Judge Halts Phone Solicitations for Alleged Gold-Mining Scam

A Costa Mesa firm that allegedly sold bogus investments through three San Diego County telephone solicitation firms bilked hundreds of investors out of millions of dollars by misrepresenting a barren chunk of Arizona desert as a vast deposit of rich gold and silver ore, the Federal Trade Commission charged Wednesday.

U. S. District Judge Manuel Real in Los Angeles issued a temporary restraining order against Pannos Mining Co. of Costa Mesa; brothers Christopher E. Pannos and James Pannos, described as partners in the company; Virgil Barker, described as project manager of the company, and Philip S. Brandon, listed as marketing director.

The order, issued in response to an FTC suit filed Monday in Los Angeles, was also served on Global Consultants, a San Diego firm that allegedly solicited investments in Pannos Mining over the telephone.

Closed by Task Force

Global, a defendant in the FTC lawsuit, was closed Tuesday by the San Diego Boiler Room Task Force, a consortium of federal, state and local law enforcement agencies charged with combatting a growing wave of investment firms that use high-pressure telephone sales techniques to sell illegal investments. Global, situated at 3024 North Park Way, was placed under control of a court-appointed receiver, said FBI agent Darwin Wisdom, a task force member.

One employee of the firm, 36-year-old Paul Cohen of Chula Vista, was arrested Tuesday on an outstanding Florida warrant for probation violation in connection with a marijuana possession charge. No other arrests were made and no criminal charges against Global employees are pending, Wisdom said.

Two other San Diego County firms, Secured Metals on Garnet Avenue and Nationwide Coin and Metal in Carlsbad, were served with temporary restraining orders ordering them to cease selling Pannos Mine contracts. Neither firm was closed.

The temporary restraining order also applies to two other “boiler-room” companies--Investment Research Corp. of Costa Mesa and Leonard Grassi Associates of Costa Mesa.

Among those who purchased worthless contracts for gold and silver to be delivered to them at about half the current market price was an 89-year-old priest from Mission Viejo who invested $5,000, according to Marcy J. T. Tiffany, director of the Los Angeles regional office of the FTC.

“It started last February,” Tiffany told reporters at the Federal Building in Westwood. “The investors were told they would get gold bars in about 12 months. So a lot of them don’t even know they’ve been scammed yet.”

Will Try to Recover Cash

Tiffany said the FTC is seeking a permanent injunction to “shut down the Pannos operation” and will “try to get some of the money back” for the investors.

“I would not hold out much hope for recovery of the money, though,” Tiffany said, noting that the money invested in such “dirt-pile” gold mines has usually been dissipated before federal officials can locate it. “It’s rare that we can get more than 10 cents on the dollar,” she said.

Attempts to contact the defendants were unsuccessful Wednesday, and all calls were referred to a court-appointed receiver, Robert A. Baker of Los Angeles. Baker said he was unable to answer any questions about the defendants.

The FTC declined comment on whether criminal complaints are being sought against the defendants. A spokesman for the U. S. attorney’s office in Los Angeles also declined comment about the case.

“The number of investors and the amount of money allegedly lost is still to be determined,” Wisdom, the FBI agent, said. He urged anyone who has invested in Pannos Mine or similar investment products to call the San Diego Boiler Room Task Force at 557-5910.

Tiffany said she traveled recently to the site of the alleged gold-mining venture, which she described as a bleak, 1,900-acre tract of brush-covered desert about 45 miles northwest of Phoenix.

‘Like a Hole in the Ground’

The actual mine “looks remarkably like a hole in the ground . . . something probably made with a backhoe,” she said. “There was virtually no activity there.”

Tiffany said “ore” provided by Pannos, along with samples collected by federal investigators, was assayed by experts from the state of Arizona. She held up one of the plastic bags of “ore” at Wednesday’s news conference.

“It looks like a bag of dirt,” she said. “That’s precisely what it is. . . . No gold. . . . No silver.”

The FTC charges that:

- “Defendants falsely represent . . . that the proven reserves of gold and silver from (the mine) are worth $826 million. . . . In fact, there are no appreciable amounts of recoverable gold or silver. . . .”

- “Defendants falsely represent . . . that investors can expect to realize a return on their investment of between 60% and 329% within one year. In fact, investors will not realize any return on their investment. . . .”

- “Defendants falsely represent . . . that the Pannos Mining Co. is currently processing 50 tons of ore per day. In fact, there is no significant processing at the defendants’ mine site.”

- “Defendants falsely represent . . . that (the company) is installing a 1,000-ton-per-day processing plant at the mine site. In fact, no such plant is being installed.”

Tiffany said that, besides the boiler-room efforts, investments were solicited nationwide through advertisements on television and in the nationally distributed newspaper USA Today.

She expressed amazement that people would invest in a scheme that promised such enormous profits, but noted that at least 500 people in Southern California parted with a total of “at least several million dollars. . . . And there may be a lot more.”

“It sounded too good to be true,” she said. “It was. . . . “

San Diego County business editor Chris Kraul contributed to this report.