Feds closing in on Johnson County man who is accused of swindling investors for years
In 2015 Phil Hudnall joined the Fertility Gods, an over-30 men’s soccer team that was always vying for a league championship.
Not just any schlub was welcome on the squad. Hudnall was fit and had enough tattoos on his forearms to be mistaken for an English footballer. But his soccer skills, such as they were, weren’t what earned him a spot on the team, Fertility Gods founder Robert Stroud said.
Rather it was his stamina. A distance runner who’d once won the Kansas City marathon, even in his mid 40s Hudnall didn’t tire from running up and down the carpet at All American Indoor Sports in Lenexa from kickoff to the final buzzer.
His patter off the field was equally relentless.
“He was always talking about his business,” Stroud said. “He was just eternally optimistic that oil prices were going to go up.”
This was during the fracking boom, when the oil market had way more promise than now. It was obvious that Stroud had a little money. Hudnall noticed that he drove a Porsche.
Stroud wonders if that’s why Hudnall asked if he’d be interested in investing in some oil and gas wells in Oklahoma. Stroud said why not. And like a lot of people who’ve done business with Hudnall over the years, he quickly came to regret that decision.
“He took 100 percent of my money and did none of what he said he was going to do,” Stroud said
Now 61, the semi-retired insurance underwriter doubts much, if any, of the $560,000 he invested with Hudnall ever went to buy the royalty interests in oil and gas wells that Hudnall promised.
He sued. But despite winning a court judgment several years ago, Stroud is still owed almost half a million dollars and prays that his former friend ends up in prison some day.
“I want him exposed,” Stroud said.
He’s not the only one who wants Hudnall behind bars. Chris Campisi in Pelham, Alabama, says Hudnall and his business associates ripped him off last year to the tune of $100,000 in what federal authorities contend was another oil industry investment scam.
“I pray to God my family and I get our money back,” Campisi said. “We got screwed. That’s a fact.”
Accusations of fraud have been levied against Hudnall again and again over the last decade, The Star learned from reviewing state and federal court filings, records at the Missouri Secretary of State’s office and interviews with investors.
Hudnall’s court-appointed criminal defense attorney, Scott Patton, said his client declined comment for this article.
The one-time track coach at Winnetonka High School in North Kansas City still owes a St. Louis-area retiree $40,000 that the then-76-year-old man was swindled out of in 2012 on a fraudulent oil and gas well investment. The state sanctioned him for it and ordered him to pay a fine.
It appears he never did.
David Grenamyer of Broomfield, Colorado, got his money back from an Ohio oil well deal in 2019, but it took years and then only after he filed suit. It wouldn’t surprise him if Hudnall paid him with money he’d swindled from someone else.
“These Ponzi guys,” he said, “they can talk up a storm.”
Until recently, all the fraud claims lodged against Hudnall were civil matters. But state and federal prosecutors began closing in on him last year.
A Colorado grand jury indicted Hudnall last summer on state securities fraud charges. His trial is pending.
In Kansas City, court records show that federal authorities are considering indicting him in connection with a deal he orchestrated earlier in 2019 that allegedly defrauded investors out of $4.6 million.
According to an FBI affidavit, the bureau began its investigation after receiving a complaint from one of Hudnall’s disgruntled investors in July.
The document alleges that he promised at least a dozen well-off folks in five states big profits if they would help him buy, refurbish and resell used oil and gas extraction equipment. Most if not all never got a nickel of their investments back.
His alleged victims include an Alabama oilman who is out more than $800,000. Another, a farmer in California who got rich growing pistachios in the San Joaquin Valley, is the namesake for the college of agriculture at his alma mater after donating his farm to California State Polytechnic University in Pomona.
Others include the operator of a flight training school in Pennsylvania. The Slovak Savings Bank in Pittsburgh. And the owner of a Wisconsin semi-trailer manufacturing firm who, now in his 80s, gives generously to charity.
“About halfway through, I was pretty sure that whole thing was fraudulent,” Don Wahlin of Stoughton, Wisconsin, said. “But you try to convince yourself maybe it’s not.”
So Wahlin kept on writing checks and now kicks himself for not doing a thorough background check on Hudnall and his brother Brian, who was allegedly part of the scheme, until after Wahlin turned $400,000 over to them.
“I got taken for quite a bit,” he said.
Fewer prosecutions
People with and without a lot of money are ripped off every day in this country through fraudulent investment schemes.
According to the FBI, the deals “are characterized by offers of low- or no-risk investments, guaranteed returns, overly-consistent returns, complex strategies, or unregistered securities,” all of which fit the pattern laid out in court documents that outline Hudnall’s allegedly fraudulent deals.
Big-time swindlers like Bernie Madoff, who stole $65 billion, get the book thrown at them because of the large sums of money involved.
But the perpetrators behind the more run-of-the-mill, penny-ante ripoffs involving fewer victims are less likely to be charged with crimes because of the substantial time and effort it takes to prosecute the highly document-dependent “paper cases,” as lawyers call them.
Prosecutors often have a much better chance of convicting a drug pusher than a conman, because the former’s crimes are easier to explain to a jury than an intricate series of transactions involving financial instruments, joint ventures and limited liability companies.
And if the white-collar crime failed to impact a lot of victims and didn’t involve very large sums, the prison sentences are relatively short.
“When you are looking at bang for your buck, it’s not there” for local prosecutors with heavy caseloads, said Del Wright, a former federal prosecutor and now a University of Missouri-Kansas City law school professor.
“Most fraud is handled civilly,” Wright said. The threshold for establishing guilt is lower than in a criminal case. But the perpetrators are only subject to financial penalties and sanctions on their future sales of securities.
Some swindlers thumb their nose at both and keep their cons going.
“As I tell my students,” Wright said, “it’s one thing to get a judgment, it’s another thing to collect.”
Court records show that as of last July, the U. S District Attorney’s office in Kansas City was preparing to submit to a grand jury evidence in support of an indictment against Hudnall and possibly others for defrauding investors.
It’s unclear what has become of that since. Prosecutors won’t comment and no federal criminal charges have been filed.
But the U.S. attorney’s office in Kansas City has been pressing several forfeiture actions in court aimed at seizing assets and money from bank accounts to recover some of the $4.6 million Hudnall allegedly misappropriated in the 2019 deal.
Last month the Securities and Exchange Commission also filed a civil suit against Hudnall and Todd Esh, his former business partner. Brian Hudnall was named as a relief defendant, someone who receives ill-gotten funds as a result of the illegal acts of someone else.
An attorney for Esh said he was misled into thinking the deal was legitimate.
Brian Hudnall did not respond to requests for comment. Three years ago, the SEC ordered him to pay an $11 million fine for defrauding dozens of investors in oil and gas deals between 2008 and 2014.
So far, only $50,000 of that has been paid and was obtained by garnishing his bank account.
The U.S. attorney’s office in Kansas City did not want to discuss why it had decided to pursue a criminal investigation in this case given the small number of investors involved and the relatively little amount of money they lost collectively.
But Wright said that sometimes the government picks cases to pursue because the Justice Department wants to send a message. In this case, to small-time white-collar criminals, most of whom think it unlikely they’ll ever go to jail.
The assistant U.S. attorney in charge of the forfeiture cases issued a statement saying the government has twin goals in matters such as this one.
“Federal civil forfeiture serves not only to punish wrong-doers, but also, where possible, to provide victim restitution,” Stacey Perkins Rock said in a written statement. “In many cases, the United States seeks permission from the Money Laundering and Asset Recovery Section of the Department of Justice to restore forfeited funds to victim restitution.”
Scheme unfolds
Phil Hudnall was a track star in high school and college during the 1980s and 1990s.
He set records in distance running at Park University, where he earned a bachelor’s degree in psychology in 1995, according to the college yearbook, before going on to become an assistant cross-country coach at Northwest Missouri State University and head coach at Winnetonka High School in North Kansas City, his alma mater.
Through the 1990s and 2000s, his name and photo would turn up occasionally on the sports pages of The Kansas City Star for both his college feats — “We are going to rewrite the whole track book. A lot of records are going to go down,” he said his sophomore year at Park — and on the local racing circuit.
He won the Amy Thompson 8K in 1998. The next year, he placed first in the Kansas City marathon, then known as the Rib Run, and came in second in 2000.
In 2002, he attempted to qualify for the 2004 Olympics in Athens. Didn’t make it, but his time wasn’t bad for a 33-year-old: 2 hours, 21 minutes and 40 seconds.
By then he’d quit teaching high school and listed his occupation as “sales rep,’’ according to records from his Olympic trial. It’s unclear who he was working for at the time.
But by the mid- to late 2000s, Hudnall had begun forming the first of a number of companies ostensibly involved in the oil and gas industry, according to records filed with the Kansas Secretary of State.
Pharyn Resources LLC was one of the first. And like many of the others that would come later, Pharyn’s mailing address was 15621 W. 87th St., Suite 262, Lenexa, Kansas.
That’s a postal box at a UPS store.
Pharyn is one of the defendants in the SEC lawsuit filed in April. Five other limited liability corporations are also named, all but one of them controlled by Phil Hudnall and the other by his brother Brian.
According to the lawsuit, the scheme worked like this:
Between February and June of last year, Phil Hudnall raised $3.3 million by selling promissory notes issued by two of the llcs: BirdDog Business Group and BirdDog Oil Equipment and commingled it with $1.3 million in loans from the Pittsburgh bank.
Hudnall told investors he’d spend the money buying blow-out preventers, mud pumps, power swivels and other oil field gear. Then he’d have it fixed up and resold for a profit of 30 cents for every dollar invested, and they’d share in the windfall within six months.
It was a sure deal, he said, because he’d done it before and had the paperwork to prove it.
“Unfortunately, Phil Hudnall’s representations regarding his previous deal were lies,” the SEC lawsuit said. “In reality, BirdDog had never completed a resale of refurbished equipment, let alone resold such equipment for a profit.”
Hudnall transferred $1.2 million of the $4.6 million to a guy in Texas in what authorities said was a half-hearted attempt to make good on his promise to buy that equipment. But according to the SEC, that man, Duc “Doug” Nguyen, cheated Hudnall and blew most of the money at Las Vegas casinos, gave $85,000 to family and friends and spent $21,000 to make payments on a new car.
Hudnall laundered the rest of the money through his brother’s LLC, according to court records. Brian Hudnall then took a $48,500 cut of that and funneled the remainder through Pharyn and two other companies whose mailing addresses were the UPS store: Kansas Oil Reserves LLC and Kansas Oil Reserves 2 LLC.
But that money didn’t sit in their bank accounts for long.
According to the SEC lawsuit, Phil Hudnall spent $450,000 of what he allegedly stole from investors like Wahlin last year to support a lavish lifestyle.
He paid $99,000 cash for a luxury sports utility vehicle at Baron BMW in Merriam, and $24,000 on tickets to local sporting events. About $900,000 went for “Ponzi-type payments” to earlier investors who were demanding their money back.
Through Kansas Oil Reserve II, Hudnall paid $1.7 million in May of 2019 to buy an interest in the oil and gas produced on 79 acres near Greeley, Colorado, and didn’t tell the BirdDog investors he’d done so.
Last October, while the government was trying to seize the mineral rights to the 79 acres, Kansas Oil Reserve II sold its interest before the government could take possession.
Records show that the company that purchased those mineral rights is owned by the Alabama oilman who lost the $800,000-plus. It’s unclear whether he paid cash for it, or Hudnall turned over ownership as compensation for his loss.
The federal government is continuing to try to seize the property. Neither prosecutors nor the oilman would comment.
“I’m not prepared to go on record at the current time,” he said in an email last week. “There are still questions I would like the Fed(s) to answer that they have been unwilling to so far.”
What happens next is anyone’s guess.
Stroud, more than anyone, can’t wait to find out. Some things still floor him about the guy who took his money.
Even after Stroud sued him in the fall of 2015, Hudnall would show up for soccer games.
“I had to get my attorney involved,” he said.
Hudnall didn’t seem to understand what the problem was, Stroud said.
Before their business dealings turned sour, Stroud was amazed at the reception Hudnall got whenever they met at coffee shops or restaurants to discuss Hudnall’s need for him to write another check.
“People would come over and hug him. They gushed on the guy. They loved him.”
This story was originally published May 17, 2020 at 5:00 AM.
