U.S. Accuses Ex-Radio Host of Fraud : Investments: Authorities say Burbank businessman R.G. Reynolds bilked clients out of nearly $3 million to support a lavish lifestyle.

One night in 1985, R.G. Reynolds, whose live radio show “The Reynolds Rap” advised listeners how to invest their savings, urged listeners to phone his office for a free “consultation.” A local aerospace worker, who was a fan of Reynolds, called and made an appointment.

The aerospace worker, who asked that his name not be used, said he met Reynolds at the talk show host’s Burbank offices and was immediately impressed with Reynolds’ folksy charm. He was even more impressed by Reynolds’ promises of big returns on an investment program called a “Managed Account,” which Reynolds told him was a blind pool that would take investors’ money and with Reynolds’ expertise invest it in stocks, futures, diamond mines, overseas loans and other ventures.

The investor plunked down $15,000 for Reynolds to invest for him. Some time later, the investor received an account statement from Reynolds saying he had already made more than a 30% profit on his investment. “I thought it was great, fantastic, unbelievable,” he said.

Six years later, the investor is still waiting for those supposed profits, and attempts to get his principal back have failed. The $15,000 he invested “meant my future, it meant everything to me,” he said. Now retired, the investor said he’ll probably have to sell his home to pay for his retirement.

These days Reynolds has his own worries. On March 27, Reynolds was arrested and charged by the U.S. attorney’s office with 60 counts of mail fraud and two counts of obstruction of justice. Federal prosecutors allege that Reynolds bilked investors out of nearly $3 million between 1985 and 1987, and used the money to fund his businesses and a lavish lifestyle that included a $750,000 Laguna Niguel home, expensive cars and trips to gambling resorts.

Reynolds, 44, pleaded not guilty and was released on $100,000 bail on May 23. His trial is scheduled to begin Aug. 13 in federal court in Los Angeles. If convicted on all charges, Reynolds faces up to 320 years in prison and more than $15 million in fines.

Reynolds did not respond to requests for an interview and his attorney, Michael Balaban, did not return phone calls. A receptionist at the company Reynolds now runs, Flow-Ventures Ltd. in Laguna Niguel, declined to answer a reporter’s questions.

For Reynolds, the federal indictment adds to a career that has included a string of arrests on bad-check charges, bankruptcies and allegations of fraud spanning from Florida to California. A former insurance salesman, Reynolds left Florida in the early 1980s and started his Burbank companies--R.G. Reynolds Enterprises and R.G. Reynolds Financial Network--in 1985. Those businesses were shut down in 1987 after they were raided by U.S. postal inspectors.

In 1989, the Securities and Exchange Commission obtained a civil judgment against the bearded talk-show host in connection with investment programs that the SEC said didn’t comply with federal securities laws. Reynolds was prohibited from further violations of securities laws and ordered to repay investors $5.7 million, plus interest. Reynolds has appealed the decision and in April, 1990, he filed for personal bankruptcy court protection, effectively staying the judgment.

Those problems didn’t stop Reynolds from taking control early last year of Flow-Ventures Ltd. in Laguna Niguel, a publicly traded company whose over-the-counter stock is listed on the “pink sheets” at just a few cents a share. With Flow-Ventures, Reynolds resumed producing his radio show and $195-a-year investment newsletter, and raising money for new ventures such as the development of a Bloody Mary-style drink mix called “Tomato Devine.”

At the height of his radio show popularity, Reynolds called himself “King of the Penny Stocks,” and had a large following in Southern California. Touting himself as a self-made millionaire, he would joke with callers to his talk show about his lack of formal education, eat food while on the air and chat with guests about the stock market and other investments. Reynolds conceded on his show that he had interests in many of the investments he promoted and received fees from some of the companies whose stocks he recommended.

Thousands of his fans would pay to attend Reynolds’ seminars, packing ballrooms at the Bonaventure, Ambassador and other hotels. Reynolds’ talk show and seminar “guests”--some of whom were paid and others who promoted certain stocks or investments on the show--ran the gamut from noted economist Arthur Laffer to Barry Minkow, the former ZZZZ Best carpet cleaning whiz-kid who was convicted in 1988 on 57 counts of fraud.

Reynolds “had that power, that charismatic personality, like evangelists,” said Scott Hayden, former producer of Reynolds’ radio shows. “Therein lies the secret of his success.”

Reynolds’ show was broadcast on at least half a dozen local radio stations, including KIEV-AM in Los Angeles until 1987. He also produced a short-lived television talk show that appeared on the Tempo cable network in 1986. Last year, KORG-AM in Anaheim stopped running his radio show, but until his arrest in March he could still be heard on KPLA-AM near Modesto.

Reynolds paid anywhere from a few hundred to several thousand dollars an hour for all the radio and TV time, and the broadcasts would typically be led with a disclaimer saying the show didn’t necessarily reflect the views of the station’s management.

Assistant U.S. Atty. Ronni B. MacLaren, who is prosecuting the case, said Reynolds induced hundreds of mostly inexperienced investors to give him millions of dollars to invest on their behalf, promising them returns of up to 1,000%.

One of the investments cited in the indictment was the “Managed Account” blind pool. Only “a portion” of the funds in the pool were invested, the indictment says, and that was in high-risk, speculative securities that often declined in value. Besides being mailed phony account statements, the indictment says, some investors received payments for what they were told were profits, but were actually funds raised from other investors--a fraudulent practice known as a “Ponzi scheme.” About 160 investors gave Reynolds from $1,000 to $130,000 each to invest in the blind pool for a total of about $2.5 million, the indictment says.

A separate investment scheme detailed in the indictment involved the sale of rare coin portfolios. Federal prosecutors say more than 100 investors paid from $600 to $19,000 each for the coins, for a total of about $320,000, but Reynolds never delivered the coins.

Many investors say they made attempts to get their money back from Reynolds. One investor said Reynolds called him several times in 1988, finally persuading the investor to put $5,000 in the “Tomato Devine” venture. That was the last time the investor heard from Reynolds. The investor said Reynolds never returned his calls or his money, and as far as the investor knows, nothing ever happened with Reynolds’ cocktail mix venture.

Another investor said he gave Reynolds $2,500 in the mid-1980s to make an overseas loan, but several months passed and he didn’t hear back from Reynolds. After hounding Reynolds with phone calls, Reynolds sent him a check for $500, but it bounced, the investor said.

In the criminal indictment, Reynolds also faces two counts of obstruction of justice for allegedly attempting to destroy a telegram referring to a Swiss bank account. MacLaren said Reynolds has also threatened witnesses, and was taped by a former employee in a phone conversation with her saying that he would “burn them badly, very badly” for testifying against him.

Reynolds, who changed his name from Richard Gonzales in 1980, is a former Florida Medicare-supplement insurance salesman who had a record there of arrests for bad-check charges. Several years ago Reynolds told the Times that those charges were dropped after restitution was made. Reynolds filed for personal bankruptcy protection in 1982 in Florida after a failed restaurant venture in Ocala. He moved to California and in May, 1983, the Florida insurance commissioner revoked Reynolds’ insurance license in absentia, alleging that he had pocketed insurance premiums.

Reynolds claimed in a 1986 interview with the Times that after moving to California he sold back-yard spas and gems and consulted for energy investment promotions, before starting his Burbank companies in 1985.

When the SEC sued Reynolds in 1989, it said that Reynolds wasn’t properly registered to sell securities, and that he made “exaggerated and baseless promises of high returns” to investors.

In 1985 and 1986, the SEC said, Reynolds raised $1.7 million and told investors that their money would be used to build a gold refinery in Kern County that would provide them gold at $250 an ounce, well below the then market price of about $350. In court transcripts of a 1986 radio show, Reynolds responded to a caller’s request for recommendations on conservative investments by telling him about the gold program. Reynolds said the gold investment was “safe as safe could be.”

Later on in the show, still talking about the gold investment, Reynolds said: “Now a lot of people say, ‘Well, listen, that’s too good to be true.’ Normally, I would agree. However, I’m not gonna go on air, on my television or radio program and put that proposal out there unless I know what I’m talking about.”

The gold program was a fraud, the SEC said, with Reynolds and his associates pocketing most of the money and failing to tell investors that a former mining venture on the same property had gone bankrupt and that they had no valid mining claims. To date, none of the investors in the gold program have received their principal or interest back.

Meanwhile, Reynolds’ personal bankruptcy was recently converted to a liquidation and a trustee has been appointed by a federal bankruptcy court in Santa Ana to disperse Reynolds’ assets.

Reynolds’ bankruptcy documents list more than $1 million in property, including the Laguna Niguel home. The house has an ocean view, three-car garage, marble entry and three fireplaces. However, there are three mortgages on the house, with a total of more than $500,000 owed. Unsecured debts listed in the documents total $7.5 million, including the $5.7 million SEC judgment.

While awaiting trial, Reynolds has been ordered to remain within California’s Central District, bounded by San Luis Obispo County on the north and Orange County on the south. To be sure he complies, the court ordered Reynolds to wear an electronic monitor.