A Newport Beach man, characterized by law enforcement officials as a rich boy run amok, pleaded guilty to federal fraud charges Friday in a precious metals scheme that bilked an estimated 400 investors out of $2 million.
Matthew A. Valentine, 27, was indicted on 32 counts of mail fraud and interstate transportation of stolen property in November. He was arrested at his Lido Isle home while a camera crew from "60 Minutes" filmed the proceedings. He pleaded not guilty to the charges several days later.
But Valentine changed his plea Friday before Chief U.S. District Judge Manuel L. Real after federal prosecutors agreed to drop 27 of the counts in exchange for his pleading guilty to three counts of mail fraud counts of transporting stolen property, according to Anthony Brooklier, his attorney.
"It's Mr. Valentine's intention to make amends and start a new life after this is over with," Brooklier said in a telephone interview. "It is my belief that Mr. Valentine had no intention of defrauding anyone in the beginning, when this business was first formed."
Paint a Different Picture
Law enforcement officials, however, painted a different picture of the young man behind Intech Investment Corp. of Newport Beach. They contend that the company stole the hard-earned savings of widows, the elderly and the disabled, among other victims.
"I think that, like many of these boiler room operators, he was a young man who wanted everything immediately without having to work for it," said Terree Bowers, chief of the major fraud division of the U.S. attorney's office.
"He had a luxurious home on Lido Isle in Newport Beach and was providing his girlfriend with expensive jewelry and cars," Bowers said. "He and his friends were taking expensive vacations to Tahiti."
Valentine operated Intech from late 1984 until early 1986. According to the indictment, clients across the country sent the company checks and precious metals to open credit accounts for buying gold, silver, platinum and copper. Intech telephone salesmen promised clients profits of up to 625% and told them that there was little or no risk of losing money, according to authorities.
But when clients tried to close their accounts, Intech allegedly failed to refund their money, the indictment said. Salesmen repeatedly told clients that they could not have their money back because the commodities market was closed or that the company owner was on vacation or with his "sick mother," according to the indictment.
Mailed Refund Checks
In addition, the company allegedly mailed refund checks to the wrong parties in the wrong amounts and issued stop-payment orders on those checks so that clients could not cash them, the indictment said.
When metals prices fluctuated and clients did not have the additional funds required to keep their accounts open, they sent personal possessions to the company. One Long Beach woman sent Valentine an Oriental rug and her car, according to Kacy R. McClelland, a postal investigator involved in the case.
"A 76-year-old widow from Texas mortgaged 100 acres of her farmland to send these guys money, and they stole $94,000 from her," McClelland said in an interview.
"Valentine aspired to the life style of the rich and famous," McClelland said. "He did everything to get to that life style, with total disregard for who he hurt."
Robert Baird, 67, of Corona del Mar was one Valentine victim. Baird sent Intech $28,000 for three silver purchases and a number of margin calls.
A senior marketing consultant for McDonnell Douglas in Huntington Beach, Baird said he had followed silver prices for a long time before he received an unsolicited telephone call from an Intech salesman.
"The appealing part was that I could invest in a three-year contract with only 15% down," Baird said in a telephone interview. "I figured, hell, that gives me three years for that stuff to shoot up. It was bound to, and it did. I would have made out like a tiger, but it was not legitimate."
Baird said he was lulled into trusting Valentine when the young company president donated $1,000 to Baird's efforts on behalf of an annual fund drive for Junior Achievement.
"I didn't really suspect him of being a crook until I had placed a sell order and didn't get a call back," Baird said. "I drove by the office, which was on my way home from work, to find out what the devil was going on, and the place was empty. I immediately went to the police."
That was about February, 1986, and Valentine had closed the operation, moved to Irvine and opened up the low-key and short-lived International Distribution Systems, McClelland said.
It took the Southern California Investment Fraud Task Force--whose members come from state, federal and local law enforcement agencies--nearly 18 months to put together a case against Intech and Valentine, who was arrested on Nov. 20, 1987, and has been in Terminal Island federal prison ever since.
Sentencing Set Feb. 22
He faces up to 35 years in prison and $1.25 million in fines. His sentencing is scheduled for Feb. 22.
Indicted along with Valentine were Mark E. Rattet, 29, Los Angeles; James G. Eglitis, 40, no known address; Richard R. Johnson, 30, Huntington Beach; Robert J. Canfield, 31, Fountain Valley, and Marc H. Guest, 30, Costa Mesa.
Rattet pleaded guilty to two counts of mail fraud. Johnson pleaded guilty to one count of mail fraud and one count of conspiracy to commit mail fraud. Both are scheduled for sentencing in February. Eglitis will go to trial in February on the full roster of charges. Authorities have dropped charges against Canfield and Guest but said they plan to refile in the future.
"It does my heart good to see them (authorities) catch someone," Baird said. "There are so many of them out there. . . . I'm continuing to work rather than retire partly because of this. That money would have been in stocks, would have grown. And instead, I lost it all."