Head of mining company settles SEC fraud charges

The head of a California mining company has settled charges by the Securities and Exchange Commission that he and his firm defrauded investors in a Nevada gold-mining venture.

Kenneth W. Carlton, president and CEO of Nekekim Corp., allegedly told investors that a special “complex ore” found at the company’s mine site near Tonopah held at least $1.7 billion worth of gold deposits, the SEC said.

He highlighted test results from two small labs that used unconventional methods and never mentioned that geologists and a government study had questioned the labs’ reliability, according to the SEC. Carlton also withheld findings from other labs that indicated the mine site held little, if any, gold, the agency said.

Carlton’s company had hundreds of investors, who put more than $16 million into the venture, the SEC said.

As his company failed to generate mining revenue, Carlton allegedly gave shareholders “false hope” that the company was close to perfecting the custom method it supposedly needed to extract gold, according to the agency.

He also is accused of “grossly overstating” the company’s progress toward profitability, while at the same time getting investors to put more money into the company, officials said.

“A NEW GOLD RECOVERY PROCESS IS SUCCESSFUL,” he allegedly wrote in a November 2007 shareholder newsletter.

The SEC announced the settlement on Thursday.

The 64-year-old Carlton, who lives in Clovis, Calif., about 10 miles northeast of Fresno, agreed to a judgment that requires him to pay a $50,000 penalty and prohibits him from managing Nekekim or selling securities for the company.

Nekekim is based in Madera, about 25 miles northwest of Fresno. Carlton, a former music teacher with no mining experience outside of Nekekim, has led the company and served on its board since its founding in 1993, according to the SEC.

Carlton and Nekekim neither admitted nor denied the agency’s allegations, the SEC said.

Efforts to reach Carlton for comment were not immediately successful.

According to the SEC, Nekekim signed up about 600 investors from 2001-2011. They hailed from California, Florida and New Jersey, as well as Canada, Australia and Singapore, among other places.

Carlton led the fundraising efforts.

To fund operations, his company relied heavily on repeat investments from existing shareholders, the SEC alleged. More than 100 people invested two or more times.

He told investors that his company had to develop a custom technique to extract the gold from its ore.

The SEC also accused him of telling shareholders that a purported physicist — who actually had no scientific training — had helped develop a “confidential” extraction method licensed by Nekekim.

In lieu of a salary, Carlton allegedly took periodic loans from the company that were funded by investor capital. He has not repaid any of the roughly $2.2 million that he borrowed since Nekekim’s inception, the SEC said.