Southland Gold Mining Scam Bilked Hundreds, FTC Charges

A California mining operation that promised to deliver bargain-priced gold bullion bilked several hundred investors of about $8 million in a major fraud case, according to charges by the Federal Trade Commission.

FTC officials say the investors, many of whom paid $75,000 to $150,000 each for gold deliveries, will probably never recover any of their money from Beverly Hills-based Axiom III Corp.

“It seems to be a popular new scam “ said Marcy J. K. Tiffany, director of the FTC’s regional office in Los Angeles. Last year, the office also charged a Costa Mesa firm with misrepresenting a piece of the Arizona desert as a rich deposit of gold and silver ore.

In the Axiom case, FTC officials say the firm delivered only 27 of the 30,000 ounces of gold it had sold, which probably did not come from an Axiom mine. Axiom’s Wilshire Boulevard offices have been locked up, and management has been temporarily replaced by a court-appointed receiver, who decided to suspend operations.

Begining in late 1987, Axiom began luring investors with advertisements, telephone pitches and seminars that offered gold bullion for the discounted price of about $250 an ounce, according to the FTC. In December, 1987, gold was selling for about $480 an ounce; it currently sells for about $370.

Axiom, which told buyers that it would deliver the gold within six to nine months, said the ore came from one of California’s largest gold strikes at a mine near Weldon, Calif. The company also said it had large amounts of gold ore ready to be shipped to a mill in Mina, Nev.

Axiom told investors in January that it was extracting 100 ounces of gold a week from the Weldon mine and expected production to jump to 700 ounces a week in February.

“They told investors they had struck another mother lode,” said Tiffany. But the FTC said Axiom managed to mine a total of only 50 ounces.

Tiffany says most of the $8 million collected from investors went to support Axiom’s 30-person telemarketing staff and executives. “About one-third went to commissions,” she said.

Based on FTC charges, a federal judge ordered Axiom and two related companies, RCI Trading Inc. and Continental Trading International, not to misrepresent their business any longer.

The order and FTC charges also include four individuals: Axiom Chairman John David Rolfe, Axiom President Jay Bishop; Mike Robertson, marketing director, and William Moreland, who operated the mining and mill operation.

Rolfe was involved in a similar scheme that began in 1985, according to FTC officials.

Attorneys for the individuals were not available for comment; the receiver said he had not yet selected an attorney for the company.