A federal judge said he would jail financial adviser and radio personality Richard (R.G.) Reynolds of Laguna Niguel unless he meets an Oct. 15 deadline to repay about $6 million he owes to victims of his various investment schemes.
Last December, U.S. District Judge A. Andrew Hauk found Reynolds guilty of violating civil securities laws for enticing about 400 people to invest in Kern County gold and other ventures. Hauk subsequently ruled Reynolds in contempt of court for failing to repay any of the money. On Wednesday, Hauk issued the order with the Oct. 15 deadline.
"We felt the judge did the appropriate thing," said Sandra Harris, chief of enforcement for the Securities and Exchange Commission's Los Angeles region. "Mr. Reynolds had ample opportunity to present evidence demonstrating his inability to comply with the court's order to pay, and he failed to do so."
In his heyday, between 1985 and 1987, Reynolds had a substantial following in California and the West through his nightly radio talk shows on investing. Reynolds, who has only a high school education, portrayed himself as a folksy adviser to plain folks with modest amounts to invest. Until a few weeks ago, his program was airing on radio station KORG-AM in Anaheim. For that show, like his others, he paid for the air time.
Harris said many investors were elderly people who gave Reynolds their retirement money. The SEC said Reynolds commingled the funds he collected from investors and spent them on himself and on other business ventures.
On Wednesday, Reynolds said he is broke. He filed for personal bankruptcy in Santa Ana federal court on April 18 to protect his Laguna Niguel home.
"If I have to go to jail, I'll go," said Reynolds, who said he plans to appeal Hauk's order to the U.S. 9th Circuit Court of Appeals and all the way to the U.S. Supreme Court, if necessary. "I would have run a long time ago if I was guilty."
Reynolds has acknowledged in court that he is the target of a Los Angeles federal grand jury investigation.
He said he does not have the $6 million the court wants because he spent all the money on salaries, newsletters and other expenses needed to operate Burbank-based R.G. Enterprises.
"My whole thing was to build a corporation and take it public," said Reynolds. He closed the business shortly after U.S. Postal Inspectors, acting on a federal search warrant, raided his offices in April, 1987, seizing business records, stock certificates and rare coins.
Last February, Reynolds said he had purchased controlling interest in Flow Ventures Ltd., a holding company with interests in a Tennessee tomato juice factory and a California cosmetics firm. Flow Ventures stock is traded in the pink sheets and has been trading for less than 20 cents a share in recent weeks.
Meanwhile, the SEC's Harris said the agency's goal is to collect the money Reynolds took in and return it to the bilked investors.
Reynolds' personal bankruptcy petition lists debts of $500,000. He asks that $1.8 million worth of property, including his $750,000 home, be exempt from the filing. The petition also says he holds 37 million shares of Flow Ventures stock, valued at $740,000. According to the petition, Reynolds lent the company $300,000.
Before the bankruptcy filing, First Fidelity Savings & Loan began foreclosure proceedings against Reynolds' home. In late August, Household Finance filed a motion for relief from the exemption so it could proceed with foreclosure on a separate $100,000 note secured by his home.