On the first morning of the fraud trial of popular financial radio talk show host Richard (R.G.) Reynolds, the electronic monitor that Reynolds had been ordered to wear to ensure that he did not leave the area and violate terms of his bail became disconnected.
Reynolds' attorney, Michael Balaban, told U.S. District Judge Manuel Real in Los Angeles that it wasn't Reynolds' fault, because a rabbit had chewed through wires on the monitor. Balaban presented a videotape and a booklet entitled "How to Care for Your Pet Rabbit" that purportedly showed the mighty chewing power bunnies possess.
Nonetheless, Real ordered Reynolds held in custody throughout the rest of his weeklong trial, which ended Thursday when Reynolds was found guilty of 13 counts of mail fraud and two counts of witness tampering.
Reynolds, who did not testify in his defense, is due to be sentenced Dec. 2. He faces up to 85 years in prison and $3.75 million in fines.
As it turned out, the rabbit defense was a fitting start to a highly theatrical trial that included colorful testimony by investors who lost money through Reynolds' schemes, references to a nonexistent Swiss bank account and shouting matches between Real and Balaban that culminated in Real ordering Balaban handcuffed.
Despite the courtroom drama, it took the five-woman, seven-man jury less than four hours to agree with prosecutors that Reynolds, 44, had used his now-defunct Burbank company, R.G. Reynolds Enterprises, to run a scam that targeted inexperienced investors. "He preyed on the little guy," Assistant U.S. Atty. Ronni B. MacLaren, the lead prosecutor, said in court.
Portraying himself as a folksy adviser to plain folks, Reynolds had a large following in Southern California in the mid-1980s through his investment seminars and radio shows. Some of Reynolds' radio shows featured Jim Newman, who is now a financial reporter on KFWB radio. Reynolds paid for air time on several local stations, including KIEV in Los Angeles and KPZE in Orange County, and he also produced and hosted a TV talk show that appeared for a short time in Los Angeles and San Jose.
From 1985 to 1987, MacLaren said, Reynolds duped more than 70 fans of his shows into investing nearly $1 million in a fraudulent investment program by promising them returns from various stocks ranging from 48% to 1,000%.
In frequently emotional testimony, investors recounted how Reynolds called them repeatedly and lured them with guarantees of safety, telling them their investments would be insured by Lloyds of London--a claim that the insurance company refuted in court. One witness tearfully testified that Reynolds even accompanied her to her bank to watch her withdraw funds to put in his investment program.
After receiving investors' money, Reynolds would send them phony account statements saying they had earned large profits, prosecutors and witnesses said. But instead of investing the money as promised, they said, Reynolds spent most of it on business and personal expenses such as radio and television time, gambling, gifts, parties--even hair and nail appointments for his wife.
Few investors ever received any profits from Reynolds, and most are still trying to get their original investments back, prosecutors said. One woman testified that the money she lost was her son's college fund. Another investor said he couldn't afford to pay for his father's funeral. Yet another said that for a while he called Reynolds' office 100 times a day, trying to get his money back. Reynolds finally sent him a check, but it bounced.
In addition to the fraud charges, Reynolds was found guilty of two counts of witness tampering for his attempts to persuade a witness to destroy a telegram that had been subpoenaed by a grand jury. The telegram was addressed to Reynolds and identified the sender as a Swiss bank. It referred to an account at the bank in Reynolds' name.
But the bank did not exist, prosecutors said, and the telegram had not been sent from Switzerland, but from Glendale, where Reynolds was living at the time. Prosecutors said that in 1987 Reynolds gave the telegram to an investor whom Reynolds owes more than $100,000, to persuade her that he had enough money to pay her.
Throughout the trial, Judge Real repeatedly admonished defense attorney Balaban not to introduce evidence to the jury that Real had ruled inadmissible and to stop arguing the judge's rulings in front of the jury. At one point, Real shouted, "This is not 'L.A. Law,' Mr. Balaban."
Later, when Balaban refused to directly answer a question from the judge, Real ordered Balaban handcuffed. But Balaban relented, and Real had the manacles removed.