Two S.D Men Arrested in Fraud Case

Two San Diegans who were part of an allegedly fraudulent oil and gas “boiler room” operation that raised nearly $5 million from investors nationwide have been arrested in San Diego and charged in a 57-count indictment issued by Oklahoma authorities.

Steve Broerman and Michael Sullivan were arrested Wednesday by members of the San Diego Boiler Room/Investment Fraud Task Force. They are being held in San Diego County Jail, awaiting extradition by Oklahoma authorities.

Twelve others--including Broerman’s brother David and father, Alvin, the reported head of the operation--were named in the indictment, issued Dec. 24 by the Oklahoma Securities Commission. They were charged with 14 counts of securities fraud, 42 counts of securities violations and one count of conspiracy, according to Spencer Barash, the commission’s associate general counsel.

In a one-year period ended last May, authorities said, the operation, using the names Harris & Clark Associates and Frontier Enterprises, raised nearly $5 million from 600 investors nationwide, including many in San Diego.

The firm sold oil and gas partnerships by claiming that it had “special Indian land leases” in Comanche County, Okla. “They misrepresented that the Comanche Indian tribe fully supported and endorsed their programs,” Barash said.

Less than 10% of the funds raised actually went into oil wells, authorities charged. “The rest went to the defendants for their own personal use and (for) their overhead,” Barash said.

The 14 defendants operated telephone solicitation boiler rooms in San Diego, Los Angeles, south Florida, Las Vegas and parts of North Carolina, Barash said.

They originally operated out of Oklahoma City, but were shut down by authorities last March.

The firms were sued by the Securities and Exchange Commission in Chicago last May and have been virtually dormant since June.

San Diego authorities last year were investigating the local operations--out of offices in Hillcrest and Mission Valley--and “were just getting ready to go in with a search warrant” when the company went out of business in early June, according to Deputy Dist. Atty. Robert Sullivan.

Neither John Goodman, who managed the San Diego office, nor Alvin nor David Broerman has yet been arrested, and they are considered fugitives, authorities said.

Also charged is the firm’s attorney in Oklahoma, James Levine.

Many of the accused operators have run similar boiler rooms in the past, according to law enforcement sources.

“As soon as the regulators closed in on them, they would shut it down, move down the street and start over again under a different name,” said one law enforcement source.

Authorities first began investigating the Broermans in November, 1985, after complaints from investors.

The investors are “orphan and widow types, hard-luck victims . . . who’ve turned over their life savings on the basis that they were guaranteed income for life on their investments,” Barash said.

Oklahoma authorities worked closely with and relied heavily upon San Diego authorities in the investigation, Barash added.

A California Department of Corporations investigator posed as a potential investor and was solicited by the boiler room operators, Sullivan said.

The evidence gathered during that undercover operation was used in the indictment, he said.