FOR RELEASE: MAY 24, 1993
KEY DEFENDANTS IN PRECIOUS METALS TELEMARKETING SCHEME
AGREE TO SETTLE FEDERAL TRADE COMMISSION CHARGES
The president and the sales manager of the Newport Beach,
California-based firm, Western Trading Group, Ltd., have agreed to
settle Federal Trade Commission charges regarding their roles in
an allegedly deceptive scheme to market leveraged investments in
precious metals by telephone. The proposed settlement agreements
would prohibit Jon A. Gentile and Sam Kingsfield from misrepre-
senting the investment potential, risk, or any other material
feature of any investment they offer in the future. The settle-
ments also would require Gentile and Kingsfield to disclose to
consumers the full amount of any fees charged in connection with
any precious metals or currency investment offering they make.
The FTC first filed a complaint detailing its charges in this
case in federal district court last July 15. The FTC alleged
that, as a result of the defendants' deceptive practices and the
volatility of the precious-metals market, most of the consumers
who invested in the defendants' metals would lose some or all of
their money. Shortly thereafter, Gentile and Kingsfield agreed to
the entry of preliminary orders prohibiting the allegedly decep-
tive conduct. The court also entered a default against Western
Trading when representatives of the company failed to appear in
court, but the default did not prohibit the allegedly deceptive
conduct. Therefore, in addition to asking the court to approve
the proposed settlements with Gentile and Kingsfield, the FTC is
seeking a default judgment against the company that includes
prohibitions on various deceptive practices. Western Trading
Group is not currently in business.
- more -
Western Trading--05/24/93)
(In a subsequent and related case, the FTC charged two inter-
related companies -- Unimet Credit Company and Unimet Trading
Company -- and their principals with aiding and abetting Western
Trading Group and numerous other metals dealers in deceptive
schemes. The Unimet defendants allegedly assisted Western by
supplying the metals, and providing financing for its customers
and other marketing assistance. Charges are still pending against
these defendants. These cases represent a relatively recent FTC
approach of targeting not only individual boilerrooms, but also
suppliers and others who aid and abet or otherwise assist them, as
a more effective approach to combatting fraud.)
The FTC's complaint in the Western Trading Group case alleged
that, in the course of marketing leveraged investments in precious
metals, the defendants misrepresented their risk, profit poten-
tial, past performance, and the point at which an equity call
would occur -- that is, the change in value at which point inves-
tors would have to pay more to maintain their equity. The defen-
dants also failed to disclose a number of fees and other costs --
including fees allegedly disguised as commissions -- associated
with the investments, the FTC charged. The defendants' customers
lost the vast majority of the funds paid into the program -- some
in excess of $100,000 -- the FTC alleged in documents accompanying
its complaint.
The proposed consent judgments to settle the charges against
Gentile and Kingsfield, which require the court's approval to
become binding, would prohibit them from misrepresenting the risk,
profit potential, break-even point, or any other fact material to
a consumer's decision to invest, for any investment offering they
make in the future. The judgments also would prohibit the defen-
dants from misrepresenting the equity call trigger point, and the
costs to a retailer of obtaining bullion that investors can
instantly resell at market prices.
Further, the proposed consent judgments would require Gentile
and Kingsfield to disclose all fees charged in connection with an
investment in precious metals or foreign currencies, and to in-
clude a specifically-worded disclosure about the risks of lever-
aged investments in such commodities. The disclosure would state,
among other things, that such investments are speculative and
extremely high in risk, and would warn consumers not to invest
unless they are capable of losing their entire investment. The
defendants also would be required to obtain each investor's signa-
ture, indicating that they had read and understood the disclosure.
Finally, the proposed consent judgments include various
reporting requirements to assist the FTC in monitoring the
defendants' compliance.
Western Trading--05/24/93)
The Commission vote to approve the proposed consent judgments
for filing in court was 5-0. They were filed May 21 in U.S.
District Court for the Central District of California, in Los
Angeles.
NOTE: These consent judgments are for settlement purposes only
and do not constitute admissions by the defendants of law
violations. Consent judgments have the force of law when signed
by the judge.
Copies of the proposed settlements, as well as previous news
releases issued in connection with this matter, are available from
the FTC's Public Reference Branch, Room 130, 6th Street and Penn-
sylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY
for the hearing impaired 1-866-653-4261.
# # #
MEDIA CONTACT: Bonnie Jansen, Office of Public Affairs
202-326-2161
STAFF CONTACT: Daniel A. Spiro, Bureau of Consumer Protection
202-326-3288
(Civil Action No. CV-02-4194)
(FTC File No. X920056)
(western2)