Metals Broker Sues Customer for $11 Million : Firm Claims Injury From Complaints to FBI, CFTC
The president of an unregistered Laguna Hills precious metals brokerage has filed an $11-million slander suit against an unhappy customer who demanded his money back and complained to the FBI and the Commodity Futures Trading Commission.
Sheldon Eskow, president of American Precious Metals Ltd., filed the suit in Orange County Superior Court earlier this month.
Eskow is suing Mark Gitomer, 33, a Philadelphia musician who said he was unable to recoup his funds until he threatened to complain to federal officials. The suit claims that Gitomer’s “defamatory accusations, menacing acts and outrageous conduct” caused Eskow to suffer “severe and continuing mental anguish, humiliation, distress and emotional shock and injury.”
The suit claims that Gitomer’s actions “to disgrace and defame American in the business community” have injured the business and contributed to lost profits.
Unregistered Partnership
Eskow’s limited partnership is not registered with the Commodity Futures Trading Commission or the National Futures Assn., according to spokesmen for those organizations.
Arthur Salzberg, regional counsel for the CFTC, said of American Precious Metals: “If this company is merely offering an opportunity to speculate in the price changes of precious metals, then a court could determine that they are selling illegal off-exchange futures contracts or unregistered securities in violation of state and federal law.”
Alan Weil, the Los Angeles attorney for Eskow, said: “The company contends these are not illegal off-exchange futures contracts.” He also said: “It is at least as likely that a court would rule contrary to what Mr. Salzberg is saying.”
The CFTC spokesman said any person who deals with an unregistered metals broker “does so fully at their own peril.”
Under a 1978 federal government moratorium, only three companies are permitted to sell precious metals on credit contracts. However, hundreds of companies, including dozens in Southern California, use telephone salesmen to sell unregistered metals contracts to thousands of investors.
Gitomer, who recently closed his account with American, signed a contract with the company in January. He said he was buying deferred delivery contracts for gold, silver, platinum and palladium. He started with a $2,800 investment but ultimately invested about $20,000 and claims that he lost about $12,000. However, he did make a profit on some transactions.
“After I made a profit, I wanted the money sent home,” said Gitomer in a recent telephone interview. But instead of honoring his requests, he said, American’s telephone salespeople called him several times a day, insisting that he reinvest his profits. “They absolutely would not take no for an answer,” Gitomer said.
“I have the perfect right to go to the FBI and the CFTC,” said Gitomer, who has filed complaints with both agencies. “I feel I’ve been ripped off.”
Eskow said Gitomer was unhappy because he lost money when metals prices fell.
“He hasn’t had any problems getting his money back from us,” Eskow said in an interview before filing the lawsuit. “We are complying with our contract. We are not doing anything immoral.” According to Gitomer’s records, Eskow sent one check for $7,518.71 after Gitomer demanded his money back.
Weil, Eskow’s attorney, said Eskow has been “quite upset” by Gitomer’s threats, although he has not been contacted by any government agency following up on Gitomer’s complaints.
Weil said he is “in discussions” with Gitomer’s lawyer but declined to comment on whether a settlement is in the works.
