Johnson sent emails and letters to investors designed to “lull them into a false sense of security” and to postpone complaints regarding delays in the project, the U.S. Attorney’s Office said.

But, as shown at Johnson’s trial, he “fraudulently solicited” $2.1 million from four investors, telling them that their money would be used to build and manage the indoor RV parks.

Instead of building the RV parks as promised, Johnson used the investors’ money to repay prior investors, fund his personal 51-acre cattle farm, take vacations, buy vintage Chevrolets, and purchase real estate, including a 17-acre island on Mink Lake in Maple Lake, Minn.

According to the U.S. Attorney’s Office, Johnson’s company did not build any indoor RV parks, did not acquire any land or property in North Dakota and Montana, and has a bank account that is currently empty.

“Ronald Johnson abused the trust of his victims only to enrich himself at their expense. He promised investors he would use their money to purchase land in North Dakota and to build indoor RV parks, but it was all a lie. Johnson simply stole their money,” Assistant U.S. Attorney Joseph Thompson said. “With today’s sentence, which includes prison time, restitution and a forfeiture order, Johnson is now being held accountable for his crimes.”

Johnson was convicted on nine counts of wire fraud and one count of money laundering and received a sentence of 126 months, followed by three years of supervised release.

Johnson was also ordered to pay $2,303,629 in restitution and forfeit all property he obtained with criminal proceeds.

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