California Energy Executive Convicted of Fraud

FORT LAUDERDALE, Florida, May 10, 2004 (ENS) - The president of a failed California energy company has been found guilty of fraud after a two week jury trial before Federal District Court Judge James Cohn, in Fort Lauderdale.

E. Douglas Mitchell, who was the president of Los Angeles based PowerSource Corporation, was convicted May 4 of one count of conspiracy to commit wire fraud and mail fraud. Mitchell faces up to five years in prison. His sentencing hearing is scheduled for July 16, 2004.

PowerSource was one of a host of energy service providers that entered California’s newly deregulated electricity industry in 1998. Mitchell was the president of PowerSource from 1999 until 2002.

According to evidence introduced during the trial, Mitchell grossly overstated his company’s financial condition, its number of customers, and its profit potential.

He also made numerous misstatements during telephone conference calls with investors and failed to disclose negative information about the company.

The scheme used spam email, an Internet website, and fraudulent telemarketing sales calls to lure in victims across the country. The investors purchased $10,000 units in a series of limited liability partnerships that were supposed to finance PowerSource.

Only a small percentage of the investment actually went to the company, however, and 61 percent of the investment was immediately consumed by sales commissions. Investors lost a total of nearly $2.5 million. Some individuals invested as much as $80,000.

Six other individuals involved in the scheme pleaded guilty earlier and have been sentenced to prison terms ranging from one to five years.

Thomas Norton, who operated a telemarketing sales room in Hallandale, was sentenced to five years in prison. His wife, M. Patricia Riley, was sentenced to two years in prison. David Freeman, who worked in Norton’s telemarketing sales room, was sentenced to 30 months in prison.

Three California men also involved in the scheme, Ronald W. Johnson, James V. Miles, and Gary Spink, were sentenced to prison terms ranging from 21 months to 41 months.

The case was investigated by the Federal Bureau of Investigation and the Federal Trade Commission and was prosecuted by attorneys Barbara Wells and Patrick Jasperse from the U.S. Department of Justice Office of Consumer Litigation.