The US Securities and Exchange Commission announced on Tuesday that it has filed fraud charges against two securities promoters who fraudulently raised $2.2 million through sales of oil and leases to at least 70 investors nationwide.
In announcing the charges, the SEC also issued an investor alert, warning investors to beware of solicitations that prey on fears of higher oil and gas prices.
The Commission alleged that between August 2002 and July 2005, Ivan Dearaujo, the principal of California-based PetroSite Assets, Inc., and the company's salesperson, Wesley A. Harbison, Jr., sold participation interests in the future production revenue of oil and gas wells.
Dearaujo and Harbison misrepresented PetroSite's ownership of wells and overstated the anticipated well production, according to the Commissions complaint, and kept a yet-undetermined amount of the money for themselves.
"Rising fuel prices make investors across the nation particularly susceptible to oil and gas scams," explained Katherine Addleman, Associate District Administrator for Enforcement in the Commission's Fort Worth Office.
She continued:
"Investors are led to believe that it will be easy to profit from an oil and gas venture. However, oil and gas investments are highly speculative and complex and many unscrupulous individuals use that complexity to enrich themselves with the investors' funds."
The Commission further alleged that Dearaujo defrauded the PetroSite investors at the time of the initial investment by misappropriating a substantial portion of their funds, instead of investing the money in the wells, and that he defrauded the PetroSite investors as the business progressed by diverting for his own benefit much of the revenue generated by the wells.
Harbison, according to the complaint, was paid a commission on his sales of the PetroSite participation interests, and participated knowingly in Dearaujo's misrepresentation of those interests.
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