Jailed After Disobeying Judge's Order
31, 1985|NANCY RIVERA
| Times Staff Writer
The head of a West Hollywood company that sells contracts for investments in coins and precious metals has been jailed for
failing to set up an account covering possible damages from a customer's lawsuit.
Edward Mazur, chief executive of Coinex International, was jailed Monday for contempt of court. Mazur and Coinex had
been ordered to turn over $260,250 or a corporate surety bond for the same amount to the federal court registry in Los Angeles.
Judge A. Wallace Tashima had issued a temporary restraining order in August requiring the deposit and freezing Coinex's assets, said Grace Carter, a lawyer representing Robert S. Richard, who filed suit Aug. 9 against Coinex. Mazur and Coinex were first ruled to be in contempt of court on Sept. [continued below]....
..... 19 and were fined $500 for each day that the $260,250 deposit was not
made, Carter said.
Mazur's attorney, Robert Sills, said Mazur hasn't paid the court because "he does not have, at this time, the personal cash
resources to make a deposit like that."
Coinex is under investigation for possible securities laws violations. An affidavit filed in Los Angeles Superior Court by
the state Department of Corporations accuses Coinex and its officers of unlawfully selling coin investment contracts as securities and "using investors' monies for their own account and personal benefit."
Richard's suit accuses Coinex of violations of federal commodities laws, fraud, racketeering and breach of contract and
fiduciary duty. The suit seeks $260,250 in compensatory damages--the amount that the Alabama resident invested with Coinex to buy silver coin contracts. In addition, the suit seeks nearly $800,000 on the racketeering charge and $5
million in punitive damages.
The suit accuses Coinex of selling Richard contracts for silver coins that were "grossly overvalued," Carter
said. The coins were never delivered, she said.
Sills said Mazur denies all the accusations in the lawsuit.
The state's affidavit also accuses Coinex of making untrue statements or omitting material facts in the sale of the coin
contracts. In July, the Department of Corporations seized 70 boxes of corporate records from Coinex's Sunset Boulevard office, and those materials are still being reviewed, a spokesman said.
PERSONAL FINANCE : PREPARING YOURSELF :
INVESTMENT TRAPS : How You Can Avoid Getting Stuck Along the Way
June 19, 1988|NANCY RIVERA BROOKS | Times Staff Writer
One of the most common types of fraud is the Ponzi scheme, named after a successful early practitioner named Charles Ponzi. Ponzi began in 1919 to buy international postal reply coupons, which he redeemed for stamps in several countries, profiting on varying rates of exchange.
Early investors received 40% returns and more and more signed on, not realizing that new money was paying off initial investors.
Some $10 million was lost, most of it by investors in the Boston area.
That time-honored scheme has been repeated again and again with new investments.
The California Department of Corporations currently is investigating a Reseda company called Missman Kaplan Associates
that allegedly took in $12.5 million primarily from public school teachers during the 18 months ended March 1, 1987, to invest in promissory notes. The company was supposed to buy accounts receivable at a discount, but spent slightly less
than $2 million in that way, a department audit found.
Out of nearly $10.7 million paid to investors in principal and interest, nearly $9.4 million was paid from new investor funds,
according to court papers.
A close cousin of the Ponzi scam is the pyramid scheme, in which participants sell an investment to newcomers, much like the chain letter of school days.
One popular variation is the "airplane game." Investors pay a fee to board a fictitious aircraft and slowly move
up row by row to become pilot, who collects money from passengers. Such a scheme depends on recruiting a steady supply of new passengers, but the plane usually goes down in flames before most get out of coach and make any money.
Metals scams--involving coins, gold mine tailings, bullion and the like--are big money makers for swindlers.
One such scam was perpetrated by Edward Mazur, head of a defunct West Hollywood firm, Coinex International. He pleaded guilty in January to 28 counts of grand theft stemming from the operations of Coinex, which sold contracts for investments in coins and precious metals.
The coins were "grossly overvalued" and in most cases never delivered, investigators say. Investors also complained
that they were not told about a 30% markup the firm charged.
More than $30 million was invested by 3,000 people nationwide, most of it lost, says Dorene B. Wolf, senior trial counsel
for the Department of Corporations. Mazur has agreed to repay investors $2.7 million over five years. After the restitution is made, Mazur will be sentenced, Wolf says.
Most of the Coinex victims were lured by telephone pitches.
"I would caution people about ever buying anything over the telephone," says Berman of the district attorney's major
fraud division. "And the old words of wisdom--if it looks too good to be true, the chances are it is not true."
DR, PATRICIA MITCHELL / Los Angeles Times
Fraud Suspect Exits Prison, Enters Jail
February 13, 1986
Minutes after a Los Angeles businessman was released Tuesday from federal prison at Terminal Island, he was arrested by an investigator for the state Department of Corporations on securities fraud charges relating to his defunct Beverly Hills precious metals company.
Edward Mazur, 39, president of Coinex International Inc., had been in custody on contempt-of-court charges since
August for failing to repay an angry investor who sued him in U.S. District Court in Los Angeles.
U.S. District Judge A. Wallace Tashima ordered Mazur released Tuesday after Mazur agreed to repay the investor a portion of the money that Mazur owed him.
Kathryn Jonkey Holguin, a senior investigator for the Corporations Department, was waiting to arrest Mazur when he left the
"He was happy as a lark until he saw her," said Dorene Wolf, Corporations Department senior counsel.
She said Mazur faces grand theft and securities fraud charges in connection with his precious metals business in the alleged
defrauding of an estimated 2,000 investors.
"Mazur is the first person jailed for securities violations in connection with the new state and federal boiler room
task force," Wolf added.
Mazur was booked at Los Angeles County Jail. Municipal Judge Glenette Blackwell set bail at $1 million and ordered Mazur to appear for arraignment on Friday.
Executive Pleads No Contest in Fraud
March 06, 1986
A former officer of a West Hollywood precious metals firm that allegedly bilked about 3,000 investors out of more than $30
million in three years has pleaded no contest--the legal equivalent of guilty--to six felony charges in Los Angeles Municipal Court.
Peter Shermet, 25, former vice president of the now-defunct Coinex International Inc., pleaded no contest Tuesday to five
counts of selling unregistered securities and one count of using a scheme or device to defraud people.
Shermet and Edward Mazur, 38, Coinex's president, were named in a criminal fraud complaint last month by the district attorney's office. Prosecutors said investors were solicited by telephone to make a 50% down payment on coins that Coinex would hold for one year as their value appreciated.
Investigators found that most of the money went to Mazur, Shermet and their sales staff.
Shermet will be sentenced on June 4. A preliminary hearing for Mazur is set for March 25.
W. Hollywood Firm Probed in Sale of Coins
July 29, 1985|NANCY RIVERA
| Times Staff Writer
The state Department of Corporations is investigating a West Hollywood company for allegedly bilking thousands of
investors out of millions of dollars since December, 1982, by illegally selling securities, department officials say.
Investigators from the department and the Los Angeles District Attorney's office on Wednesday served a search warrant at the Sunset Boulevard office of Coinex International, which sells contracts for coins and precious metals to investors over the telephone.
When investigators arrived Wednesday morning at Coinex's offices, they found between 70 and 75 salesmen pitching the coin contracts by telephone, according to Dorene Wolf, a Department of Corporations senior counsel. They seized 70 boxes of corporate and financial records, computer records, advertising materials and other items, she said.
The Department of Corporations is beginning to analyze the records seized but is not yet able to determine how many investors are involved, Wolf said.
Took a While
"Our estimate is that there are thousands of investors because someone ran the investor list through the computer and it
took several minutes just to get through the Bs," she said.
The Department of Corporations estimates that Coinex took in about $34 million over the last seven months, Wolf said.
No arrests have been made and no charges have been filed. Coinex Chief Executive Edward Mazur was not in his office Friday and no other company officials were available for comment.
An affidavit filed last week in Los Angeles Superior Court said the search warrant was sought because of possible felony
violations of state securities laws by Coinex and its principals.
Specifically, Coinex and its officers allegedly sold investment contracts to the public even though the securities were not
qualified by the Department of Corporations, allegedly made untrue statements or omitted material facts in the sale of securities, and allegedly committed grand theft by "using investors monies for their own account and personal benefit," the affidavit said.
Coinex also has done business under the names of Domaine Precious Metals & Coins, Domaine Consultants, Domaine Numismatics, Domaine Productions and Northwind Enterprises.
Investors were told that the contracts, primarily for gold and silver coins, could be had for only a 50% down payment. They were told that after a certain period they could liquidate the contracts, roll them over or pay the other 50% and take possession of the coins, the affidavit said.
Investors were told that Coinex charges a 3% commission on profits, but salesmen never mentioned that the company also
charges a 30% spread between the purchase price and the selling price, the affidavit said.
The contracts "are sold in such a manner that the investor had to rely on the expertise of Coinex to make a profit," Wolf said.
The Department of Corporations acted because it has received dozens of complaints from Coinex investors located all over the country who say were not told about the 30% markup, have been unable to liquidate their contracts or whose checks from Coinex have bounced, she said.
One investor named in the affidavit was Ralph Frates, who spent more than $150,000 on contracts to buy coins from Coinex
beginning in mid-1983, the affidavit stated. The Fullerton resident said he is still not sure what his losses totaled.
His investment is "gone, gone, gone," said Frates, a Standard Oil retiree who says he is "over 70".
YOU MAY ALREADY BE A VICTIM OF FRAUD Investment schemes of telephone pitchmen can rob you of $10,000, $100,000 or more. Think you're too smart for them? Think again.
By Marlys Harris Reporter associate: Elizabeth M. MacDonald
August 1, 1989
How victims con themselves If you fall for a scam, chances are you will deny the awful truth for as long as possible. Con artists these days play on this propensity with ''lulling techniques'' designed to keep you from running to the cops. Here are excuses given to customers demanding money by Goldex, a California precious metals firm until it was shut down in 1983: the request arrived too late; the firm had been burglarized; the money was slow coming from the bank; the owner was out of the office. Lulling techniques are sometimes used to suck even more money from victims, as JoAnn Londy, 65, learned. Londy, a retired Claremont, Calif. medical administrator, invested in an Escondido, Calif. firm called Vulcan Mining that claimed to dig up gold and silver. She refused for more than a week to talk to MONEY about her experience because she
still hoped that somehow her cash would be returned. This, despite the fact that Vulcan's promoter, Edward Mazur, had just started a nine-year prison term for engineering an earlier fraud. Londy got involved with Vulcan in 1987, when a stockbroker with whom she had worked earlier urged her to invest $24,000. He never told her that he had signed on as a salesman with Vulcan. The broker promised Londy that she would have gold in six months -- but no gold ever came.
Desperate for money, she called the broker and was told that the gold was delayed. He advised her to invest in Vulcan's silver project for faster profits. So she cashed in her $12,000 life insurance policy and sent off the entire amount. Months went by, and neither metal arrived. ''I've gone into debt waiting for this money,'' she says sadly. ''I don't know what I will do without it.'' Officials with the New Mexico securities department who have investigated the scheme say Londy paid for dirt that is unlikely to be milled. Vulcan president Norman Bennett says, however: ''They don't understand what we're
doing here -- we are mining gold.'' He adds that Londy may get her money by year-end and that Vulcan has dissociated itself from its jailed promoter, Mazur. Appeals for more cash, like the one Londy heard, are termed ''load calls'' by boiler-room salesmen. They reason that someone who invests once is a willing mark. What's more, his or her friends may be good prospects too. A 46- year-old Baptist minister in a rural New York town invested $10,000 in leveraged precious-metals contracts in early 1988 with Eastern Financial Services of Newport Beach. A month or so later, after he had made a paper profit of $6,000, his broker called and offered a ''special program'' for the firm's best customers. The minister had no more to invest, so he suggested the salesman talk to a colleague at his church. His friend also invested.
5 Seized in Raids on 'Boiler Rooms'
April 21, 1989|MARIA L. La GANGA | Times Staff Writer
Its jurisdiction was broadened in 1985 to include oil and gas fraud. Precious metals fraud, a Southern California specialty, was added last June. Three months later, the California Department of Corporations joined up, embarking on the seven-month investigation that led to the past week's arrests.
Through Leviticus, investigating agencies are reimbursed for such costs as hiring expert witnesses and transporting victims
and investigators from state to state to prosecute perpetrators of fraud.
"What we've always needed (to fight telemarketing fraud) is more resources," said David Katz, assistant U.S.
attorney and head of the Southern California Fraud Task Force. "Precious metals is the big game here. With Leviticus money available to us now, we're really going to kick some behind."
Other sites raided were: Midwest Petroleum of Los Angeles; S&S Petroleum, Lake Arrowhead; Vulcan Mining and Development, also known as Esmeralda Mining, Escondido; Vulcan's Georgetown, Calif., mine site; Westar International, Thousand Oaks; Capital International Trading, Santa Ana; Oxford Oil and Gas, Century City; W. Scott and Associates, Carlsbad, and W. Scott's Carlsbad home.
The fraud suspects, all of whom were released on bail, were identified as: Steve Scott Moleski, 29, of Lake Arrowhead; Todd
Thomas Roberts, 28, Woodland Hills; two officials with S&S Petroleum; Vulcan Mining's marketing director, John Treat Zimmerman, about 35, Escondido; Richard Bensacon, 53, Corona, a supervisor for the Karrington Group, which was
not raided, and Hiromichi Hiro Hirahara, 37, Laguna Hills, vice president of the defunct West Cumberland Oil & Gas.
William Graysen, attorney for Midwest Petroleum, said the firm is a legitimate business that sells working interests in four
Oklahoma oil wells--three that have struck oil and one that is paying dividends.
"What they (authorities) will find out is that we have a legitimate business," Graysen said. "I don't know what these other people have been doing, but I know my client is honest. It usually happens when they make a sweep that they catch the good and the bad, the black, the white and the gray."