3 Irvine Firms Allegedly Bilked Oil-Gas Investors

The Securities and Exchange Commission alleged Tuesday that three Orange County businesses and seven individuals participated in a multimillion-dollar scheme to defraud hundreds of investors in oil and gas partnerships.

In a civil complaint filed in U.S. District Court in Los Angeles, the SEC claims Larry R. Crowder of Coto de Caza and John L. Powell of Laguna Beach ran the scheme over the last five years, raising $15.7 million from more than 600 investors nationwide. The alleged scheme was operated through three Irvine-based companies--Irvine Securities Inc. and two affiliates, according to the suit.

In recent years, the agency has brought several similar cases in Southern California involving oil and gas partnerships. In the most extreme case, investors were bilked out of as much as $40 million, officials said.

The SEC has investigated Crowder, Powell and other defendants for about 1 1/2 years using video cameras to capture securities salesman making cold calls on elderly clients, many of whom were retired, officials said.

The agency claims defendants told investors that a “large percentage” of their funds would be used to acquire interests in oil and gas properties, but failed to disclose that certain defendants would pocket profits of 159% to 64,000%.

In contrast, agency officials said, investors received modest returns.

In addition to Irvine Securities, the suit names affiliates Environmental Energy Inc. and Environmental Operating Inc.

The suit also named securities salesmen Christian R. Higgins of Newport Beach, Charles L. Powell of Huntington Beach, James P. Gallaher of San Juan Capistrano, Dale J. Engelhardt, of Trabuco Canyon and Trey L. Friedmann of Costa Mesa.

David Grey, an Irvine lawyer for all of the defendants but Friedman, said his clients “deny liability” and plan to “vigorously defend against the allegations.”

He noted that all of the partnerships and businesses named in the complaint are still operating.

Bruce Bridgman, the attorney for Friedmann, said his client was “exploited. He was doing what he was told to do.”

In the lawsuit, the agency also alleged that certain defendants promised investors they planned to purchase certain oil and gas interests after having lost the right to purchase those properties.

What’s more, the agency charged, the salesmen inflated expected returns to investors, falsely claimed that they personally invested in the partnerships, and misrepresented the status of a Kentucky utility expected to buy gas from the partnerships.

Bloomberg News contributed to this report.