Colorado Securities Commissioner Fred Joseph filed a fraud complaint today in Denver District Court against four businesses, saying their investment marketing tactics violated the Colorado Securities Act.
The companies, HEI Resources, Heartland Energy Development Corp., Bedrock Energy Development and Gulf Coast Western, along with a number of associates and attorneys named in the complaint, are accused of perpetrating a long-running scheme to defraud investors by offering the sale of unregistered securities in the form of interests in oil and gas drilling operations.
The complaint says HEI’s founder and CEO Reed Cagle and associate Joe Kinlaw orchestrated the scheme by directing sales agents to make misleading and unsubstantiated statements about prospects for successful investment returns and the previous track records, all the while minimizing or dismissing the risk associated with drilling each well.
It is also alleged that HEI Resources and Gulf Coast Western operate “boiler rooms” in Colorado Springs, and Heartland Energy Development Corporation and Bedrock Energy Development operate “boiler rooms” in Englewood and Greenwood Village.
Boiler rooms typically feature numerous salesmen, each making hundreds of cold-calls per day to unsuspecting individuals, using scripted sales pitches and high pressure tactics to push investment opportunities.