Release:#4111-98 (Civ 97-4443)
For Release: February 19, 1998
CALIFORNIA COURT ENTERS ORDERS OF PERMANENT INJUNCTION AGAINST
CALIFORNIA TELEMARKETING FIRM, ITS PRESIDENT, AND TWO FIRM EMPLOYEES;
ORDERS RESTITUTION BE PAID TO FIRM'S INVESTORS
CFTC Charged C.O.M. Consultants d/b/a Golden State Bullion and Other
Individual Defendants with Fraud in the Sale of Illegal, Off-Exchange
Precious Metals Futures Contracts Nationwide
WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that on February 10, 1998, the Honorable William Matthew Byrne, Jr. of the U.S. District Court for the Central District of California entered consent orders of permanent injunction barring C.O.M. Consultants, Inc., d/b/a Golden State Bullion (Golden State), of Marina del Rey, California; Richard David Otto, Golden State's president and owner, of Corona del Mar, CA; and Golden State telemarketer Bruce Michael Paine of Venice, CA, from soliciting new customers or customer funds in connection with futures trading and ordering Golden State and Otto to pay restitution to Golden State customers.
The court previously entered a default judgment against Golden State telemarketer Fred Ronald Williams of Pacific Palisades, CA, on December 8, 1997, which, among other things, permanently bars him from soliciting customers or funds in connection with futures trading and orders him to pay restitution to investors.
The court's orders were entered to settle a two-count injunctive complaint filed by the CFTC on June 18, 1997, against Golden State, Otto, Paine, Williams, and telemarketer Linton Samaru of Venice, California. The complaint alleged that the defendants had engaged in fraudulent telemarketing of highly-leveraged investments in platinum, gold, silver and palladium. (See CFTC News Release #4030-97, June 23, 1997). Specifically, the CFTC complaint charged that the defendants violated section 4(a) of the Commodity Exchange Act (CEA) by offering and selling illegal, off-exchange futures contracts and section 4b of the CEA by cheating and defrauding customers through false claims concerning the likelihood of profit and the risk of loss associated with investments in these contracts. On June 19, 1997, the court entered an ex parte asset freeze order which, among other things, froze the defendants' assets.
According to the complaint, Golden State required customers to pay cash
for a portion of an investment in precious metal (usually 20 percent), and
an off-shore financial institution would loan customers the balance of the
purchase price of the metal. Golden State allegedly told customers that
they would not receive the metal they had supposedly purchased; instead,
the metal would be held by the off-shore financial institution. Golden
State telemarketers allegedly claimed that their precious metals investment
program involved little or no risk and that impending labor turmoil at
South Africa's platinum mines would cause the price of platinum to increase
to between $600 and $700 per ounce, providing investors with a return of
three to four times their investments in two to three months. In fact,
customers consistently lost the bulk of their investments, according to the
Redress Agent Appointed to Disburse Funds to Golden State Investors
Under the terms of the court's permanent injunction orders, Golden State, Otto, and Paine are permanently enjoined from committing further violations of federal commodity law and regulations, as charged. The order as to Golden State provides for the transfer to a Redress Agent of all the company's assets, now under the control of a court-appointed receiver. The Redress Agent is charged with disbursing those funds to Golden State investors. Defendant Otto has been ordered to pay to the Redress Agent a lump sum of $9,244.77 and an additional 25 percent of his taxable income during the years 1997 through 2001. Finally, the consent orders prohibit Golden State, Otto, and Paine from ever seeking registration with the CFTC, or from acting in any capacity for which registration is required or for which an exemption from registration exists.
Under the terms of the default judgment entered against defendant
Williams, the court has ordered that he make restitution to investors in
the amount of $2,459,117 and has permanently prohibited him from engaging
in any commodity-related activity, including soliciting new customers or
CFTC is Continuing Litigation Against Two of the Defendants
Lastly, the CFTC is continuing its litigation against defendants Paine and Linton Samaru. As to defendant Paine, the only issue that remains is the award of a monetary judgment. As to defendant Linton Samaru, the CFTC is seeking permanent civil injunctive and other remedial relief, including restitution to allegedly defrauded investors.