The Financial Industry Regulatory Authority (Finra) has expelled San Antonio, Tex.-based Pinnacle Partners Financial Corp. from the financial services industry and barred its president, Brian Alfaro, for allegedly running a fraudulent "boiler room" operation.
Finra has ordered Pinnacle and Alfaro to discharge all contract agreements with customers who were sold fraudulent offerings.
Finra officials said that from August 2008 to March 2011, Alfaro and Pinnacle operated a "boiler room" in which about 10 brokers placed thousands of cold calls on a weekly basis to solicit investments in oil- and gas-drilling joint ventures Alfaro owned or controlled. Alfaro and Pinnacle, according to Finra, raised over $10 million from more than 100 investors, and Alfaro diverted some of the customer funds for unrelated business and personal expenses.
Finra also charged that Pinnacle and Alfaro deliberately attempted to mislead investors by deleting unfavorable information from well operator reports and providing investors with maps that omitted numerous dry, plugged and abandoned wells near their projected drilling sites. In addition, according to Finra, Pinnacle and Alfaro distributed an offering document claiming that a previous venture had distributed more than $14 million to its investors when the actual distribution was less than $1.5 million.
When projects failed or were failing, Finra claimed that Alfaro concealed his misuse of customers' funds by persuading them to transfer their investment to his other oil and gas ventures. In one instance, Alfaro collected more than $500,000 in subscription costs for a well that was never drilled, and used those funds for personal and unrelated business expenses, according to Finra.