O.C. Firm Closes Amid Assertions of Investor Fraud
A company that sold limited partnership interests in oil and gas ventures has closed its doors amid assertions that it swindled elderly investors out of more than $25 million with promises of profits from oil wells that never existed or weren’t operating.
Pacific Coast Financial Securities Inc., in a notice to about 1,100 investors, blamed its demise on litigation against the firm and its owners and operators.
Two lawsuits charge that the company, president Don Tullio Morandini and others created 30 investment funds that were “simply a scheme and a ruse” to steal money from elderly investors.
The Huntington Beach company and the operators also face investigations by the state Department of Corporations and the National Assn. of Securities Dealers. The company is scheduled to relinquish its broker-dealer license by Feb. 22, officials at both agencies said.
James L. Sanders, a lawyer for Pacific Coast and Morandini, said he’s challenging the first lawsuit on grounds that it doesn’t state any legal wrongdoing. He wouldn’t comment Monday on the second suit, which was filed Thursday, because he said he hadn’t seen it.
Both lawsuits charge that the company targeted elderly residents and guaranteed high returns of 11% or more.
“People were told these investments were safe, they were backed by government bonds, they could get their money back at any time,” said Steven M. Green, a San Diego lawyer who filed suit in May in Orange County Superior Court. None of the representations were true, the suit alleges.
“People were subjected to very aggressive sales tactics,” Green added. “They were constantly being called.”
Only those who appeared to be sophisticated, who asked the right questions and demanded information, were dropped by salespeople, the lawyers said. “Those who were sophisticated wouldn’t have talked to these people,” Green said.
The lawsuit filed last week charges that Morandini and others operated a Ponzi scheme, paying off earlier investors with money from new investors. Any expenditures for investments or interest payments were made to establish a track record to persuade other investors to turn over their funds, according to the suit filed by San Diego lawyer Robert Scott Dreher.
The lawyers said that their clients typically didn’t receive prospectuses or offering circulars for two to four months after they invested. The documents, Green said, showed that “it was economically impossible to make money” on the deals.
Pacific Coast Financial Securities was incorporated in September 1991, and Morandini soon was taken to arbitration by customers who alleged that he misrepresented securities and sold them products that were unsuitable for them. State records also show several customer complaints alleging unauthorized trading in securities.
Morandini ran his oil and gas operations, Beacon Energy and Beacon Acquisition, out of his home in Long Beach, according to state records. Investments involving Beacon Energy are the basis for the lawsuit by Dreher’s client, Billie Escallier of Huntington Beach.
The suit contends that Morandini’s operation received help from American Business Securities in Irvine to create the Beacon income funds. But, the suit alleges, he never told prospective investors that American Business was involved in other oil and gas investment schemes that were under investigation by federal authorities.
The Securities and Exchange Commission shut down American Business and three related firms in Newport Beach and sued the principals, winning settlements or judgments from them. Investors lost $31 million in those companies, the SEC said.
