DENVER (CN) – Cease-and-desist orders from three states did not stop two Colorado Springs men from defrauding investors of millions of dollars through an unlicensed boiler room that employed criminals, Colorado’s securities commissioner claims in court.
Securities Commissioner Fred Joseph sued Brian T. Sullivan and Daniel F. Sheriff in Denver City and County District Court. Also sued are Fairfield Energy Inc., D.B. Wheeler LLC, and Amazon Exploration LLC.
“Attracting investors through boiler-room cold calls, Sullivan, Sheriff and Fairfield Energy have defrauded dozens of investors nationwide of millions of dollars,” the complaint states. “The securities offered were investments in oil wells and oil drilling equipment, offered to investors in the form of ‘units’ of investment in newly formed joint ventures and partnerships. The defendants used unlicensed sales agents, some with criminal histories, to contact investors nationwide, with each sales agent making as many as 300 to 400 cold-calling attempts per day, relying upon canned scripts and statements to promote the investments, and earning commissions for their efforts.
“In an effort to evade federal and state securities regulations, all defendants … claim the investments are ‘joint ventures’ and not securities. The defendants failed to disclose any risks associated with the investments, their prior legal troubles, their prior failures, and the actual amount of commissions and other compensation they pad themselves out of investment funds. The commissioner seeks a permanent injunction enjoining the defendants from future violations of the Colorado Securities Act … disgorgement, and restitution for violations of the registration, licensing and anti-fraud provisions of the Act.”
California, Nebraska and Washington have issued cease-and-desist orders against Sullivan’s and Sheriff’s scheme, the commissioner says. Among their failings, the state says, are that Sullivan and Sheriff “failed to disclose material facts to investors” about their offerings and sales agents; failed to tell investors “that wells from prior offerings were ‘plugged and abandoned;'” that “none of the defendants were licensed to sell securities from the state of Colorado;” that “Fairfield Energy bought the rig for the TM4500 Joint Venture investment from a party that did not have the title to the rig;” and that “at least one of the sales representatives contacting the investor had a criminal record, including felony theft.”
What Sheriff and Sullivan did offer was “two pages of boiler-plate language providing virtually no disclosure regarding the risk of nature of the investment,” the complaint states.
All five defendants operate out of Colorado Springs.