Federal authorities have sued two Newport Beach companies linked to schemes that allegedly bilked thousands of investors out of at least $20 million through the sale of precious metals and foreign currencies.
The Federal Trade Commission filed a lawsuit this week against Unimet Credit Corp. and UnimetTrading Corp., which it charged with funding and providing training expertise for three allegedly fraudulent dealers: Osborne Precious Metals Inc. in Los Angeles, Western Trading Corp. in Newport Beach and First American Trading House Inc. in Ft. Lauderdale, Fla.
"(We're) going to the supply side, where the financing came from, the aiding and the abetting," said David Siegel, an attorney for the FTC in Washington. "We're dealing with the source."
Unimet President Louis Carabini was named in the lawsuit, along with Unimet's executive vice president, E. Keith Owens, and two other executives, Ed Martin and Ed Myers. Carabini, a former coin dealer, also owns Monex International Ltd., which sells precious metals.
Unimet officials issued a statement Friday denying the FTC's allegations and vowing to "vigorously oppose" the complaint, which was filed in U.S. District Court in Los Angeles.
The dealers sold the metals and currencies over the phone, often to senior citizens who spent between $10,000 to $25,000 on average to get in on highly leveraged investments, FTC officials said. But the dealers misrepresented the investments as low risk and failed to disclose the actual amount of fees and commissions they charged, the FTC said.
Unimet supplied the dealers with the precious metals and loaned money to the investors, the FTC alleges, even though the company knew that dealers were misrepresenting the products. In most cases, the agency alleges, the investors put up 20% of the cost of the metal or currencies, and Unimet financed the remaining 80%.
The FTC charges that Unimet liquidated the bullion and currencies, provided storage space for the bullion and currencies, issued statements to investors and trained the dealers' telemarketers.
Unimet officials said in their statement that the FTC "incorrectly asserts that the Unimet companies knew about alleged misconduct between the dealers and the dealers' customers."
Earlier this year, the FTC obtained an injunction and froze the assets of Osborne Precious Metals and First American Trading. They are seeking an injunction against Western Trading Corp. FTC officials say they believe that Western Trading vacated its Los Angeles and Newport Beach offices in late March.
Also, San Francisco lawyer Richard Heimann has filed four class-action lawsuits against Unimet alleging that it bankrolled the investors yet knew of the fraudulent schemes.
The suits also allege Unimet recruited as many as 50 dealers to sell the bullion and currencies. Those suits are pending in U.S. District Court in Los Angeles.
Federal officials estimate that investors' losses "could be well in excess" of $20 million. One investor allegedly lost as much as $700,000.
And FTC officials say that few, if any, of the investors in Osborne Precious Metals ever made a profit.