No one seems to know exactly where $4.5 million in gold and silver held by Ruff Financial Services Inc. has gone.
But an estimated 2,000 customers of the Orem precious metals and coin dealership founded by financial guru Howard Ruff do know from U.S. Bankruptcy Court records that their coins and bullion are missing.Harold and Edna West, of Bloomington, Ill., retired from the Eureka vacuum-cleaner company, thought they had $16,000 in gold and silver stored at Ruff Financial.
"We figured all along that the gold and silver were there, being held in our name," West said Tuesday. "We were told by the company that it was there.
"Now we find out that it isn't," he said. "It sounds to me that someone is getting away with an awful lot of money."
The company, which conducted business under the name Ruffco, has filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
Ruff, a financial adviser and author, said he sold the company in July 1988 but allowed it to continue to use his name. He said he had no knowledge that the company was in trouble.
"I remained as an outside director partly because I felt responsible to the minority shareholders," Ruff said. "I raised $3 million from them to launch the company and thought that their interests should be represented."
Ruff resigned as an outside director of the company - two days before Ruffco filed for bankruptcy on May 3. Most of Ruffco's executives resigned or were replaced shortly before the company sought protection from its creditors, records show.
Stewart P. Chambers, a Fort Lauderdale, Fla., attorney who was appointed by the court to investigate the company's operations, said many of Ruffco's customers paid for coins and bullion that didn't exist.
Many customers were attracted to the company by advertisements in Ruff's newsletter, "The Ruff Times."
Marvin Dorst of Wichita, Kan., a long-time subscriber to the newsletter, said he sent the company $3,200 for bullion after placing an order via telephone.
"Howard was advertising it as a win-win type of situation," he said.
Chambers said none of Ruffco's current management could tell him where the money went.
Ruff said the company began withholding financial information from him almost a year before the bankruptcy petition. Further, he was not notified of any board meetings during that time, except for one shortly before the Chapter 11 petition was filed.
"I thought about resigning from the board of directors several times during that period," Ruff said. "But I was preoccupied and had other things on my mind. I was diagnosed with cancer during that time period and was busy launching another company."
In his report to the court, Chambers said Ruffco's sales dramatically decreased from $61,975,706 in 1987 to $44,926,410 in 1988.
"However, most telling and troubling was the increase in Ruffco's liability to customers," he said.
In 1987, Ruffco reported no customer liability on inventory. At the end of 1988, it owed $8,142,708 to customers whose coins and bullion were ostensibly in storage.
But by 1989, that liability to customers, presumably as a result of shipments to customers, had been reduced to $5,582,041, the report said. By the time it filed for Chapter 11, the company listed customers' coin and bullion inventory debt at $4,554,930.