SEC Charges Family-Run Business Promising Investors Stake in Purported $11 Billion Gold Mine
The US Securities and Exchange Commission has charged a father, son, and daughter with running a nationwide investment scheme that falsely promised investors whopping returns from a gold mining operation while their money was actually spent on family cars, jewelry, vacations, and vitamin supplements.
The SEC alleges that Harry Dean Proudfoot III of Mt. Vernon, Ohio, and his children Matthew Dale Proudfoot of Colbert, Wash., and Laurie Anne Vrvilo of Tigard, Ore., raised at least $2.7 million from approximately 140 investors in 23 states through their Portland, Oregon-based company 3 Eagles Research & Development LLC (3 Eagles). They told investors their company would extract gold worth more than $11 billion from gravel pits in central Ohio, and promised investors they could earn 35 times their initial investment. However, 3 Eagles did not even have rights to much of the property it claimed to be mining for gold, and the Proudfoots instead diverted investor money for personal use rather than the mining activities outlined in presentations to investors.
According to the SEC’s complaint filed in federal court in Portland, the scheme primarily occurred between September 2009 and October 2011. The Proudfoots sold investors “royalty units” in the purported gold mining project, claiming their money would be used to purchase mining equipment and conduct mining operations at two gravel pits. The Proudfoots falsely touted they had an expert geologist on the mining project. They solicited investors in a variety of ways, including through a Power Point presentation filled with misleading information. They also hired a securities broker named Dennis Ashley Bukantis of Denver, who is not registered with the SEC and assisted in the sale of royalty units in exchange for nearly $165,000 in commissions. Bukantis is charged along with the Proudfoots in the SEC’s complaint.
The SEC alleges that rather than using investor funds for gold mining equipment and operations, the Proudfoots siphoned off more than $1.1 million of investor money and misused 3 Eagles corporate accounts as their own personal piggy bank, leaving the company penniless and unable to pay the necessary expenses to get the Ohio mine into production. Among their illicit personal expenditures, the Proudfoots spent $80,000 on automobiles, $235,000 in personal travel, and upwards of $30,000 per year for vitamins and nutritional supplements.
According to the SEC’s complaint, after being served investigative subpoenas by the SEC and various state securities regulators in the fall of 2011, Harry Proudfoot was removed from the company and 3 Eagles represented it stopped selling royalty units. However, by December, Matthew Proudfoot was again selling investors a stake in 3 Eagles, this time calling them “membership interests” that would be used to move the Ohio mining project into production. Yet once again, much of the investor money was misused for personal expenses, including defense lawyers for each of the Proudfoots and 3 Eagles as well as Matthew Proudfoot’s bankruptcy payments and household bills.