A San Clemente man was sentenced Monday to 10 years in prison for running a telephone marketing scam that bilked more than $2 million from hundreds of people who invested in precious-metals contracts.
Michael Maddox, 40, pleaded guilty in May to five counts of fraud stemming from his 2-year operation of Goldex International, a Seal Beach investment company that sold precious-metals contracts by telephone and folded in 1983. He faced a maximum sentence of 25 years in prison, $5,000 in fines and unlimited restitution orders.
Using high-pressure sales tactics, Goldex, which also had a Long Beach office, offered at least 400 investors across the country a chance to invest in contracts for future delivery of gold, silver and other precious metals.
Prosecutors argued in U.S. District Court in Los Angeles that the Goldex operation was a classic Ponzi scheme, in which money taken from new investors was used to pay off old investors.
‘Outright Con Artist’
Terree A. Bowers, assistant U.S. attorney, called Maddox “an outright, notorious con artist” who used investors’ money to live “a lavish life style” that included a boat and expensive cars and even an elaborate staff Christmas party as the company was on the verge of collapse.
U.S. District Judge Consuelo B. Marshall imposed two consecutive 5-year sentences and suspended prison terms on the other three counts. She ordered Maddox to begin paying $1 million restitution during a 5-year probation period after prison.
Maddox’s attorney, Michael Brennan, asked for leniency, arguing that Maddox’s business was legitimate but that he got into trouble when he could not deliver on the contracts. Brennan said Maddox “lost more than any investor did . . . he didn’t walk away with a penny.”
Maddox promised to try to make amends.
“I’ve made some tragic mistakes,” he said. “I apologize to people who lost money. I’ll do everything I can to repay it. . . . I’ll never be a director (of a company) again. It’s just not something I’m good at.”
Bowers said it was an insult to victimized investors to suggest that Maddox should get lenient treatment because he lost money as well.
Lose Life Savings
“Sometimes the impact of white-collar activities is greater than what we see in violent crime,” Bowers said. “People lose their life savings, they have to change their life styles, their marriages disintegrate.”
As part of his plea agreement, Maddox cooperated in an investigation of two firms he ran before his arrest in March, Sentry Financial Network and Sentry Funding Group, investment firms specializing in retirement plans.
The attorney general’s office said an initial analysis of the firms indicates that the Sentry companies were shell companies used by Maddox for his personal benefit. Bowers said investigators hope to recover some investors’ money from Sentry.