AUDIT AFTER GOLD DEALER'S SUICIDE SUGGESTS CUSTOMERS LOST MILLIONS

This happened in 1983 - it can and will happen again - make sure you take physical possession of your precious metals!

AUDIT AFTER GOLD DEALER'S SUICIDE SUGGESTS CUSTOMERS LOST MILLIONS
By ROBERT J. COLE
October 5, 1983

Some $60 million worth of gold, silver and platinum sold to thousands of individuals and then supposedly stored in Rocky Mountain vaults may never have existed, an investigation suggested yesterday.

The possibility emerged in an audit conducted by the accounting firm of Touche Ross & Company in connection with the suicide last Wednesday of Alan David Saxon, 39-year-old chairman of Bullion Reserve of North America, a gold dealer with offices in Los Angeles, Dallas and Hong Kong.

Bullion Reserve has 30,000 to 35,000 customers. If the missing assets cannot be found, most of their investments may be lost.

Vaults Near Salt Lake City

Lawyers for the company said the audit showed that a depository, owned by Perpetual Storage Inc. of Salt Lake City and buried 200 feet in a nearby mountain range, contained only about $900,000 in bullion and coins. Another $140,000 to $150,000 worth of coins were found at Brinks Inc. of Los Angeles, another Bullion Reserve storage center.

The discovery, made over the weekend, prompted Bullion Reserve to file a bankruptcy petition Monday in Los Angeles, seeking court protection from its creditors.

Patrick Lynch, president of the Salt Lake City company, said that in the three years he had stored bullion for Mr. Saxon, the most he had ever seen in the vaults was about $3 million. He said it was standard practice for his company to register the bars by their serial numbers.

A Brinks executive in Los Angeles said he had been advised by his lawyers not to comment.

Where the millions of dollars in customers' money went is unclear.

Robert Abrams, Attorney General of New York, said his office had been flooded with calls about the company. His office has been investigating Bullion Reserve, which advertised heavily in the New York area, for several weeks, and the investigation is continuing.

There were reports from Mr. Abrams's office that Mr. Saxon, his wife and others closely identified with the gold dealer had received $41 million in loans from the company. And the auditors' report said ''millions of dollars'' in loans had been made to Mr. Saxon. But a laywer retained by the company said he had no such informa tion.Lawsuits have been filed seeking to recover $23 million in cash, jewelry and other assets from the company. The largest seeks to seize $16.4 million in assets, including three luxury cars and two condominiums owned by Mr. Saxon's wife and his estate.

One of the lawsuits named Arnold Kopelson and Michael Miller, officers of the now-defunct California Commercial Bank. Mr. Saxon had served briefly on the bank's board last year. The defendants were charged with receiving unauthorized transfers from Bullion Reserve of $1.7 million. The bank, closed by state regulators in May, is the subject of an investigation by the Federal Bureau of Investigation.

As related by Mr. Abrams in an interview, the events leading to Mr. Saxon's suicide and the subsequent bankruptcy of his company began a few weeks ago when the Attorney General heard a radio commercial for Bullion Reserve.

Parallels With Earlier Case

''What they were saying,'' Mr. Abrams said, ''was exactly analagous to International Gold Bullion Exchange in Florida.''

A New York State grand jury last summer indicted International Gold's two top executives, William and James Alderdice, on charges of securities fraud and grand larceny; investors in the now-defunct company lost between $20 million and $40 million.

The gist of the ads, Mr. Abrams said, was that customers could ''come and buy gold and silver bullion, have a safe and secure investment, capitalize on the appreciation of these precious metals and store them safely and securely in our own vaults in Utah.'' Although his office had not received any complaints, he said, he asked his staff to investigate.

By last Wednesday, a company lawyer had met in New York with Mr. Abrams' staff and had agreed to furnish within 24 hours financial data about the company and detailed records of its sales in New York.

Death Ruled a Suicide

That same morning, however, Mr. Saxon's body was discovered in the sauna of his $680,000 beach-front condominium in Venice, Calif. A rubber hose connected to a motorcyle's exhaust had been run inside the small enclosure and a tape had been found nearby. The Los Angeles coroner's office did not disclose the tape's contents but called the death a suicide.

Bullion Reserve named a prominent Beverly Hills law firm, Finley Kumble Wagner Heine Underberg Manley & Casey, to conduct its own investigation. The law firm, in turn, appointed Touche Ross to undertake the audit.

Mr. Abrams said he understood that Mr. Saxon's taped message said he was going to commit suicide because of financial reverses and his inability to cover recent losses.

News of the suicide touched off a brief drop in gold prices last week because traders reasoned that vast amounts of gold might be dumped on the market.

Offices Closed

All offices of Bullion Reserve have been closed since Thursday, but tape recordings promise customers that the office will open today. The firm's lawyers, however, said operations would not be resumed soon.

The events left many questions unanswered. For one, how could companies like Bullion Reserve operate so long without detection?

Attorney General Abrams criticized two Government agencies - the Securities and Exchange Commission and the Commodity Futures Trading Commission - for ''timidity and lack of enforcement'' of such companies.

Responding to Mr. Abrams, a commodities commission spokesman said in Washington that the commission had not received any complaints from Bullion Reserve's customers, that the firm was not registered with the agency and that it did not believe the firm was subject to its regulations.

Response by S.E.C.

An S.E.C. spokesman said that when the securities commission found a fraud within its jurisdiction, it pursued it. But, the spokesman added, ''not every fraud is a securities matter'' and states ''also have an important law enforcement role.''

But the central question is where Bullion Reserve's $60 million in assets went, and what Mr. Saxon's role was in its apparent disappearance.

Interviews with several suppliers and others with whom Mr. Saxon did business suggest that he was bright, charming, reserved and fairly prompt in paying his bills.

An official of Conti Commodities Inc. of Chicago said Mr. Saxon's account with that trading firm was handled ''in a businesslike manner.'' Johnson Matthey & Company of Toronto, a gold bullion supplier, dealt with Mr. Saxon regularly through its Los Angeles office.

Perpetual Storage said it had investigated Mr. Saxon's background before storing his gold and took his business ''because he didn't have anything in his file to show he was ever connected with a fraud.''

Neighbors of Mr. Saxon in Venice said that he drove a Maserati and a Porsche, but showed no other signs of affluence. He kept to himself, often walking a dog in the neighborhood, wearing cowboy boots.

Mr. Saxon moved to the condominium a few months ago, from one nearby that he had shared with his wife. He told acquaintances that he was separated from his wife and that they were getting a divorce.