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Broker Accused of Fraud Claims Theft by Worker

June 26, 1986|BILL RITTER | San Diego County Business Editor

SAN DIEGO — An Encinitas commodities firm, accused of fraud last week by federal regulators, went out of business because of embezzlement by a key employee, the firm's owner said Wednesday.

James Timpson, owner of Timpson & Associates, claimed in an interview that a former office manager absconded with as much as $800,000 in funds that were supposed to be wired to the firm's account at a Chicago commodities company.

"He cleaned all of our money out and left us with $100,000 in bills," Timpson said in an interview.

According to federal court records, filed last week to obtain a search warrant of Timpson & Associates' office, Timpson raised the embezzlement charge with the San Diego County district attorney's office in December, when he requested a formal investigation.

At the time, Timpson alleged that the missing funds totaled only about $192,000.

Subsequently, Timpson claimed Wednesday, he "found a whole bunch of stuff" that proves that the embezzled funds could total as much as $800,000.

Sources familiar with the case, however, contend that upwards of $1 million was raised by the firm since Timpson filed his charge.

About 350 investors from Southern California and several other states were attracted to the firm by promises that precious metals could be bought for a down payment of 21% of the purchase price and pledges of "substantial profits."

Regulators contend, however, that clients seldom, if ever, earned a profit and, in most cases, lost part or all of their investment.

Authorities were not suspicious of Timpson & Associates until Timpson asserted his embezzlement claim, according to one source.

The office manager was Mark Mohr, although he also is known as Douglas Marks, according to both Timpson and court documents. Timpson also alleged that Mohr was assisted by another employee, Harry Cohen, who is also known as Harry Kay.

Neither Mohr nor Cohen could be reached for comment Wednesday.

Both Timpson and Mohr were employed by La Jolla Trading Group, a "boiler room" operation similar to Timpson & Associates that reportedly attracted between $3 million and $5 million from hundreds of investors. The firm went out of business last year but has been sued by at least one investor for fraud and selling unregistered securities.

Timpson, 27, appeared without an attorney in federal court Wednesday and did not oppose a request by the Commodity Futures Trading Commission (CFTC) for the appointment of a receiver to take over Timpson & Associates. He also did not object to the issuance of an injunction prohibiting him from concealing or destroying assets and company records.

CFTC Regional Counsel Arthur J. Salzberg told U.S. District Judge Howard B. Turrentine that his office has unearthed only $7,900 in assets at the company. "It's difficult to ascertain if there are additional assets," he said.

The firm last week was accused by the CFTC of fraud and violations of the federal Commodity Exchange Act for allegedly selling unregistered futures contracts.

Federal investigators, based on a tip from a former salesman with the firm, contend in court documents that no metals or other commodities were actually purchased by Timpson & Associates, and that investors' funds were used by Timpson and at least two colleagues "for personal use."

In addition, the documents claim that the salesman contends that "these individuals spend much of their time under the influence of alcohol and drugs."

Timpson denied the allegation, saying that the salesman "can say whatever he wants."

The firm, which employed as many as 30 salesmen who solicited investors over the telephone, closed shop last week. Acting on a tip that the firm's furniture was being removed, federal agents obtained a search warrant for Timpson's Encinitas office. It turned out, however, that the furniture was repossessed by the company that rented it to Timpson.

Timpson said he couldn't afford an attorney because regulators last week had frozen all of his assets. The CFTC suit is a civil action, which precludes a court-appointed lawyer.

Norbert J. Nowicki, owner of a management consulting firm in San Diego, was appointed receiver of Timpson & Associates.

Because there appears to be few assets to take control over, however, Salzberg suggested in court that bankruptcy may be "the best way to liquidate" the firm.

Further legal action against Timpson seems likely, according to sources close to the case. Court documents filed by an FBI agent claim that federal officials believe the firm engaged in mail and wire fraud as well as theft of customer funds.

Two attorneys with the district attorney's office and an FBI agent were at Wednesday's court hearing.

Before the hearing, Timpson, sitting alone at the defense table, said that he would cooperate fully with authorities. "If I were going to cheat people, I would have taken off long ago," he said. "But I didn't; I'm still here right now."

He said that the "only reason" he remained in business after reporting the embezzlement to prosecutors was to "try and make money back" for the investors.

Timpson claimed that if the money hadn't been embezzled, "it would (now) be worth $4 million."

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