An owner of a natural-gas company manipulated meters to charge a Kentucky city for gas it didn’t receive, a federal grand jury has charged.
It’s not clear how much the alleged scam cost the city of Somerset, but it was in the millions of dollars, said Mayor Alan Keck, who ended the contract with the company soon after taking office.
The men named in the indictment are Mark Edward Holbrook and his son, Marshall Holbrook.
The two founded a company called Puissant Industries, which leased, brokered and sold natural gas.
The city of Somerset, which owns a gas pipeline from Eastern Kentucky to the city but does not own wells, bought gas from Puissant to sell to residential and industrial customers.
Sometime before 2016, Marshall Holbrook came up with a way to manipulate meters that measured gas going into the Somerset and Delta Natural Gas systems, so that the meters would show Puissant put in more gas than it really did, the indictment alleges.
Delta Natural Gas transported gas for Puissant.
A Lexington company, Greystone Equine LLC, bought much of the gas Puissant moved by Delta pipelines during the time covered in the indictment.
In January 2016, Marshall Holbrook allegedly showed his father how to rig meters. They called the process “propping up the meter,” according to the indictment.
From early 2017 to May 2019, the two rigged meters “with increasing frequency,” with Mark Holbrook focusing on Somerset meters near his home in London and his son focusing on Delta meters closest to his residence near Barbourville, the indictment says.
The effect of the manipulation was that Somerset paid Puissant for gas the company didn’t actually provide, according to the indictment.
In the case of the Delta meters, Greystone Equine, the Lexington company, paid the Holbrooks’ company for gas that actually belonged to Delta, because Delta credited Puissant for gas it didn’t provide, the indictment says.
The indictment charges Mark Holbrook with conspiracy to commit wire fraud, punishable by up to 20 years in prison, and conspiracy to convert property from a gas pipeline, which carries a top sentence of five years.
The indictment describes alleged illegal conduct by Marshall Holbrook but it does not charge him.
Keck, the Somerset mayor, said the manager of the city gas system came to him early in his first term in 2019 and raised concerns about the issue.
After looking into the situation, the city stopped doing business with Puissant — the Holbrooks’ company — and reported concerns to authorities, in conjunction with Delta Natural Gas, Keck said.
Keck said the city would have had more money to spend on other needs if it hadn’t paid for gas it didn’t receive.
“I think the real victim here is the city of Somerset,” he said.
Eddie Girdler, who preceded Keck as mayor, said he was not aware of the situation or the people or company allegedly involved.
The indictment against Mark Holbrook includes a count under which the government will try to recoup money he received from the alleged crimes if he is convicted.