Fool's Gold

Downfall of a bullion dealer

For a while at least, William Alderdice, 39, and his brother James, 26, seemed to have the Midas touch. During the past three years, they transformed a small storefront jewelry business in Fort Lauderdale, Fla., into the International Gold Bullion Exchange (IGBE), a thriving enterprise with 1,000 employees, branch offices in Dallas and Los Angeles, and 1982 sales of $80 million. William Alderdice, the company's chief executive, bragged that IGBE was the biggest gold and silver dealer in the U.S. In television commercials and ads splashed across such newspapers as the New York Times and the Wall Street Journal, IGBE offered to sell precious metals at exceptionally low prices. There was just one catch: customers had to wait several months for delivery of the coins or bullion.

For many investors, delivery never came and probably never will. IGBE filed for bankruptcy last week after being charged with "civil theft" and ordered by a Florida judge to halt operations. Thousands of customers from around the U.S. had complained about not receiving their metals, leading to investigations by the Florida attorney general's office, the Fort Lauderdale police, the FBI and the Postal Service. IGBE's attorney, Thomas Tew, estimates that 25,000 customers are owed more than $10 million. He admits chances of their being paid are "remote."

Much of the money came from investors who could ill afford to lose it. St. Michael's Church of Life in Unionville, Conn., sent in $278,000 that its 200 members had set aside for the construction of a new chapel. Patricia Bear, 52, a divorcee who lives in a mobile home in Denison, Texas, is out $46,000. Says she: "I'm in a terrible financial bind. I sent them my life savings, but evidently they are a bunch of crooks."

IGBE's business strategy was simple, but risky. In exchange for discount prices, most customers agreed to wait at least twelve to 15 weeks to receive their metals. In the meantime, IGBE invested the customers' money, earned interest on it, and waited for metals prices to dip so that the company could pay less for the gold or silver sent to the client. The scheme worked well from 1980 to mid-1982, when metals prices were on a downward trend. But late last year prices started to rise, and the bullion often cost the company more than customers had paid. Says Attorney Tew: "The house of cards collapsed."

Few investors putting money down with IGBE knew about the Alderdice brothers' past. Before striking gold with IGBE, William had tried his luck with a wig salon, a penny arcade, a restaurant and a concert-promotion business. Florida police revealed last week that the brothers had arrest records that over the years included charges of assault, vagrancy, indecent exposure and writing bad checks.

Investigators are unsure what happened to all the money that IGBE took in, but some of it seems to have paid for high living. Says Fort Lauderdale Police Detective Stephen Raabe: "The brothers would think nothing of paying $10,000 for a private Learjet to fly to the West Coast. They were living a jet-set life with lots of cars and women around." Things sometimes got rowdy. On one occasion, a girlfriend wrecked William's Lincoln Mark VI after an argument.

William Alderdice promised last week to "do everything in our power to get the gold and silver to the customers," but he admitted that he had no firm tally of his company's debts. When William Leonard, a court-appointed attorney, opened the vault at IGBE's Fort Lauderdale headquarters he found that "like Old Mother Hubbard's cupboard, it was bare." Or almost bare. Leonard did find a small adding machine and a few wooden blocks painted to look like gold bars. This file is automatically generated by a robot program, so viewer discretion is required.