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Brothers Who Had Investment Firm Get 10 Years in Mail Fraud

February 19, 1988|MARIA L. La GANGA and JOHN SPANO | Times Staff Writers

The two owners of a defunct Costa Mesa gem and investment company were sentenced Thursday to 10 years each in federal prison on mail fraud charges stemming from a scheme that bilked more than 800 customers out of at least $9 million.

U.S. District Judge Edward J. Rafeedie also ordered the pair--Ronald Allen Smith of Fullerton and his brother Michael Edward Smith of Fallbrook--to pay up to $1 million in restitution each for the part they played in Crandall Financial Corp.

Rafeedie denounced the brothers' "cruelty, brutality and viciousness" and said that the men showed "total, utter disregard for the people who were harmed," a group that included such vulnerable victims as widows, the elderly and the disabled.

"I believe that justice has been served in this case, and I hope that others are deterred," said Sharon McCaslin, a deputy attorney general who helped prosecute the case.

But several of the two dozen Crandall victims in court for the Smiths' sentencing said that they were dissatisfied with Rafeedie's decision.

"Well, it doesn't seem like very long really," said one woman, who declined to state her name. The woman said she had lost a substantial amount of money but recovered it in a civil suit. Another victim, who also declined to be identified, said he lost $23,000. "As far as I'm concerned," he said, "the sentence was light."

Crandall has been closed since September, 1984. At that time, the Securities and Exchange Commission filed a complaint accusing the company of fraud and obtained a federal court order placing Crandall in receivership. The Smiths, Crandall's founders and owners, were indicted last May on mail fraud charges, along with eight co-workers.

The entire group faced charges of using deceptive sales techniques and unauthorized use of customer money, according to court records. Three of the Smiths' employees pleaded guilty and agreed to testify against the brothers and their other colleagues.

Those who pleaded not guilty in the case were convicted last November. Along with the Smiths, one top-level manager was sentenced to 10 years in federal prison. The others were sentenced to prison terms of two to seven years.

Although lawyers for both brothers requested leniency--citing the Smiths' previously clean criminal records, family-support obligations and good military histories--Rafeedie denied the defendants' requests to be free on bail pending their planned appeals.

Rafeedie said the men's records left him unimpressed and ordered them to surrender by March 10.

In rejecting the Smiths' requests for freedom, Rafeedie noted that their current telemarketing business--Global Marketing of West Covina--promotes the sale of art lithographs, gem mines, and thoroughbred horses, commodities he called "historically the staple of the swindler's lot."

Rafeedie also reviewed the "callousness" of Crandall's sales pitch, which started with "a little puffing, then exaggeration, to hyperbole and finally to outright fraud." The judge characterized the men's crimes as "pernicious" and particularly blameworthy because they were "repeated over and over."

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