Suit Filed Over Alleged Scam That Targeted Elderly

Investors in an alleged $9-million oil-and-gas leasing investment scam that targeted elderly people filed a fraud suit Wednesday in Orange County Superior Court in Santa Ana.

The complaint against Denver-based First Trust Corp. and Sandstone Income Fund V and Liberty Energy Management Inc., both of Laguna Niguel, and five men who allegedly orchestrated the investment fraud was brought by two Orange County residents and the estate of a deceased investor.

According to the suit, the defendants ran a Ponzi scheme in which they sold promissory notes and interests in high-risk oil and gas partnerships to elderly people and pocketed most of the money.

A small portion of the funds raised from later investors were used to make some payments to earlier investors, according to Montgomery G. Griffin, a Newport Beach-based consultant to the law firm representing the plaintiffs. He said that while plaintiffs in the suit lost less than $100,000, the defendants raised more than $9 million from investors across the country.

The investors were told that First Trust Corp. was a brokerage and securities firm selling so-called Enerco Energy Series notes as well as interests in the Sandstone partnership, the lawsuit states. Also named as defendants were Lance Van Alstyne and John L. Prokell, both identified as Orange County residents; Patrick Wayne Maloy, whose whereabouts aren’t known; and Joe Gardner, a Los Angeles County resident.

The out-of-pocket losses to the plaintiffs totaled $91,300, the lawsuit says. Citing California’s elder abuse law, the suit seeks recovery of actual losses and triple damages, a total of almost $400,000, plus unspecified punitive damages.