Precious-Metals Swindler Gets 12-Year Prison Sentence

A former Long Beach stockbroker convicted of swindling more than 130 investors out of an estimated $1 million in a precious-metals telemarketing scheme was sentenced Monday to 12 years in prison.

Keith A. Grimes, founder of the now-defunct International City Investors Inc., was also ordered to pay restitution to victims, who in some cases lost their homes and their life savings in the fraudulent boiler room operation.

Grimes’ business partner, Marc R. Shapiro, was sentenced to six years in prison for his role in the business, the first target of a new joint task force aimed at a growing number of fraudulent telemarketing firms in Southern California that law enforcement officials say may be costing investors up to $1 billion a year.

Firms Abundant

“Precious-metals firms are abundant in (Southern) California and are some of the most difficult boiler room operations to investigate. Additionally, the losses caused by fraudulent precious-metals firms are often much greater than the losses resulting from other types of telemarketing fraud,” Assistant U.S. Atty. Terree Bowers said in a report to the court.

Federal prosecutors say the company was insolvent from its first months of operation, and even when precious-metals prices began dropping and losses became severe, company officials continued to solicit cash from investors by making false representations about the firm’s health.

By the time U.S. Postal Service inspectors raided the firm on July, 24, 1986, “they were just flat broke. They didn’t have anything,” Bowers said.

Able to Make Deliveries

Grimes, 40, has argued that he and his business partners never intended to defraud potential investors when they began soliciting money in 1984, and in fact were able to make deliveries to many of the company’s early clients.

“They thought they were the smartest businessmen in the world, and their dream was going down the drain,” said Grimes’ attorney, Wayne Young.

“My remorse and my sorrow go way beyond my family,” added Grimes, pledging to pay restitution to investors. “I was president of the company. I feel personally obligated to fulfill the contract requirements, no matter when that time may be.”

In seeking a 20-year prison term for Grimes, federal prosecutors produced evidence that he was forced to leave his former job as a Wall Street stockbroker as a result of an investigation into allegations that he embezzled funds from an elderly client.

Longtime Friend

Among those defrauded through ICI investments, the government said, was a longtime friend of Grimes who had assisted him in a recent unsuccessful attempt to win a seat on the Long Beach school board.

U.S. District Judge James M. Ideman conceded the damaging case against Grimes, but he added: “I’m also faced with a man with no criminal record, a man with a wife and nine children.”

Ideman ordered ICI’s former sales manager, Robbie Noel, to pay $20,000 restitution to one of the company’s investors, a Rockfield, Ill., man with whom Noel had become friends. Sentencing for William Pearson, the fourth defendant in the case, was postponed until Monday.