Two Thousand Oaks brothers were sentenced to prison on Thursday for their roles in bilking about 200 investors in their gas exploration business out of nearly $3 million.
Investors’ cash was illegally pumped into their company, Fountain Oil & Gas of Westlake, to keep it afloat, investigators said.
Moreover, investigators said the president and founder of the firm, Charles E. Fuentes, diverted company funds into expensive cars, clothes and personal expenses.
Fuentes, 47, was sentenced to five years and eight months in state prison and ordered to pay $10,000 in restitution to the victims.
His brother, James A. Fuentes, 42, was sentenced to 16 months in prison and also ordered to pay $10,000 in restitution.
A third brother, Kenneth R. Fuentes, 36, of Thousand Oaks, was sentenced in February to a year in County Jail for his role in the fraud.
In pronouncing Thursday’s sentences, Ventura County Superior Court Judge Lawrence Storch took into account that Charles E. Fuentes pleaded guilty to seven counts of grand theft, two counts of securities fraud and one count of tax fraud.
James A. Fuentes, like his brother Kenneth, had pleaded guilty to seven counts of securities fraud.
The two brothers were being held in County Jail on $500,000 bail each.
After the arrest of the brothers in October, investigators found that Charles Fuentes had diverted thousands of dollars in investors’ money to purchase a Rolls-Royce, a Lamborghini and 20 expensive designer suits.
“The thrust of our case,” Deputy Dist. Atty. Rebecca S. Riley said, “was that money had come in from investors to be used for a specific well. In some cases it was diverted to other wells, or to other expenses of Fountain, or to specific personal purchases for Charles.”
The now-defunct company used telephone soliciting and mailers to attract investment cash into natural gas drilling projects in the Sacramento Valley between 1986 and 1989. As many as 250 investors put up about $12 million into the ventures, according to court papers filed by district attorney’s investigator Thomas L. Kitchens.
Some of the investors, mostly from Ventura County, made a profit, said Gerald T. Raydon, a receiver appointed for Fountain in 1989 by the U. S. District Court in Los Angeles.
But of the 26 wells drilled in the Sacramento Valley, only two returned to investors their initial investment, Raydon said. Among the reasons, he said, were the huge fees and royalties that the brothers took off the top.
Each gas well venture involved about 30 investors who would put up a total of $400,000 to $550,000 for drilling.
Raydon said investors should have known better and checked out the venture. “Some people were too eager to listen to a salesman’s pitch,” he said.