As Colorado’s oil-and-gas industry continued its surge in May 2007, Jack Hardy received a pitch for a sure-fire investment in natural-gas wells that would produce generous returns.
“After several phone calls and a whole lot of fancy literature, I bit,” the retired General Electric salesman said in a phone interview from his home in Mechanicsville, Va.
Less than a year later, Hardy received another call, this time from officials at the U.S. Securities and Exchange Commission. Hardy, 75, had sunk $22,500 into Icon World, a company that was being investigated for allegedly selling stakes in wells it didn’t own.
Icon and its affiliate, Sunco, raised more than $1 million from 23 investors to purportedly develop wells in Colorado, Ohio and Michigan, according to an SEC complaint filed last May in Denver federal court.
“However, Icon and Sunco did not own any interest in the oil and gas wells, did not have any rights to sell interests on behalf of the rightful owners of the wells and did not pay funds to contractors necessary to develop the wells,” the complaint alleges.
The Icon case is part of a growing number of oil-and-gas schemes that are being uncovered in Colorado and across the country. The scams boomed last year as oil hit a record high of $147 a barrel, regulators say.
Much of Icon’s business was conducted at offices in Colorado.
“These guys follow the headlines, and they tout this stuff to investors: ‘Look at this, we’re talking $200 for a barrel of oil, you’re going to get rich,’ ” Colorado Securities Commissioner Fred Joseph said. “They’re making promises like if you invest $60,000, you’ll get $6,000 a month for the next 15 years.”
Joseph said oil-and-gas investment- fraud cases represent the largest number of cases his office has investigated since 2007.
The SEC last year launched a task force to focus on these types of cases. Investigators in Washington, D.C., are at the center of the task force, but “every office in the commission is a part of it,” said Don Hoerl, regional director of the SEC’s Denver office.
“We’re pursuing a number of matters that have oil-and-gas overtones,” Hoerl said, declining to disclose specifics.
In August, the SEC announced that Colorado Springs resident Donald Allen and two of his companies agreed to pay $510,000 to settle energy-related fraud charges. The SEC alleged Allen raised $9.9 million from at least 355 investors for oil-and-gas projects but spent the money on other expenses, including personal use. Allen didn’t admit or deny guilt as part of the settlement.
Joseph said scams continue even though the price of oil has plunged to around $40 a barrel.
“I probably have at least a dozen unregistered oil-and-gas cases we’re working on,” Joseph said.
William McCoy, who invested $70,000 in Icon, said he has received 50 to 100 oil-and-gas pitches over the phone in the past year, including one Tuesday.
“I just tell them I don’t have any more money,” said McCoy, 74, of Richmond, Va.
Regulators have been unable to locate one of Icon’s principals, Christine Zamorsky, who had home addresses in three states, including Colorado.
The other principals, Jeff Zamorsky and Tony Aguilar, have been served by the SEC but have not responded to the charges. The government has moved for a summary judgment against them, seeking a payment of $1.4 million in ill-gotten gains.
Andy Vuong: 303-954-1209 or avuong@denverpost.com
