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3 Leaders of Pyramid Scheme Guilty of Stealing $2.5 Million

Family operators of Panorama City-based company are convicted of multiple felonies targeting Latinos.

October 26, 2002|Richard Fausset | Times Staff Writer

The ringleaders of an elaborate pyramid scheme that stole more than $2.5 million from working-class Latino families throughout Southern California were found guilty Friday of multiple felonies, including grand theft, securities fraud and tax evasion.

Mercedes Navarette, 54, and her husband, Felix, 70, each faces more than 20 years in prison for their part in the scheme. Mercedes' daughter, Joan Frederick, convicted of grand theft and "an endless chain scheme," could receive up to 15 years for operating the telecommunications company La Luz de Oro -- the "Light of Gold."

All three are scheduled to be sentenced Nov. 20.

The Los Angeles Superior Court verdict was read in a courtroom packed with faithful company "members" who sobbed, prayed and promised they would continue attending their pep rally-style meetings.

Other group leaders told the 50 or so followers at the trial not to talk to reporters, but one woman, who declined to give her name, offered a tearful response to the verdicts: "Injustice."

Los Angeles police say as many as 16,000 people may have joined the Panorama City-based company, lured by the promise of cars and homes, and stirred by a sales pitch mixing Christian rhetoric, game show theatrics and a celebration of working Latinos' bootstrapping resolve.

But in recent months up to 1,000 members complained to police that they had received little or no reward for paying into a scheme that required an endless supply of new members to fulfill its promises, Det. John Rodriguez said.

Members paid $75 to join the company and were required to attend meetings and purchase long-distance telephone cards. They were told they could share in the profits of the phone services and qualify for free homes and cars if they persuaded others to join, police said.

One popular program encouraged members to purchase autos, suggesting that the company had paid for them when it had not, Rodriguez said.

At least 300 vehicles were eventually repossessed, wrecking credit records of both the buyers and unwitting co-signers, police said.

Another scheme promised $250,000 toward a "dream home" if members gave the company at least $2,400. Rodriguez said the company helped only one woman buy a home, and she is also charged in connection with the alleged scheme. Others were duped into signing their house deeds over to the company, prosecutors said.

Machinist Robert Ledea, in court to hear the verdict, said he and his wife paid $5,000 into the program and worked full time for La Luz de Oro as security guards. But he said they only received $100 in return.

A bank eventually foreclosed on Ledea's Huntington Park house after he signed the deed over to La Luz de Oro, he said. Ledea said he was happy with Friday's verdict, especially given the religious overtones favored by company president Mercedes Navarette, who wowed many members with her image of homely piety.

"She would put on a big cross, like God or Jesus Christ, but it was all a big lie," said Ledea, 52. "They should pay, and the money should be given back to the people who paid into the program."

Prosecutors seized about $2 million in company funds and plan to redistribute the money among the victims. But they acknowledged it would be difficult to determine who gets what.

Seven others are awaiting trial on similar charges for their role in the scheme. Their trial is set for Friday.

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