Brothers Plead Guilty to Fraud Involving Gas-Drilling Ventures

Two Thousand Oaks brothers have pleaded guilty to charges stemming from the misappropriation of almost $3 million invested with their defunct gas exploration business based in Westlake.

Charles E. Fuentes, 47, pleaded guilty Wednesday in Ventura County Superior Court to seven counts of grand theft, two counts of securities fraud, one count of tax fraud, and another theft allegation.

His brother, James A. Fuentes, 42, pleaded guilty to seven counts of securities fraud.

Deputy Dist. Atty. Rebecca S. Riley said the brothers committed the violations while operating Fountain Oil & Gas, a Westlake company that opened in 1986 and closed three years later.

Using telemarketing and other sales approaches, the brothers lured about 250 people--mostly from Ventura County and the San Fernando Valley--into investing a total of $12 million into gas-drilling ventures, according to court documents.

At first, the company had a few good wells and some investors made money, according to Gerald T. Raydon, a court-appointed receiver who is trying to straighten out the company’s affairs. But most found no gas, Raydon said, adding that such failures are not unusual in the high-risk, high-payoff petroleum industry.

The Fuentes brothers broke the law, investigators said, when they tried to keep the company afloat by using funds invested in one venture to finance a different drilling operation. In addition, Fountain President Charles Fuentes diverted some company funds to expensive cars, clothes and other personal expenses, Riley said.

“The thrust of our case was . . . that money had come in from investors to be used for a specific well,” Riley said. “In some cases it was diverted to other wells, or to other expenses of Fountain, or to specific personal purchases for Charles.”

Riley said nearly $3 million was misappropriated, but she could not estimate how much investors lost in the deals. In a sworn statement filed after the brothers’ arrest, one investigator said investors had lost $2.3 million.

Charles and James Fuentes were arrested Oct. 14, along with their brother, Kenneth R. Fuentes, 36, of Thousand Oaks. Each was charged with 11 counts of grand theft, 11 counts of selling unregistered securities and 11 counts of securities fraud.

Kenneth Fuentes, who by all accounts had the smallest role in the company, pleaded guilty to seven counts of securities fraud and was sentenced Feb. 21 to a year in Ventura County Jail.

On Wednesday, the remaining defendants accepted Riley’s offer to let them plead guilty to a smaller number of counts after Judge Lawrence Storch indicated how he would probably sentence them.

According to Riley and Charles Fuentes’ attorney, Deputy Public Defender John H. Voigtsberger, Storch said he would probably sentence Charles Fuentes to six years and four months in prison. Storch said James Fuentes, the company’s vice president, should get 16 months, Riley said.

Riley said Storch did not make an official commitment. After probation officials complete background reports, the judge could still sentence them to the maximum possible sentences, which would be 10 years for Charles and six for James.

Riley and Voigtsberger expressed satisfaction that the case will not go to trial.

“It avoids a monster trial and significant expense to the taxpayers,” Voigtsberger said. He said the cost of expert defense witnesses--at public expense--would probably have exceeded $100,000. Riley estimated that a trial would have lasted two months.