County Businessman Pleads Guilty in Precious Metals Swindle

A 28-year-old Los Angeles man who operated several Orange County boiler rooms and swindled victims nationwide out of $2.3 million pleaded guilty to four counts of mail fraud in U.S. District Court in Santa Ana.

From 1985 to 1987, David James Donovan masterminded a “nationwide boiler-room telephone solicitation scheme involving the fraudulent telemarketing of precious metals . . . from various locations in Laguna Hills, Mission Viejo, San Clemente and Laguna Niguel,” according to court documents.

Donovan and his sales staff solicited money and property from their victims for purported investments in gold, silver, palladium, copper and coins, the documents said. But instead of buying and storing the precious metals, they pocketed the money.

Their fraudulent companies included American Financial Exchange, First American Financial Corp., United Metals Exchange and International Commodities Trade Center, according to the state attorney general’s office.

Donovan operated under the aliases Luis Shirpser, James Lewis Nicol and James Baker. He used the money swindled from his victims to buy a customized Corvette, a motorcycle and gold jewelry and to place a $40,000 down payment on a house. He also made payments to his wife and girlfriend, court papers said.

“Donovan was originally arrested by state authorities for failing to register his telemarketing business,” said Judy King, a spokeswoman for the attorney general’s office. “Then the state handed him over to the federal authorities for the mail fraud charges.”

Donovan pleaded guilty Thursday before U.S. District Judge J. Spencer Letts. He faces a maximum penalty of up to five years in prison and a $250,000 fine. Letts also ordered Donovan to pay $500,000 in restitution to his victims.

He is scheduled to be sentenced on Dec. 14.