Rhyne Sentenced To Prison For Fraud

Craig Rhyne stood in a U.S. District Court room yesterday, weeping as he explained how his precious-metals business spiraled into a web of fraud that cost his customers $3.6 million.

It was the first public statement Rhyne had made about the fraud since he abruptly shut down his business, Rhyne Precious Metals, in July.

"I thought I could pull my business out and pay off all my debts," he said. "I was wrong."

U.S. District Judge William Dwyer sentenced Rhyne, who pleaded guilty to one count of mail fraud in September, to 33 months in prison, the low end of the sentencing range for mail fraud. He also will serve three years' probation after his prison term and work to pay back his creditors.

Rhyne opened his business in 1974 with money he received in a settlement when he lost his leg in a car crash. He became successful quickly in the 1970s as the price of gold soared.

But in the 1980s, when the market flattened, he said it became more difficult to make ends meet. By the late '80s, he began defrauding customers. When they paid him for precious metals, he either would use that money to buy metals for other customers or pay the overhead expenses of his business.

"I reasoned I'd made so much money before that I could do it again and pay everyone back," he told the court.

Some of his customers lost their life savings. About 65 people - some friends of Rhyne, some creditors - attended the sentencing. Several spoke on his behalf.

Dwyer said he had to balance the emotional and financial devastation Rhyne caused with the fact that he had no criminal record and that he turned himself in and cooperated with the U.S. Attorney's office and Scott Henrie, an attorney at Williams Kaster & Gibbs who was appointed receiver of Rhyne Precious Metals.

Rhyne's attorney, Peter Avenia, a public defender, asked the court to consider that Rhyne had not received proper advice from his attorneys and accountants - advisers who knew what Rhyne was doing yet did not tell him to turn himself in.

Henrie said he is still looking into a possible lawsuit against some of those advisers.

Some creditors also mentioned they are planning a civil suit against those parties.

But despite Rhyne's agreement to help creditors receive restitution for their losses, some customers are not sure they will see their money again.

Mark Amberson, an Everett contractor, lost $20,000 in gold and silver coins. He said he had mixed feelings about the sentencing, because he won't be satisfied until he is reimbursed.

When he spoke before the sentencing, he addressed his statements to Rhyne.

"I don't have a lot of money, but I do have three children," Amberson said. "I don't know how I can sit in your office, and you take monies from me knowing you're not going to pay it back. It's wrong . . . . You robbed my kids."

Henrie said he is currently reviewing creditors' claims. He has spent several months locating the assets of the company, which include some bank accounts and an insurance claim. In December, Henrie auctioned most of the items that were left in Rhyne's retail store at 425 Pike Street, bringing in about $280,000.

Rhyne assured the court that he is broke, with no metals or money stashed in private off-shore accounts, no mansion, car or airplane. He said Avenia was representing him because he could not afford a private attorney.

Until about a month ago, Rhyne had been represented by John Wolfe. Rhyne had paid Wolfe in gold coins, but Wolfe turned most of them over to the receivership, Henrie said.