Colorado securities regulator sues Springs companies, businessmen

Colorado's securities regulator has sued two companies and five executives or salespersons, all from the Colorado Springs area, alleging they operated a fraudulent scheme to sell partnerships in oil and gas wells to more than 200 investors nationwide.

Colorado Securities Commissioner Fred Joseph sued HEI Resources Inc., Gulf Coast Western LLC, Charles Reed Cagle, Dale Phillips and Nicholas Troyer, all of Colorado Springs; Joseph Kinlaw of Woodland Park and Steve Ziemke of Monument on Wednesday in Denver District Court. The suit charges the companies and individuals with operating “boiler rooms” to solicit investments to drill oil wells in Texas that “were frequently unsuccessful” and generated “virtually no return.”

Cagle was founder and chief executive of HEI, and with Kinlaw allegedly orchestrated the scheme with help from executives Brandon Davis of Castle Rock and Matthew Fleeger of Dallas and salesman Phillips, Troyer, Ziemke, James Pollak of Denver and John Schiffner of Parker, the suit said. Kinlaw had been sued by and settled with the Securities and Exchange Commission in a similar scheme in 1995, and Cagle and Kinlaw agreed to similar settlements with Alabama and Virginia regulators.

Mikel Bowers, a Dallas attorney for Cagle and HEI, said all claims in the suit “are unfounded and the result of the failure by the Attorney General(‘s office) to conduct the most basic and rudimentary investigation. We intend to vigorously defend these allegations.” He added that neither Cagle nor HEI “engaged in the sales of securities. They were selling legitimate general partnership interest. The Attorney General’s actions are without grounds.”