Authorities Search for Operators of Brokerage That Closed in Irvine

Acting on complaints from investors, local and federal authorities have begun searching for the operators of an Irvine gold and silver futures brokerage that took in a reported $6 million before suddenly closing down last week.

The firm, M.S. Sawyer & Co., closed last Friday after an out-of-state customer, his lawyer and a private investigator barged in and began taking pictures of about two dozen salesmen soliciting money over telephones, said Eric G. Lipoff, a Newport Beach lawyer who has been investigating the company.

Left Through Back Door

“Everybody fled out the back door,” said Lipoff, who sued the company Monday on behalf of a Michigan investor. The U.S. District Court suit, filed in Los Angeles, also names Sawyer’s predecessor firm, B.N. Goldberg & Associates, and three principals.

None of the principals named in the suit could be reached for comment.

It was also learned that both the Orange County district attorney’s office and the Federal Commodities Trading Commission are investigating the sudden closure of the Sawyer firm and the apparent disappearance of its operators. Officials of the two agencies, however, would neither confirm nor deny the existence of an investigation.

The suit filed by Lipoff seeks $146,720 in lost investments and profits and $5 million in punitive damages from the Sawyer firm and its operators, Mark Ott and Blaine Riley, and from Goldberg and its operator, Barry N. Goldberg. It accuses them of violations of state and federal laws and breaches of contract and fiduciary duties.

Local and federal authorities said investors have begun complaining that money due them has not been paid and that they cannot reach the company.

Sent Silver

An Austell, Ga., investor said he began dealing with the Goldberg firm last spring when he sent the company 1,700 ounces of silver, worth almost $12,000, to be used to buy futures contracts for 8,500 ounces of silver. The investor, J.E. Pettey, said in a telephone interview that a Sawyer salesman convinced him last Friday to roll the contracts over into other precious metals because the price of silver had dropped. He said he sent Sawyer $300 to cover the new purchase but now plans to stop payment on the check.

Lipoff’s client, Ronald Schaupeter of St. Clair Shores, Mich., had been buying and selling futures contracts through the Goldberg firm since last November, mailing the firm checks for more than $105,000, the lawyer said. The Sawyer firm sent one check representing a $22,498 profit a month ago, but it bounced, Lipoff said.

Pettey, Lipoff and other sources said the Goldberg firm either merged into, or was sold to, the Sawyer firm about a month ago. Authorities said salesmen who flee one shop closed by lawsuits or prosecutions often set up a new shop elsewhere.

“This is one of 200 telemarketing outfits operating in the county,” said Patrick S. Geary, a deputy Orange County district attorney. “We’ve got up to 10 cases we’re working on right now. There’s so many, we can’t do them all at once.”

To sell commodities such as futures contracts, a company must be registered with the U.S. Commodity Futures Trading Commission or the National Futures Assn. To sell anything over the telephone, companies must be registered with the state Department of Justice.

Neither Sawyer nor Goldberg was registered “in any capacity whatsoever,” said Arthur Salzberg, regional counsel for the commission.

Salzberg said the investing public often is too “greedy and gullible.” Investors in the futures market--which involves sales of contracts, not the actual delivery of materials--should deal only with registered brokers and be wary of any futures contracts that go by other names, such as credit purchase contracts, he said.

“The frauds we are seeing are really quite sophisticated, with glossy brochures and carefully worded sales pitches,” he said. “If it sounds too good to be true, it probably is.”