A Florida newspaper story has led to a Morgan Hill man being
charged with 78 felony counts on defrauding seniors in two counties
by selling securities that turned out to be worthless. The victims
were almost entirely elderly and seven live in Morgan Hill, Gilroy
or Hollister.
A Florida newspaper story has led to a Morgan Hill man being charged with 78 felony counts on defrauding seniors in two counties by selling securities that turned out to be worthless. The victims were almost entirely elderly and seven live in Morgan Hill, Gilroy or Hollister.
Michael Drozen, 62, of Morgan Hill, who is not licensed to sell securities, surrendered Friday at Santa Clara County Jail. He faces 57 felony counts of unlicensed sales of securities, selling unregistered securities, defrauding clients in the sale of the securities and elder financial abuse; the securities were for an infomercial company called Buena Vista.
Drozen was arraigned Monday afternoon in Santa Clara County Superior Court and released on $500,000 bail.
Assistant Santa Clara County district attorney Mike Fitzsimmons said he added six more charges at the arraignment, bringing the total to 63. Drozen’s next appearance is scheduled for Thursday afternoon when he is expected to have hired an attorney.
Attorney Tim Palm of San Francisco, appeared at Monday’s hearing but hasn’t been formally retained by Drozen, Fitzsimmons said.
Reports that Drozen was still contacting several victims named in the Santa Clara County indictment were true, Fitzsimmons said Monday afternoon.
“Over the weekend he asked this 80-year-old man for another $30,000 to form a trust fund,” Fitzsimmons said, “but I’m not sure whether it was to pay back his victims or to pay for his own defense.”
The $30,000 was on top of money previously allegedly defrauded from the man.
Brad Ledwith, an investment counselor in Morgan Hill, said a potential client had been approached recently by Drozen, asking $45,000 for the same purpose.
“One condition for him to get his bail reduced in Santa Cruz County,” Fitzsimmons said, “was that he not contact his victims.”
He said that since Drozen had contacted victims in the Santa Clara County indictment, not in Santa Cruz, technically he was not in violation.
When first arrested on March 15, Drozen, an insurance salesman, was charged in Santa Cruz County with 21 counts of violations similar to those in Santa Clara County. He pleaded innocent, posted $200,000 bail, reduced from $1 million, and was released. A court date has been set for June 3.
“He’s clearly targeting seniors,” assistant Santa Cruz County district attorney Bill Atkinson said recently. “A lot of these people he has had prior contact with selling life insurance to, or annuities. He would go to these people and tell them he had investments for them that were making good money.”
Atkinson said the violations occurred in 2002 and 2003.
Santa Cruz County uncovered Drozen’s history of selling the securities when a resident noticed in a Florida newspaper story that Jerred DeGray, a Drozen associate, was being investigated for misdealings over another company, the Music Depot, Fitzsimmons said.
“He said, ‘hey, I just bought Buena Vista from the same guy,’” Fitzsimmons said the resident recalled.
The Santa Cruz County D.A.’s office contacted Santa Clara County’s, starting off the second investigation.
The securities were for Buena Vista Infomercials Inc. of Florida. In pitching the investment, Atkinson said Drozen neglected to inform his customers of certain key facts:
• Drozen, a licensed insurance salesman, is not licensed to sell securities.
• Securities in Buena Vista Infomercials are not licensed in either California or its home state.
• Buena Vista Infomercials owner Jarred DeGray is awaiting trial in Florida for grand theft, involving shares he allegedly sold in another unlicensed company.
• Buena Vista’s products were never profitable, largely due to poor quality.
“Nothing that they’ve sold so far has made any money, except obviously for Mr. Drozen and Mr. DeGray.”
Fitzsimmons said penalties could include time in prison and a possibility of restitution to the victims.
“Restitution is not going to be easy,” Fitzsimmons said. “I don’t know if many of his assets can be relied on; we might have to look to Florida.”
He said there could be more victims.
“When there is not a return (on investments) people get angry and start wanting to get their money back,” Fitzsimmons said.
If you or someone you know were possibly defrauded by Drozen’s or a similar scam, contact the District Attorney’s office at 299-7400.
- Staff Writer Peter Crowley contributed to this story.
Carol Holzgrafe covers City Hall for The Times. She can be reached by e-mail at ch********@*************es.com or phoning (408) 779-4106 Ext. 201.
