Ostrich breeder Doug Osborne, who was quoted extensively in a recent Food Section story ("The Long Necks," April 20), was found guilty of deceptive practices in a telemarketed precious metals investment scheme March 8. On that date Judge A. Wallace Tashima, US District Judge for the Central District of California, in Los Angeles, granted summary judgment upholding Federal Trade Commission charges filed in July, 1992.
The court entered a $13.3 million judgment against Osborne and his firms Osborne Precious Metals Inc. and Osborne Stern & Co. in favor of 370 named investors, who had lost up to $340,000 apiece. It is not clear how much of the judgment will be collected or distributed to victims of the telemarketed scheme, the FTC said.
Osborne could not be reached for comment.
The government argued that Osborne's firms misrepresented or failed to disclose fees and commissions associated with the investments and the risks of loss, such as margin calls and the possibility of forced liquidation, and misrepresented the current and potential profits of the investments. Virtually none of the investors actually made money, said FTC attorney David Spiegel.
The case also noted Osborne's history of legal problems, including 18 settlements, state civil judgments or dispositions against him between 1989 and 1992, all involving precious metals or stocks (at this time there have been no legal actions against Osborne in connection with his ostrich businesses). The Securities and Exchange Commission has also sought a judgment against Osborne.
Tashima ordered Osborne to post a $5 million bond before engaging in any kind of telemarketing activity in the future. The bond would have to remain in full force for three years after he ceases telemarketing, and Osborne would have to disclose clearly to future telemarketing customers that he has posted such a bond.
The judge dismissed Osborne's argument that his sales personnel acted contrary to his policies, saying that Osborne had direct oversight and supervision. "One in his position of active control cannot plead the ostrich defense," said Tashima.