Charges Filed in Alleged Pyramid Scheme

State prosecutors have filed charges on 45 counts of fraud and grand theft against a Palmdale woman, accusing her of running a pyramid scheme in Orange County and cheating about 900 investors out of tens of thousands of dollars.

Authorities say M. Elizabeth Broderick, 53, sold shares in her California Gold Co., which had offices in Santa Ana and Long Beach. Broderick told investors they could double their money because Broderick bought gold coins at cut-rate prices on the world market, said Van Coleman, special agent in charge of the California Bureau of Investigations’ Orange County office.

In fact, according to the charges, Broderick had no gold but was using new investments to pay off previous investors.

“She’s good,” said Coleman, who oversaw the three-year investigation of Broderick. “She’s a very skillful lady.”

Advertising on radio and in newspapers, Broderick drew investors from across the country, he said. One ad proclaimed: “Americans don’t need jobs. They need money. We have money.” More than 100 people invested $1,000 or more apiece in the company, Coleman said.

The operation began to fall apart in early 1993 when new investments dried up, he said.

According to court papers filed in support of a 1993 search warrant, the company owed as much as $1 million to investors when employees discovered it was a pyramid scheme and went to the authorities.

The Orange County district attorney’s office declined to charge Broderick, saying it was hampered by her poor paperwork. But the California Department of Justice continued to investigate and was preparing to file an arrest warrant for Broderick when federal agents arrested her April 25, Coleman said.

“It was a very complex investigation . . . a lot of people to talk to,” Coleman said. “They sort of beat us to the punch.”

If convicted of the 30 federal charges against her, Broderick faces a likely 15 years in prison, federal prosecutors said. The state charges, filed Wednesday, carry a possible six-year penalty, Coleman said.

The state proceedings will not begin until after the federal court trial of Broderick and four suspected co-conspirators, Coleman said. The federal trial is scheduled to begin June 18.

California Gold’s collapse sparked a lengthy battle in Orange County Small Claims Court as Broderick and her investors swapped a series of lawsuits. Three investors persisted, each winning $5,000 judgments but finding themselves unable to claim their money, which was held by state investigators as evidence.

Broderick is a member of the “patriot movement” and asserts she is beyond the jurisdiction of the federal courts.

Federal authorities arrested Broderick late last month on suspicion of taking in $1.5 million by charging up to $200 for admission to seminars at which she promoted the use of homemade checks, supposedly backed by “liens” against government officials.

Broderick remains in custody at the Metropolitan Detention Center in Downtown Los Angeles on federal fraud and conspiracy charges.