Fraud Crackdown Snares Brea Man, Ex-Tax Collector

As part of the continuing crackdown on boiler-room operations in Orange County, a federal grand jury convicted a former county tax collector of tax fraud related to an alleged gold-mining investment scam and, in a separate case, a Brea man pleaded guilty to mail fraud for selling bogus oil leases.

A federal grand jury in Los Angeles on Tuesday convicted Harold E. Nichols, a former Orange County tax collector, of tax fraud in an alleged Newport Beach gold mine investment scam.

Nichols, 60, who worked for the Orange County tax collector-treasurer’s office in 1974-80, was convicted of three counts of tax evasion, one count of conspiracy to defraud the United States and two counts of use of a false Social Security number.

The case stemmed from a lengthy investigation by the Internal Revenue Service into several precious-metal mining investment companies--including Dore Capital Corp., Dore Development Corp., Dore Mining Co. and Juniper Mining Corp.--that Nichols and his partner, John C. Fulton, operated in Newport Beach in 1983-85.

Fulton, 63, pleaded guilty to related charges in October and was sentenced to two years’ imprisonment, three years’ probation and a $10,000 fine.

According to the evidence presented during a two-week trial, Nichols and Fulton raised nearly $2 million from about 230 individuals, whom they persuaded to invest in mining ventures as tax shelters. But prosecutors said the men secretly diverted much of the money to their own use and failed to file any federal income tax returns or pay federal taxes.

“Nichols kept about $470,000 for his own use and Fulton about $115,000,” said Assistant U.S. Atty. Jennifer T. Lum.

The prosecution said Nichols and Fulton tried to hide their diversion of funds by, among other things, depositing the money in bank accounts that Nichols opened under a false Social Security number, falsifying company records and moving some money overseas. Nichols allegedly used some of the investors’ money to buy a house in Puerto Vallarta, support a mistress and buy offshore shell banks.

Nichols and Fulton solicited investors, mostly in Orange County, through varied seminars, mass mailings and telephone sales.

Nichols, who now lives in Las Vegas, is being held without bail pending sentencing Aug. 29. He faces up to 30 years’ imprisonment and a fine of up to $1.5 million.

In the other case, Thomas J. Neavitt Sr., 59, of Brea pleaded guilty to two counts of mail fraud in U.S. District Court in Los Angeles for operating a bogus oil and gas exploration firm out of offices in Anaheim and Placentia.

He faces up to 10 years in prison for his role in operating Red Bird Petroleum, which solicited money from hundreds of investors across the nation from August, 1984, to April, 1986. They were bilked of about $2 million altogether.

Each investor contributed $3,500 for an initial stake in one or more Kentucky oil wells. But, the indictment against Neavitt said, many of the wells did not exist and those that did were pretty much worthless. Nevertheless, Red Bird often told investors that their wells had struck oil. Then investors were asked to invest $1,100 more for every property that “hit.”

Neavitt is scheduled to be sentenced Aug. 13. He could not be reached for comment Tuesday.

“This is part of our continuing effort to attack oil and gas boiler rooms in Southern California,” said Assistant U.S. Atty. Terree A. Bowers, who prosecuted the Neavitt case.