William Matthews thought he had found the perfect way to invest some of his retirement money when he paid $25,000 for a California automaker's bonds in September. The bonds promised to pay 13 percent interest and MTD Inc., the company that sold them, insisted they were risk-free.
But for the retired recreation maintenance supervisor from Catonsville, MTD was not what it said it was. In fact, the state of Nevada had revoked the company's charter after its check, written to pay the corporate filing fee, bounced.
Mr. Matthews' check, however, did not.
Maryland's Securities Division yesterday began enforcement action against Las Vegas-based MTD. Administrative charges include fraud, selling securities with out licenses for the firm or its sales people, and selling securities that are not registered with Maryland regulators.
Maryland's action came the same day California began 100 enforcement actions against 426 firms and individuals in that state's biggest such crackdown ever.
In all, an estimated 20,000 people have invested $1.5 billion in the alleged scams nationwide.
Maryland Attorney General J. Joseph Curran Jr. joined the North American Securities Administrators Association, a group of state securities regulators, in issuing an "urgent" warning to consumers about phony tax-free retirement investment schemes.
"People should steer clear of unscrupulous individuals who tout 'IRA approved' investments," said Mr. Curran. "The Internal Revenue Service does not give its blessing to specific investments."
He said people should not respond to investments advertised on television and should never transfer individual retirement account funds directly to an investment promoter.
Maryland officials have begun a series of securities fraud enforcement actions in the past year. Most involve companies charged with trying to exploit interest in wireless cable television technology to dupe investors who are promised annual returns as high as 100 percent or more.
State authorities know of about 100 Marylanders allegedly taken in by eight recent schemes. Losses average about $6,000 per investor. Many of the promoters lure investors through late-night infomercials on UHF television stations, investigators said. They say more promoters are under investigation.
"We jumped on these pretty hard at the beginning, so we kept a lot of them out of the state," said Webb Brenner, chief of enforcement for the Maryland Securities Division. "Maryland does not have the severity of the problem of a lot of the rest of the states."
Still, the problem is severe enough for Mr. Matthews.
"It almost wiped me out," said Mr. Matthews, who was prepared to send MTD another $28,000 in November.
Looking to invest some retirement money, Mr. Matthews was told he purchased bonds in Auto Bitter Group Inc., a Newport Beach, Calif.-based carmaker. Sold by MTD Inc., the bonds were paying a 13 percent return and were fully guaranteed, he was told.
But the bonds had not been registered with Maryland securities regulators, as state law requires. Officials at the U.S. Securities and Exchange Commission say they have no record of Auto Bitter attempting to register any securities since early 1993.
Indeed, Auto Bitter attorney Tony Marriott said yesterday that the automaker has never heard of MTD Inc., did not authorize anyone to sell bonds for it this summer, and did not receive any money.
Attempts to reach MTD or its representatives were unsuccessful yesterday. Telephone numbers at two addresses in Nevada have been disconnected.