Ore. levies major fines in gold mine investment scam
Updated On: Jul 09 2013 05:47:18 PM CDT
The Oregon Department of Consumer and Business Services said has levied fines totaling nearly $1.4 million against seven people and companies who were part of a gold mining investment scheme.
Promoters raised approximately $2.6 million from 158 investors, most of them Oregonians, during a three-year period ending in 2007. Promoters told investors that their money would be used to mine for gold in British Columbia and that they would not have to wait long to receive a substantial return.
In fact, the mine was not operational, the state said, and salespeople hid multiple investment risks.
They lied about having innovative proprietary mining technology and special contracts to sell gold through European bullion banks. They issued "promissory notes" and "gold certificates" to investors, although the department's Division of Finance and Corporate Securities had not licensed them to sell investments.
Also, the agency said, they failed to register the investment with the division. Registration ensures that consumers receive objective information about an investment's risks.
The department had disciplined one of the participants, Harry Proudfoot III, twice before for investment fraud.
The lengthy investigation was slowed in 2009, when the department was forced to sue Proudfoot to obtain 21 boxes of key documents.
Several participants appealed the fines proposed by the department in 2011. An administrative law judge ruled in the department's favor on a number of issues in April 2013, paving the way for the department's final order of June 17, 2013.
"It's highly unfortunate that many Oregonians lost their hard-earned money," said David Tatman, administrator of the division. "While the types of investments sold using outright falsehoods can be diverse -- from real estate to technology to precious metals such as gold -- the one characteristic they share is that they are sold by individuals who are not licensed to sell securities."
The division issued the following fines:
* $474,000 against Harry Proudfoot III (last known address in Ohio) and Family Benefits USA, LLC of Nevada. The division permanently revoked Proudfoot's license to sell securities in 1991 after he was caught selling unregistered investments without a license. It also ordered Proudfoot to stop selling unregistered securities in 2003, when he was fined for selling investments in a company peddling ATM machines.
* $474,000 against RKANE III, LLC, Rimrock III, LLC, (both of Nevada) and Three Nines Minerals, Ltd. of Vancouver, B.C.
* $168,000 fine against Lyle Hathaway (last known address, Vancouver, Wash.).
* $250,000 against Kurt Black, an Enterprise, Ore., attorney whose license to practice law was suspended in 2002 by the Oregon State Bar. (A portion of Black's penalty was suspended in exchange for his cooperation with the investigation.)
Tatman encouraged investors to contact the division before investing to determine whether a salesperson is licensed. In this case, for example, investors would have learned that Proudfoot was not authorized to sell investments in Oregon.
To check an individual's credentials and licensing history, call the division at 866-814-9710 (toll-free in Oregon) or 503-378-4140, or go to www.dfcs.oregon.gov.
Copyright 2013 KTVZ. All rights reserved. This material may not be published, broadcast, rewritten or redistributed