Precious Metals Ponzi Scheme : Newport Man Gets 6-Year Prison Sentence for Fraud

A 27-year old Newport Beach man who claimed that he “didn’t understand” the ramifications of his telemarketing scheme was sentenced to six years in prison Monday.

Matthew A. Valentine, who masterminded a precious metals operation that defrauded 400 investors of $2 million, was ordered jailed by Chief U.S. District Judge Manuel L. Real.

Federal prosecutors also alleged that Valentine ordered the beating of an ex-employee who had repudiated the fraud.

“I got involved in something that was over my head, and I didn’t understand the ramifications of what I was doing,” Valentine told Real in a brief statement before sentencing. “I apologize to the people who have been hurt by this, and I promise to do what it takes to make them whole again.”

Valentine was the last of six men implicated in the Intech Investment Corp. fraud. Salesmen at the Newport Beach firm allegedly used high-pressure tactics to induce investors to buy worthless contracts for future delivery of gold, silver and other precious metals.

Prosecutors said Intech was a classic Ponzi scheme in which money from new investors was used to pay earlier participants.

“It is clear that if you operate a boiler room in (Southern California) and you are convicted, you’re going to serve time in jail,” said Terree A. Bowers, major frauds chief for U.S. Atty. Robert C. Bonner.

Bowers said prosecutors are pleased that federal judges are “continuing to issue substantial periods of incarceration for boiler room operations.”

Until March, 1986, Valentine operated Intech in Newport Beach. Clients from across the country sent checks and precious metals to open up credit accounts to buy precious metals contracts.

Intech telephone salesmen promised profits of up to 625% and asserted that there was little or no risk that the money would be lost, prosecutors said.

Intech employees used several tactics to stall investors who wished to close their accounts. They issued refund checks for the wrong amounts, sent them to the wrong clients and issued stop-payment orders on checks to prevent clients from cashing them, according to a federal indictment.

Intech employees also forced some investors to provide added capital, claiming that precious metals price declines required additional funds. One client sent an Oriental rug, and two others turned over their autos, according to prosecutors. An elderly widow from Texas mortgaged 100 acres of farmland to send money and lost $96,000, prosecutors said.

An Intech salesman, Mark Rattet, 29, was sentenced by Real earlier this year to 10 years in prison. But the sentence was suspended, and Rattet was ordered to serve 60 days in jail on weekends.

Another salesman, James G. Eglitis, was sentenced to 4 1/2 years in prison in February. Eglitis, 40, was implicated in several boiler-room operations. In one case, Eglitis allegedly victimized the same unsophisticated investors three times in three different telemarketing schemes.

Bowers once described Valentine as a young man “who wanted everything without having to work for it.” While it lasted, Valentine lived a high life style, maintaining a home on Lido Isle, buying expensive jewelry and cars and vacationing in Tahiti.

Valentine’s sentencing closes the book on the Intech case. The scheme was investigated by the Southern California Investment Fraud Task Force, a multiagency group assigned to prosecute telemarketing fraud in Orange and Los Angeles counties.