R. G. Reynolds: Investment Guru Faces His Past

From obscurity less than a year ago, R. G. Reynolds has become a star in Southern California financial broadcasting. Starting Friday, his weekly “Reynolds Report” is to be seen in all 50 states via cable television.

But as Reynolds’ popularity has grown, he has drawn investigations by federal and state securities regulators. Further, his public exposure has led to disclosures about his past, including a financial failure in 1982 that left him owing about $200,000 to a dozen elderly investors in Florida.

The bearded, 39-year-old Reynolds spent much of his adult life selling life insurance before flopping in a restaurant-nightclub venture in the early 1980s.

In May, 1983, Florida revoked his insurance agent’s license in absentia, alleging that he diverted to his own use the premiums on Medicare-supplement insurance that he had sold.

A year earlier, Reynolds had left his native Florida for Burbank during messy bankruptcy proceedings. Victims of his nightclub failure were the clients who had invested $10,000 to $40,000 each. Two later complained that banks had returned to them checks from Reynolds of more than $10,000 each because of insufficient funds in his accounts.

Reynolds says he now is preparing to repay the investors and was unaware of the license revocation. He adds: “As far as taking any premiums, I have never stolen a nickel in my life from anybody.”

Reynolds seems to be in his element on his daily KIEV-AM radio and weekly KSCI Channel 18 television shows, praising his favored investments and bantering with callers in down-home style. His talk is interspersed with hearty, resonant chuckles.

Often he recommends speculative stocks that sell for less than $1 a share. He proclaims that he himself owns shares in the companies he recommends. Some, but not all, of the firms pay him fees as sponsors of his radio and TV shows, he says.

Reynolds operates a big, bustling office in Burbank where workers take telephone orders for his monthly financial newsletter and his computerized stock information service for $325 a year. His staff also sells other things, including rare U.S. coins.

The newsletter, information service and sponsor fees are his sources of income, Reynolds says. He doesn’t make sales commissions or receive fees for individual consultations, he claims. And if people want to buy a stock, he refers them to a broker.

“I charge (investors) nothing. Never have and never will. And anybody can come in here and get an appointment with me.”

Asked about his first years in Southern California, Reynolds says he spent time selling such things as gems and “consulting” for a gas and oil investment promotion. He now says he departed those enterprises after learning things about them that he considered questionable.

But since he went on the radio, Reynolds says, he discovered his purpose in life: “to go out there and help as many people as I can, educate them, to inform them and try to help as many of them as I possibly can (to) become financially independent.”

Draws Large Audiences

Reynolds’ popularity was abundantly clear Sept. 20 when about 1,500 fans--some wearing his free, promotional T-shirts--filled a ballroom at the Bonaventure downtown.

They paid $15 a head ($25 a couple) to attend an all-day financial seminar, in which he advised them to “take a chance” with some of their savings. Reynolds elicited appreciative laughter by deriding a 6% return on bank savings with, “Gag, it bores me.”

His stated goal was to “help you people make as much money and enjoy life, have fun, make money--a lot of you will say--the R. G. Reynolds way.” But, he added, “If I come up on the stage in a robe, everybody run like hell, ‘cause I will. I’m not a guru. I do what I do and I am what I am and I try my best for everybody.”

The seminar underlined Reynolds’ broadcast formula: pep talks on over-the-counter stocks by chief executives of firms he recommends, larded with educational talks by professionals--in this case economist Arthur B. Laffer and UCLA Professor Larry Kimbell.

A member of Laffer’s staff says the economist was invited by Reynolds to be a featured speaker, and that he was “very impressed” with the seminar. The staff member said she did not know if he received a fee. Kimbell acknowledged receiving a fee for his appearance.

Wider vistas are in the offing. Reynolds, who has been on radio a year but on television only several months, is about to beam his 90-minute radio show nationwide five nights a week.

Reynolds has arranged to transmit his hour-long, viewer call-in show live via the Tempo cable network on Friday nights. Tempo, which says it charges a flat fee of $5,600 an hour for its network time, claims a potential audience of 12.8 million homes and about 35 million viewers.

Strong Advance Interest

Advance interest in the program has been strong, Reynolds said the other day with a happy smile, after completing a series of promotional television commercials.

But behind the scenes, all is less than serene in the Reynolds empire. Disclosure of his past has complicated life.

Richard Reynolds, the name he used after 1980 in Florida (he became “R. G.” in California), left a raft of troubles and debts behind. According to public records and interviews, major losers were retired people who lent their money in hopes of bigger interest than they could get elsewhere. Reynolds gave them as collateral 40 shares in his insurance agency for each $10,000 loan.

Reynolds’ own mother put more than $20,000 in his failed restaurant venture in Ocala, Fla., in 1982, he recently confirmed. Reynolds said he has long since repaid her, but only now is he completing plans to pay back the others. Until recently, he explained, he did not have their names and addresses.

Before departing Ocala for Burbank, Reynolds was arrested on misdemeanor bad check charges involving five checks for less than $50. The charges were later dismissed. These cases echoed earlier dismissal of bad check and fraud charges that had been brought in 1975 and again in 1979, while he was in the Miami area and before he legally changed his name from Richard Fernando Gonzales. Reynolds says charges in all the cases were dropped after he repaid those who received bad checks

Officially Changed Name

Reynolds notified the state insurance agency in 1980 of his name change, records there show. He says he changed it to that of his “true father.”

In May, 1983, Florida revoked Reynolds’ insurance license after failing to locate him at his Ocala address to serve an administrative complaint charging that he “engaged in fraudulent practices” by keeping two $532 premium checks for Medicare-supplement insurance he sold two women in the Ocala area.

California problems began for Reynolds last March, when state securities investigators looked at a multimillion-dollar gold program he promoted on his shows. Investors were offered interests in ore that would yield gold at $250 an ounce when refined. At the time, the market price for gold was about $350.

William Moreland, seller of the gold ore to persons who put up at least $5,000 each, at that time was under criminal charges involving an unrelated desert mining sales promotion. Those charges against Moreland, which he denied, were dismissed last May by a judge on grounds that the statute of limitations had run out.

The California Department of Corporations ordered Reynolds and Moreland to stop dealing in the gold ore promotion on grounds that it was an unregistered security. The ruling was appealed to the Fresno County Superior Court, which recently decided in the state’s favor.

One result of the cease-and-desist order, Reynolds complains, is that he has had to pour “my own money” into the project to protect his investors. Although he is unable to sell the program any more, Reynolds says it is continuing to refine gold for the benefit of earlier investors.

In recommending the gold deal on one of his radio programs early this year, Reynolds urged listeners to call in their orders for information packets to staff members who were on night duty at his office. According to a transcript of the program, Reynolds also told his listeners: “You know there is an old saying that if something sounds too good to be true, stay away. But not in this particular case.”

Callers Were Assured

Moreland and his lawyer were on the show and assured callers of the low risk of the investment, which involved refining ore that was piled on the surface from previous mining operations in a mountain area of rural Kern County.

Reynolds, who confirmed to an inquiring caller on the show that he was getting a fee from Moreland, told listeners that his staff had checked the Moreland program “very vividly.” He also spoke of Moreland’s “very high credentials” and added: ‘I’ve had my firm check everybody out.”

In addition to the state cease-and-desist action, Reynolds’ subsequent problems include a continuing Securities and Exchange Commission investigation, which Reynolds says also involves the Moreland gold program. The SEC declined to comment on the Reynolds matter.

Now, on the verge of going national with the TV show, Reynolds says that he also may sell stock to the public in his Reynolds Financial Network in January or February.

The SEC can’t stop him “as long I disclose my past,” he says. If the government agency tries to “blackball” him, he adds defiantly, he will send his followers by the thousands to “the courthouse steps” on his behalf.

Reynolds also describes other recent problems, which he blames on a front-page article in the San Francisco Examiner on July 20 about his troubles in Florida.

As a result, radio and cable-TV stations that formerly carried his programs in the Bay Area have “blackballed” him, he says, and the Vancouver (Canada) Stock Exchange forced him to give up the presidency of Mariah Resources Ltd., a gold mining company headquartered there.

According to filings made to Canadian securities authorities and confirmed by Reynolds, this also led to the recent abandonment of a plan to put his U.S. radio, television and other holdings under Mariah ownership, while he sought to expand his holdings in the Canadian firm to a control position.

Makes No Apologies

As for the Florida matters, Reynolds makes no apologies. “If you invest in any investment, there are no 100% guarantees in life . . . especially in the restaurant business. . . . I sure didn’t take their money to lose it, because I lost as well.”

Erma Daubert, an elderly investor who with her husband lent Reynolds $40,000, recently told a reporter that she still has one of his checks for more than $11,000, which came back from the bank marked “insufficient funds.”

Daubert recalled that she and her husband bought insurance from Reynolds, and that he “was a frequent visitor to our home as a friend.”

“When we last heard from him--it was the Fourth of July, 1982--and he said: ‘Please don’t push the check charges against me; I don’t want to go to prison. I will repay it.”’ According to public records, Reynolds gave another retired couple, Mr. and Mrs. Frances Wright, an insufficient funds check for $12,500 and several months later a promissory note for it. The note signed by Reynolds states on its face that it was “in lieu of an insufficient check No. 1385 in the amount of $12,500.00 dated 8 Feb. 1982.”

The Wrights’ attorney, Lewis O. Myers, complained in writing to the court that Reynolds had borrowed $20,000 from the Wrights several weeks after Reynolds filed for bankruptcy in October, 1981, and later gave the insufficient funds check.

While conceding the general circumstances of the bankruptcy case debts, Reynolds has not discussed them in detail. He recently recalled the events in general terms.

He was refurbishing a big restaurant-night club and was “running very low on funds,” he recounted, so he approached his insurance clients for loans. “They all understood it was a risk.”

Denies Wrongdoing

Asked about the Florida insurance commissioner’s complaint, Reynolds said he is unaware of the specific accusations and denies any wrongdoing, noting that it did not result in criminal charges.

Later, asked about the premiums collected on the two policies, he said: “Well, there was checks written. I can guarantee you that.”

Besides, he said, the life insurance company could have taken the $1,064 out of his renewal account, adding: “They owed me $15,000, $20,000 a year (as his share of policy renewals) for as long as I lived; I have never collected one nickel from that.”

He added that he doesn’t have records on the Florida matters because he couldn’t retrieve them from the restaurant after a lien holder foreclosed on the equipment.

His bankruptcy creditors are listed in court records, however. Files show that he never returned from California for his discharge hearing set for Aug. 9, 1982, in the bankruptcy court.

His attorney, Valerie J. Hall, had written the court that Reynolds was “presently residing in California and does not have the funds available to him to attend.” But, she wrote, Reynolds preferred to have the hearing in Florida rather than in California. On Sept. 1, 1982, Bankruptcy Judge George L. Proctor noted that Reynolds had not appeared Aug. 9 or at the rescheduled hearing Aug. 23. Therefore, he ruled, “the discharge of the debtor is denied for his failure to obey a lawful order of the court.”

After publicity about the Florida matters, Reynolds commissioned Ted Gunderson, a Los Angeles private investigator, to go there for records and other information about the insurance revocation as well as the bankruptcy case. Gunderson formerly headed the FBI office here.

sh Couldn’t Work There “I did not flee Florida or flee Ocala,” Reynolds says in an indignant voice. “I left Ocala because there was no way I could get any work there. Nobody would give me a job. . . . Ocala is a very clannish town.”

The “only good thing” that came out of the recent publicity, he says, is that “I am obtaining the names of those people now.”

He has now received Gunderson’s report, and says he will soon start “cutting” checks for his hapless investors in Florida--”and they will never be able to say that about me again.”

“I really am not obligated to pay them back, but I always told them that I would,” he adds.

Although Reynolds concedes that he has no formal background as an investment adviser, he made it clear in his September seminar and in an interview that he doesn’t regard this as a hindrance.

“When I was in high school, I was so bored. . . . I was not the greatest student in the world,” he told the seminar crowd, which chuckled with him.

When he started his radio show, he said, he decided it would not be boring like so many financial programs.

(KIEV co-owner Ron Beaton says an advertising agency originally bought time for Reynolds, who has proved to be extremely popular with the public. Beaton recalls that when “The Reynolds Rap” was off the air one day several months ago, the station was inundated by indignant callers. He said the station and its attorneys monitor the show and have had few problems with it. One, he said, was the Moreland gold program, which it has required that Reynolds not mention on the air any more.)

“I have an awful lot of 4-year-olds, 8-year-olds and 11-year-olds and 16-year-olds listening to my program now,” Reynolds told the seminar audience, adding that he also has a lot of elderly listeners, including “one client who’s 103 years old in Atlanta.”

Told of Problems

Reynolds also told the crowd about some of his past problems without specifying the hard details.

“I have been around for 39 years,” he told the throng. “I’ve been up and I’ve been down in my life. . . . I went bankrupt. Big deal. So did major corporations. I could have sat back and lulled and been depressed--matter of fact I was.”

The audience laughed, and Reynolds continued: “Whooo, was I depressed! Twice . . . the first time I went under I sat on Miami Beach on the beach underneath the coconut tree. For 60 days I slept on the beach. Even the police welcomed me then. I sat there with a bottle of V.O. Me and my V.O.”

About the 59th day, he recalled, he said: ‘What the hell are you doin’? You’re not dead. . . . Pick yourself up.’

“I did,” he went on. “I picked myself up and went at it again. Made it again. Went down again. Took another 60 days depression relief. Came out to California approximately at the end of ’81 with approximately $1,200 in my pockets. Now I have $400 in my pockets.”

In an interview, Reynolds talks similarly, but much faster.

“Yes, I’m a maverick,” he declaims. “I don’t have any formal quote-unquote training. I never went to school for the particular investments. I learnt about them the hard way. I have what I call the best degree in the world, and that’s common sense, number one. You can take all of the other degrees, as far as I’m concerned, and throw them out the window.”

He said he worked as a carpenter for his “rich” uncle’s construction business as a young man.

“Worked on 13-story buildings and was swaying back and forth in those winds. I said: ‘This is not for me; I’ve got to get out of this.’ ”

Went Into Insurance

He went into the insurance business, “where I learnt all my knowledge about IRAs, about annuities, about life insurance, about hospitalization, disability income, car insurance. I know that business in and out.”

He says he worked for Bankers Life & Casualty, owned by the late billionaire John D. MacArthur, with whom he claims to have had a personal relationship in the early 1970s. MacArthur’s well-publicized style included living in a modest apartment in a West Palm Beach, Fla., hotel and conducting business from a hotel coffee shop until he died at 80 in January, 1978.

Reynolds, who was licensed as an agent in 1970 in Miami, says: “For some reason he liked me. I don’t know why, but he did. . . . He used to call me and just had me come up and have lunch . . . and he’d pick up the phone and say, ‘Get up here, Reynolds.’ Then, it was Gonzales. He’d say, ‘Get up here, Gonzales,’ and I’d say, OK, and come up there (West Palm Beach). And he’d just want to sit there and talk for about an hour and a half.”

A spokesman for the MacArthur Foundation in Chicago, which manages much of MacArthur’s estate, said it would be all but impossible to prove or disprove Reynolds’ story, adding: “A lot of people came to see John D. at his coffee shop table, and he was interested in people from all walks of life.”

Reynolds says the first time he went broke was about 1975, but he did not officially declare bankruptcy. He said his ex-wife “took off with all the funds,” and he wrote a number of checks before discovering there was no money to cover them.

He said he paid off all but two checks, and then “went out and started doing anything I could--cleaning garbage cans, working for Burger King at nighttime, 15, 16 hours a day, and I paid those two checks back, so all charges were totally dropped.”

After coming to Southern California, he says, he sold backyard spas for a Glendale firm that went bankrupt six months later.

He says he went to work for an outfit selling gems “over the telephone,” and made “an awful lot of money” working long hours, six days a week for about two years. He says he still has some of the same clients because “I always took care of them.”

Later, he says, he went to work for another firm, “as a consultant for them in how to properly structure their oil and gas ventures, check on the management.”

Asked his background for that job, Reynolds says: “Well, I’ve read over 6,000 books,” and in Florida “at a very young age I was involved for about a year with a oil and gas company down there--real good company. As a matter of fact, they went bankrupt. They didn’t do anything wrong; they just went bankrupt.”

When the oil and gas firm here got into financial trouble, he went to work for another in Encino, but “they didn’t tell me that they were taking bank account money for certain oil programs and not putting the money into the oil programs.”

Closed Down Operation

“I was interviewed by the FBI, told them all the detailed information on what they were doing. I gave them records, everything that I had photocopied. The SEC was after them, the state of California was after them. . . . I don’t know what happened with the case, but in any event they closed down their operation here.”

After that, Reynolds recounts, he said to himself: “I’m going to come over here (Burbank) and I’m going to open up R. G. Reynolds Enterprises. I’m going to do a newsletter, I’m going to do a TV show and I’m going to do a radio show and go out there on the air and tell people the best way that I know possible with all my experience of 39 years--in the stock market, in real estate, in oil and gas and everything, and what I don’t know, and I don’t know everything, that’s where my panel of experts come in. And they do know.”