Owners of Defunct Costa Mesa Gem Firm Found Guilty of Fraud

The owners and five employees of a defunct Costa Mesa gem and investment company were convicted by a federal court jury Thursday of mail fraud.

The seven Crandall Financial Corp. employees were charged with defrauding about 800 customers out of $9 million before the company was placed into receivership and shut down by a federal court order in September, 1984.

Ronald Allen Smith of Fullerton and his brother, Michael Edward Smith, of Fallbrook, were the founders and owners of the company. The Smith brothers were each found guilty of 10 counts of mail fraud. Five Crandall salesmen were each found guilty of two to four counts of mail fraud, according to Deputy Atty. Gen. Sharon McCaslin.

“I feel justice was done,” said McCaslin, who works for the Attorney General’s major fraud unit. She joined Asst. U.S. Atty. Gary Lincenberg to prosecute the Crandall case.

“In 15 months, $9 million went into gems, money market funds and annuity programs,” McCaslin said.

She told the jury that shortly after the Smith’s learned their company was under investigation by the Securities and Exchange Commission, they moved about $1 million into a new company called Global Marketing.

In September, 1984, the SEC filed a complaint accusing the company of fraud and obtained a federal court order placing Crandall into receivership. In his opening statement to the jury, Ronald Smith’s defense attorney, Marcus Topel, blamed the company’s financial troubles on unscrupulous telephone salesmen and an unexpected plunge in diamond prices.

Each mail fraud count carries a maximum penalty of five years in prison and a fine of $250,000, McCaslin said.