3 Brothers Accused of Duping Energy Firm Investors

Three Ventura County brothers were charged Monday with stealing $2.3 million from more than 100 people who invested in their oil and gas exploration company.

The three men were identified as Charles E. Fuentes, 47, of Thousand Oaks, president of Fountain Oil & Gas Co.; James A. Fuentes, 42, of Westlake Village, vice president of the company; and Kenneth R. Fuentes, 36, of Thousand Oaks, the company’s senior account manager.

They were arrested at their residences by investigators from the Ventura County district attorney’s office and were being held on $500,000 bail each. They are scheduled to be arraigned on Wednesday in Ventura County Municipal Court on charges of grand theft and securities fraud.

Deputy Dist. Atty. John L. Geb said the three men sold unregistered securities in the form of joint-venture agreements. Typically in such ventures, as many as 35 investors put up money for a specific purpose, such as drilling an oil well.

Geb said that according to information supplied to investors, the money was supposed to be spent on oil and gas drilling operations. Instead, the men misappropriated a total of $2.3 million for other purposes, according to the charges.

The alleged misappropriations occurred between August, 1986, and late 1989, when Fountain was placed under the control of a receiver, Geb said. The state Department of Corporations, which took part in the investigation, had an outside auditing firm examine the company’s bank records. The district attorney’s office then hired an oil and gas expert, who said many of the company’s expenditures did not involve oil exploration.

The company was placed in receivership by U.S. District Judge Manuel Real, who issued an injunction prohibiting the Fuentes brothers from seeking investments for oil and gas exploration. The judge acted after several disgruntled investors sued the brothers in U.S. District Court in Los Angeles.

The court-appointed receiver, Gerald T. Raydon of Rolling Hills, said a total of $12 million was invested in the company. Since he took over, Raydon said, a number of the company’s wells have been placed back into production and some creditors and investors have recouped their money.

But many people invested in wells that were never drilled, he said. “Those people are just not going to see a significant part of their money returned,” he said.

The company, using telemarketing techniques, solicited investors from all over California, “but a substantial number came from Ventura County,” Raydon said. The minimum investment was $15,000, he said, and one investor sank $250,000 into the company.

Raydon said there are always risks attached to oil and gas drilling. “The unfortunate thing is, some of these people never had a chance because no well was drilled,” he said.

“The whole thing is tragic because the company started off with some good intentions and some good wells,” Raydon said. “But somewhere along the way, they went off on a very strange tangent.”

Two former associates of the brothers, who asked not to be identified, said Charles Fuentes supplied himself with Rolls-Royce and Lamborghini automobiles at company expense.

For a few years, Fountain Oil & Gas leased an 8,000-square-foot, $16,000-per-month suite in the Westlake Plaza area of Thousand Oaks. The building manager, who also did not want to be identified, said Charles Fuentes lived in the exclusive North Ranch area.

“They were living high on the hog for a while,” the building manager said. He said Charles Fuentes asked for a private parking space and wanted to put Fountain’s name on the building.

“Then they stopped paying rent,” the manager said. “They kept saying the money was coming, they were going to borrow money or merge . . . This Charlie is quite believable. He’s taking you down the road and you still think he’s going to come through.”

Times staff writer Psyche Pascual contributed to this story.