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SEC Suit Accuses Phoenix Metals of Scam

September 30, 1997|Debora Vrana

The U.S. Securities and Exchange Commission sued Beverly Hills-based Phoenix Metals U.S.A. II Inc. and owner Robert F. Flaherty of Alhambra over an alleged $2.5-million scheme involving promises of turning dirt into gold. The complaint, filed in U.S. District Court in Los Angeles, alleges that Flaherty, 61, told about 100 investors that he and Phoenix Metals were in the business of extracting gold and other precious metals from volcanic cinder ore in Arizona and Nevada. Instead, the suit alleges, Flaherty spent most of the investors' funds on his own lavish lifestyle, including the purchase of expensive cars. The investors, mostly elderly, were promised returns of 300% but have yet to see any, the agency alleged. Phoenix Metals trades over the counter under the symbol PMTU. Flaherty sold stock and options in the company from 1994 to 1995. The SEC is seeking a permanent injunction against the company. Flaherty's lawyer could not be reached for comment.

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