American Investia, which is believed to have collected millions of dollars from California investors by offering unusually high interest rates on investments purportedly backed by diamonds, has halted operations as state authorities press an investigation of its business.
The Swedish-owned firm has been headquartered for several years in the penthouse of a Beverly Hills office building. During that time it has been a frequent advertiser in various newspapers, including The Times, the San Francisco Chronicle and the Sacramento Bee.
The California Department of Corporations confirmed Wednesday that it has been investigating the company for many months. The agency declined to detail the case publicly now but indicated that it would do so soon.
Telephone Recording Responds
American Investia ceased selling investments Jan. 19 and closed its branch offices in Newport Beach, San Francisco and Sacramento, according to investors who have been in touch with the company in recent weeks.
Persons calling the firm's headquarters now find the telephone answered by a tape-recorded message stating:
"The American Investia staff is involved in special projects for the rest of this week. All clients will receive a letter within seven days detailing recent changes."
An attorney for American Investia did not respond Wednesday to a telephone inquiry from The Times. The firm's president, Lennart Martinson, also could not be reached.
According to the firm's brochures and ads, its programs for investors began at $10,000 and ranged to more than $150,000 each, for which it promised fixed rates of return that were up to double the prevailing money-market rates.
Investors bought "asset-based accounts." According to Investia literature, the basis of the accounts was "specially selected diamonds" that belonged to the investors "until liquidation." The idea, according to Investia, was that the accounts would appreciate according to increases in the value of "rough diamonds."
In addition to assigning each investor sealed capsules containing 10 tiny diamonds totaling about one carat in weight, American Investia set aside 25% of their investments in bank-controlled trust funds. Several months ago, the firm gave customers access to those funds, and some investors have since withdrawn the money.
The state's investigation came to light as the result of calls this week to The Times by investors, who said they started looking into the matter earlier this year after finding that the company was having difficulties.
"I'm a retired senior," one investor said. "That was my nest egg, baby."
He declined to be identified by name because "it's too embarrassing." He added that he is a former hotel executive and didn't want his friends to know about the situation.
He added that he is angry, not the least at "the greed on my own part to make five points more" than the prevailing interest rate on money-market accounts.
He said that after receiving regular payments for two years he failed to receive one in February and started asking questions. He reached his account executive, he said, and "got the usual happy talk."
He said he was told the company was preparing to "go public" and was not allowed to bring in new business. Shortly afterward, he received three checks for nearly $200 each, representing full payments for February, March, and April.
An actor here, who also declined use of his name, said he invested $20,000 with American Investia last November.
He got worried after receiving a letter dated Feb. 11 in which the company said that since Jan. 19 it had been "working very closely with " the state corporations department. The message also asked him to accept deferral of payments due on his account for 90 days.
He decided to withdraw the $5,000 in the bank account without waiting further.
On March 17, he said, he went to the firm's quarters in an office building at Wilshire Boulevard and Rexford Drive and found that the elevator had been locked to prevent it from going up to the penthouse. He said he went up a stairway and found the offices occupied, but that he did not learn much.
Then, seeking to make further inquiry this week, he encountered the firm's telephone recording.