Investors May Lose $50 Million in Closing of Commodities Firm
Commodities investors in several states could be out more than $50 million in the wake of the closing of Monarch Equity Corp. of La Jolla by state and federal authorities Monday afternoon for alleged violations of the federal Commodity Exchange Act.
Members of the San Diego Boiler Room Investment Fraud Task Force swooped down on Monarch’s Girard Avenue offices Monday to search the premises and seize records. Agents also arrested Monarch owner Donald Lee Carpenter, who was using the alias Kyle Whidden, on an outstanding Nevada warrant charging him with embezzlement.
Carpenter is being held without bond in County Jail and is scheduled for arraignment in San Diego Muncipal Court this morning, said Deputy Dist. Atty. Robert J. Sullivan, a task force member. Three additional Monarch employees were arrested on misdemeanor charges and released on bail, he said.
The task force acted after U.S. District Judge John S. Rhoades granted the federal Commodity Futures Trading Commission an injunction Monday to halt what investigators allege was Monarch’s illegal trading in precious metals contracts. Rhoades also named Norbert Nowicki as temporary receiver of Monarch.
The judge also granted the task force a warrant to search Monarch offices and Carpenter’s Bonita home in response to an affidavit filed by FBI agent Darwin Wisdom.
In the affidavit, Wisdom alleged that Monarch was selling commodities contracts without proper licensing. The affidavit detailed complaints by several investors that they had been pressured by “telephonic boiler room” sales tactics and then allegedly defrauded of much of their money.
Several former sales personnel have approached the FBI in recent months to express doubts that investor funds were being properly handled, the affidavit said.
Although the task force’s examination of bank records was incomplete Tuesday, one member said investor funds at risk probably exceed $50 million. More than $9 million in commodities contracts were sold in September and October alone, he said.
A task force member who asked not to be named held out little hope that investors would recover the bulk of their funds.
“It was a bucket shop. The money seems to have been put in personal accounts or in business accounts not related to the investors,” the member said, adding that Monarch investors probably number in the hundreds.
Carpenter gained control of Monarch in May, 1986, from Ronald Morrison, who had acquired the firm in 1983 from Stephen Bischel, Andrew Vento and Wayne Richdale.
A task force member said the business activities of the previous Monarch owners are under investigation.
The raid on Monarch was scheduled for Tuesday morning, Sullivan said, but it was hastily moved up a day after the federal court clerk failed to note that the affidavit was supposed to be sealed and made copies of it available to reporters Monday afternoon.
