Securities regulators from five states this week raided three Southland telephone solicitation firms that they say have sold at least $8 million in allegedly illegal oil and gas investment programs that promised annual returns of 20% to 50%.
Ten people were arrested at two of the firms in the sweep, which involved authorities from California, Kansas, Missouri, Texas and New York, where a large number of the investors in the programs live or where oil and gas wells they purportedly bought were located.
The raids are part of a growing crackdown in California on so-called boiler-room telemarketing operations that promote allegedly fraudulent investment schemes over the telephone. Typically, salespeople sit at a bank of telephones, from which they call investors to pitch programs using high-pressure sales tactics. Authorities say Orange County, particularly Newport Beach, is the nationwide center of such schemes.
The last of three raids took place Wednesday at Transamerica Energy Corp., a Newport Beach company that authorities said took in $4 million last year from investors. Company President Baxter Joel Boulet, 49, was arrested on an outstanding warrant for alleged felony securities violations in Kansas. One salesman, Keven Dahl, 30, of Long Beach, was arrested on felony charges of selling unregistered securities, while five salespeople were arrested on misdemeanor charges of working without a telemarketing permit.
The sweep began Monday at Interior Reserves Corp. in Sherman Oaks. No arrests were made there, although records were seized.
The second raid occurred Tuesday at Insured Recovery Corp. in Los Angeles, where company President Michael C. Kramer, 53, of Los Angeles, was arrested on an outstanding felony warrant in Missouri for securities fraud. In addition, salesman Milo C. Martin, 37, of Hermosa Beach, and a Dallas-based associate, David Lee Hunter, 42, were arrested on similar outstanding Missouri warrants.
The sweep was coordinated through the North American Securities Administration Assn., a national organization of securities regulators. Those arrested will be tried by authorities in the various states.
Telephone calls to each of the three companies went unanswered Wednesday. Authorities said the three operations are unrelated.
Investors in some of the programs told authorities they were frequently assured that the investments were guaranteed, according to William McDonald, director of enforcement for the California Department of Corporations. In one case, investors were told their investment was guaranteed by a London insurance company that apparently does not exist, McDonald said.
McDonald said one Missouri man invested $360,000 through Kramer's Los Angeles operation, allegedly for oil and gas wells in Texas. The man told authorities he was told that the price of oil and gas would rise as a result of the Persian Gulf conflict, that he would receive 25% a year on his investment and that royalties would flow in for 15 to 20 years.
The man said he first invested $90,000 on the promise he would receive 25% annually. He said he was then promised a 50% return if he invested $70,000 more. Finally, he invested another $200,000, which he was told was guaranteed a 50% return.
One investor in the Los Angeles operation told authorities he invested $25,000 and was promised 25% to 30% annual returns. He received several hundred dollars back in royalty checks while being pitched further investments. The checks then stopped coming.
"They'd use the royalty checks as a come-on to investors, then they would try to sucker them into investing more," McDonald said.
Investors in the Sherman Oaks operation have told authorities they were sold interests in partnerships for $11,000, promised 30% returns the first year and returns of 25% to 30% after that for 10 to 15 years.