WASHINGTON (AP) - Joe Melomo says the phone call promising a "safe" investment in gold and silver offered him hope, a way to help cover the enormous bills from his restaurant. But Melomo says those pledges of huge profits with little risk never once mentioned whopping, hidden fees that ended up wiping out most of his retirement savings.
WASHINGTON (AP) — Joe Melomo says the phone call promising a "safe" investment in gold and silver offered him hope, a way to help cover the enormous bills from his restaurant. But Melomo says those pledges of huge profits with little risk never once mentioned whopping, hidden fees that ended up wiping out most of his retirement savings.
Melomo, 77, is far from alone, according to a yearlong Senate investigation into unscrupulous precious metal companies.
The report, released Wednesday by the Senate Special Committee on Aging, estimates that more than 10,000 Americans have fallen victim to precious metal schemes. Too often, those victims are seniors, says the report, which pegged losses at around $300 million since 2001.
The 2008 financial crisis helped con artists steer people away from the stock market, telling consumers that precious metals were immune from market volatility, which isn't necessarily the case. In 2013 alone, the report says, the price of gold fell nearly 30 percent.
Joe Melomo, of Austin, Texas, thought gold was the answer to his troubles.
The former IBM physicist had lost his wife of 41 years. After her death, he felt lost and decided to go into business as a silent partner in an Italian restaurant only to learn, he says, that a partner was stealing money. But then he got a call about buying gold and silver. The company sent him glossy promotional materials and made him feel comfortable turning over his money.
"They made me feel like family," Melomo said in an AP interview. "I thought they were watching out for me. They told me they were, but they didn't."
Melomo lost almost $200,000 after investing in gold and silver with Florida-based American Precious Metals. He says the company never told him about administrative and other fees. After precious metal prices dropped in 2008, most of his metals were liquidated and the company called him for more money. He didn't have it and asked for his money. Only then did he learn that of the $170,000 or so that he gave American for the precious metals, they had charged him $165,000 in administrative fees and several thousand more in interest charges. He was only able to recoup $25,000 after hiring a lawyer.
His daughter contacted the Federal Trade Commission, and an investigation eventually led to the agency filing a complaint against American Precious Metals, its owner, Harry Tanner, Jr., and his wife, Andrea Tanner, that alleged they engaged in deceptive and abusive practices in connection with the telemarketing and sale of precious metals. They settled with the FTC, as did another owner, and were ordered to pay more than $24 million.
Melomo was testifying Wednesday at a hearing chaired by Sen. Bill Nelson, D-Fla., and ranking member, Sen. Susan Collins, R-Maine.
Their committee report says that local officials in Florida, Minnesota, Texas, North Carolina and California have made progress in fighting worst practices in the industry.