Former Precious Metals Trader Fights Contempt Order at 11th Circuit

ATLANTA (CN) – An attorney for a Florida businessman who served as CEO of a company that defrauded customers in a precious metals investment scheme asked an 11th Circuit panel Tuesday to overturn an order finding him in contempt for not paying restitution.

A federal court ruled against Robert Escobio in a fraud case brought by the U.S. Commodity Futures Trading Commission, permanently banning him and his companies Southern Trust Metals Inc. and Loreley Overseas Corporation from commodity trading and registration. Escobio was ordered to pay more than $2.5 million in restitution and penalties.

In August 2016, U.S. District Court Judge James Lawrence King in Miami ruled after a three-day bench trial that Escobio and his companies violated anti-fraud provisions of the Commodity Exchange Act and other regulations.

According to King’s ruling, Southern Trust Metals purported to be a seller of physical precious metals including gold and silver and lured investors to purchase metals that it claimed were being held in depositories in London or Hong Kong. Customers were told they could buy metals by utilizing loans arranged by the company and were assured that the metals would be held in their names at the depositories.

In reality, Southern Trust Metals did not buy or sell physical metals and the loans were “entirely fictional,” the ruling states.

Instead, the company transferred investors’ money to Loreley Overseas Corporation, a Virgin Islands subsidiary, and then to trading accounts at London-based margin trading firms where the money was used to trade in Loreley’s name.

According to the ruling, at least 100 customers were duped by Escobio and Southern Trust Metals before their scheme was discovered in April 2013. The victims lost a total of $1.5 million.

In March of this year, King entered a ruling finding Escobio in contempt for his failure to pay restitution and requiring him to pay $10,000 per month towards the restitution balance.

According to court documents, Escobio paid just $3,525 in restitution between the entry of the original judgment in August 2016 and October 2018 despite having over $900,000 in assets and an annual household income of around $250,000.

On Monday, King granted the commission’s motion for coercive sanctions and ordered Escobio to surrender to U.S. Marshals. Despite the court’s prior order, court documents show that Escobio paid only $1,160 to the restitution fund since March.

At the start of oral arguments Tuesday morning, Escobio’s attorney told the 11th Circuit panel that, to his knowledge, his client had not yet turned himself in.

Attorney Peter Winslow Homer of Homer Bonner told the panel that the contempt order against Escobio was improper because the final judgment against him was vague and allowed for partial payment of the restitution award.

Homer also argued that his client simply lacks the income to pay the restitution and penalties.

“As a result of the judgment, Escobio has no ability to work in the industry he had worked in for 35 years. When he was incarcerated he lost his part-time job as a pilot as well,” Homer said.

“The government has put as much pressure on Escobio as possible. If you sustain this, the FTC and the CFTC will hold people in contempt and incarcerate them,” he continued, using abbreviations for the Federal Trade Commission and Commodity Futures Trading Commission.

Homer added that the commission’s treatment of Escobio is unfair because “we don’t have debtor’s prison.”

Attorney Anne Stukes, assistant general counsel for the CFTC, told the panel that the district court repeatedly attempted to “prod” Escobio into action before entering the contempt order against him.

“Escobio is not the victim here. [He] maintained a luxurious lifestyle. His discretionary expenditures were over $14,000 a month. He has contemptuously prioritized his expenditures over the victims. He has paid more for his cable TV than he has paid to the victims,” Stukes said.

She continued, “The argument has been that [the Fair Debt Collection Practices Act] forbids courts from entering contempt sanctions for restitution awards, but restitution is an equitable remedy which is traditionally enforceable by contempt. The contempt standards were met in this case. Failure to comply was demonstrated. Escobio paid a pittance to the restitution award.”

In response to a question from U.S. Circuit Judge Elizabeth Branch, Stukes told the panel that the commission has set up a system to return to the victims any restitution money paid by Escobio.

Branch was joined on the panel by U.S. Circuit Judges Ed Carnes and Gerald Tjoflat, who was not present in the courtroom for reasons unknown.

The judges did not indicate when they will reach a decision in the case.

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