A Costa Mesa firm 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.
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."
Restraining Order Issued
Tiffany said that in response to an FTC suit filed here Monday, U.S. District Judge Manuel Real has 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 firm, and Philip S. Brandon, listed as the firm's marketing director. The order also applies to three "boiler-room" companies--Global Consultants of San Diego, Investment Research Corp. of Costa Mesa and Leonard Grassi Associates Inc. of Costa Mesa--which are said to have solicited investments in Pannos contracts by telephone.
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 not successful 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.
Officials Decline Comment
The FTC declined comment on whether criminal complaints were being sought against the defendants. A spokesman for the U.S. attorney's office in Los Angeles also declined comment about the case.
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.
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 these 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."
But despite these findings, 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."