2 Employees of Defunct Costa Mesa Firm Get Suspended Terms for Roles in Scam

Two sales representatives of a defunct Costa Mesa gem and investment company were sentenced in Los Angeles on Tuesday on mail fraud charges stemming from a scheme that bilked about 800 customers out of nearly $9 million.

U.S. District Judge Edward J. Rafeedie sentenced Virginia Lukei to two years in prison and Tom Newell to three years. He then suspended the sentences and ordered both to serve four months in a community treatment center, placed them on five years’ probation and ordered them to pay $10,000 each in restitution.

“You’re not immune to prosecution in an illegal operation just because you’re only a salesperson,” Gary S. Lincenberg, assistant U.S. attorney in the case, said after the sentencing. “The sentences of Lukei and Newell are not insignificant. Both pled guilty and testified and were cooperative and remorseful. They still got 120 days and restitution.”

Lukei and Newell were both sales representatives for Crandall Financial Corp. of Costa Mesa, which has been closed since September, 1984. At that time, the Securities and Exchange Commission filed a complaint accusing the company of fraud and obtained a federal court order placing Crandall in receivership.

Ronald Allen Smith of Fullerton and his brother, Michael Edward Smith of Fallbrook, were the founders and owners of Crandall. They were indicted last May on mail fraud charges, along with eight co-workers.

According to the indictment, Crandall customers--mostly Southern Californians--invested $5.5 million in gems and $3 million in money-market funds. During the trial, Lukei testified that not one of her customers made any money on their investments, although she promised them a 36% annual profit.

Three of the Smiths’ eight indicted co-workers--including Lukei and Newell--pleaded guilty and agreed to testify against the Smiths and the others. The entire group faced charges of using deceptive sales techniques and unauthorized use of customer money, according to court records.

Lukei and Newell each pleaded guilty to one count of mail fraud.

In November, the Smiths were found guilty on 10 mail fraud counts each, and the five salesmen who also pleaded innocent were found guilty on two to four counts of mail fraud each. The brothers are scheduled for sentencing in February, and the remaining Crandall sales personnel are to be sentenced today and on Dec. 30.