A FINRA hearing officer has expelled a San Antonio, TX-based broker-dealer and barred its President, for fraudulent sales of oil and gas private placements and unregistered securities.  Additional charges were issued against the President. Pinnacle Partners Financial and its President, Brian Alfaro, were further ordered to offer rescission to investors who bought the allegedly fraudulent offerings, and to refund all sales commissions to any customers who do not request rescission. FINRA Findings and Default Decision. On the day Alfaro and Pinnacle Partners were to appear before the hearing panel, Alfaro decided not to attend the hearing. As a result, the hearing officer issued a default decision.  The hearing officer found that from August 2008 to March 2011:

• Alfaro and Pinnacle operated a boiler room in which some 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.
• All told, they raised over $10 million from more than 100 investors - some of which allegedly was diverted by Alfaro and allegedly used for unrelated business and personal expenses.
• Pinnacle and Alfaro included numerous misrepresentations and omissions in the investment summaries for 11 private placement offerings, including:  (i) grossly inflated natural gas prices, (ii) projected natural gas reserves, (iii) estimated gross returns, and (iv) estimated monthly cash flows.
• Material containing unfavorable information from well operator reports were deleted from the offerings documentation.
• Investors were provided with maps that omitted numerous dry, plugged and abandoned wells near their projected drilling sites.
• An offering document was provided to investors that claim a previous venture had distributed over $14 million to investors, when the actual distribution was less than $1.5 million.

The hearing officer decision also notes that from January 2009 to March 2011:

• Alfaro misused customer funds on personal expenditures and for business purposes unrelated to the customers' investments - rather than on drilling and production in the wells in which their ventures invested.
• When projects failed or were failing, 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 never was drilled - those funds went for unrelated personal and business expenses.

  One year ago, in April 2011, FINRA suspended indefinitely Pinnacle and Alfaro for failure to comply with a FINRA Temporary Cease and Desist Order prohibiting their fraudulent misrepresentations.  FINRA was represented at the hearing by Mark Dauer, Enforcement Deputy Chief Litigation Counsel, and Robert Long, Enforcement Senior Regional Counsel. With a default decision, ... unless the hearing officer's decision is appealed to FINRA's National Adjudicatory Council (NAC) or is called for review by the NAC, the hearing officer's decision becomes final after 25 days. For further details, go to:  [FINRA News Release, 4/25/12] and .... [FINRA Default Decision of the Office of Hearing Officers] [FINRA 2nd Amended Decision of the OHO]