MORGAN HILL
– A newspaper story 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.
MORGAN HILL – A newspaper story 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, was arraigned Monday afternoon in Santa Clara County Superior Court and released on $500,000 bail.
Drozen,who is not licensed to sell securities, surrendered Friday at Santa Clara County Jail. The 57 felony counts in Santa Clara include 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’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, Assistant Santa Clara County district attorney Mike 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.”
In addition, a potential client had been approached recently by Drozen, asking $45,000 for the same purpose, said Brad Ledwith, an investment counselor in Morgan Hill.
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 not guilty, 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.
The alleged 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.
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 that he is not licensed to sell securities and that the securities are not licensed in California.
“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.
Staff Writer Peter Crowley contributed to this story.
Carol Holzgrafe covers City Hall for The Times. She can be reached by e-mail at cholzgrafe@morgan
hilltimes.com or phoning (408) 779-4106 Ext. 201.
