Fantasy Island: The Strange Tale of Alleged Fraudster Pearlasia Gamboa

Illustration by Sam Bosma

The woman who more often than not calls herself Pearlasia Gamboa withdraws three sets of government identification from her wallet — two California driver's licenses and a U.S. passport — and spreads them on the table. Each bears a different name next to her own photo. A handsome Filipina who looks younger than her 60 years, Gamboa has high cheekbones, dark eyes, and glossy black hair. “I have to show you all my IDs,” she says with pride.

Pearlasia, aka Elvira Gamboa, aka Pearlasia Gamboa, has granted an audience with a reporter this May afternoon for the purpose of demonstrating that she is not a con artist. Showing off her panoply of assumed names might seem an odd way to start. Then again, there is little about Gamboa that conforms to expectations.

She calls attention to a fourth form of identification, a green-and-gold business card bearing the company name “Pearl Asian Mining, Inc.” Alongside a headshot of a beaming Gamboa in a yellow headdress and red beads is the name Bae C. Catiguman. It means “Princess of Unity,” she explains, a title she claims was given to her by warring indigenous tribes among whom she brokered peace in the mountains of the Philippines. “I am a princess,” Gamboa/Catiguman says.

According to federal and state authorities, she is also a serial scammer. A resident of Redwood City, Gamboa has been investigated by the Securities and Exchange Commission for fraudulently soliciting investments in an allegedly phony Philippine gold-mining operation between 2004 and 2008.

She is also facing accusations that she stole more than $300,000 from a San Francisco real-estate investor with ties to the family of infamous “Hollywood Madam” Heidi Fleiss, and then threatened to dismember him this year when he tried to get his money back.

And that's before the story of Pearlasia Gamboa starts to get really strange.

Gamboa is the past president of the Dominion of Melchizedek, an enigmatic island nation in the South Pacific. Leaders associated with Melchizedek — named after a holy man who makes a brief appearance in the Book of Genesis — say it is an ecclesiastical state similar to the Vatican, with its own laws and religion. However, it has never received diplomatic recognition from most countries, which may be because the atoll claimed as its territorial capital lies underwater at high tide. And the prominence of convicted con artists in the upper echelons of Melchizedekian government raises questions about the country's legitimacy and true purpose.

David Korem, the Dominion's former vice president and Gamboa's husband, has been prosecuted several times by federal officials in connection with financial crimes. Gamboa acknowledges he was engaged in illegal activity, but denies allegations that she has committed fraud or theft. Instead, she insists, contrary to the assertions of federal and state authorities, that she is a spiritual leader and entrepreneur who has innocently run afoul of laws intended to protect consumers from investment fraud.

“I don't want you to distort everything,” she tells SF Weekly. “I want the truth. I'm coming to you. I'm showing you everything.”

Getting to the bottom of that truth requires delving into a story that might have resulted from an artistic collaboration between Ian Fleming and Salvador Dalí. Gamboa's tale involves secret ore deposits, hidden stocks of Soviet nuclear armaments, the Queen Mary ocean liner, portions of Antarctica, a new version of the Bible, allegations of fake deaths and miraculous resurrections, and a collection of some of the most colorful aliases ever to grace America's criminal and civil case dockets. (According to court documents, Korem also answers to the names Tzemach Ben David Netzer Korem and Branch Vinedresser.)

While it's impossible to deny the outré entertainment value of Gamboa's dealings, this is comedy with an edge. Her latest alleged victim, real-estate investor Eric Diesel, says he fears Gamboa might try to do him physical harm. The SEC alleges in court filings that Gamboa persuaded a New York financial firm — which is not identified, per standard agency practice — to sell $5.4 million of stock in her fake gold-mining concern.

Given the complexity and diffuse nature of some contemporary stock investments, it's not always easy to put names and faces to those Gamboa and Korem are said to have defrauded over the years. But authorities say real people lost substantial sums as a result of the pair's bizarre schemes.

“They're highly entertaining,” says Steven Suchil, a private insurance lawyer in Sacramento who investigated Gamboa on behalf of the state of California in the 1990s. “Unless you're burned by them.”

In 1995, Gamboa appeared at a small bank in Shasta County seeking a $20,000 car loan. Rather than apply for a personal loan, she sought this sum on behalf of a financial entity she called Bankasia AG. A clerk suspected something wasn't right and reported her to state officials, who told her that it was illegal to represent herself as a bank without proper licensing.

California financial regulators were not prepared for what came next. “Her response was to come back with all this information about the Dominion of Melchizedek and how it was a licensed bank,” recalls Kenneth Sayre-Peterson, acting general counsel for the state banking department, which investigated Gamboa at the time. Looking into it, investigators realized that the car loan was just the tip of the iceberg. Gamboa and Korem, he says, “were soliciting deposits from people. There was fraud involved.”

An injunction was issued barring Gamboa from representing herself as a banker anywhere in the state. That put a stop to banking schemes involving the Dominion in California, Sayre-Peterson says, though it prompted an unusual form of retaliation. Gamboa used her position as president of Melchizedek to declare “spiritual warfare” on California's government. “I will do metaphysical battle with you in your dream state,” Gamboa wrote to former California Deputy Attorney General David Green, according to a 1995 account of the episode in the Sacramento Bee. “And if you interpret your dreams correctly you will know that I am the victor.”

What, exactly, had state bank regulators stumbled upon? Melchizedek, according to fraud experts who have studied it, was originally the brainchild of David and Mark Pedley, father-and-son con artists who operated for years in California, Mexico, Canada, and elsewhere. The pair perpetrated various acts of fraud in mystical symbiosis, sporting matching Nazarene-style beards and long, flowing hair. They created their own version of the Bible, a cribbing of the King James translation embroidered with idiosyncratic metaphysics. (In the so-called Melchizedekian Bible, the Holy Ghost is referred to as “Scientific Being.”) One of Korem's oft-used aliases, Branch Vinedresser, appears to be a form of filial homage inspired by a verse from John 15: “I am the vine, and my father is the vine-dresser.”

In 1982, the Pedleys were indicted and convicted for a real estate swindle in Placerville. Mark Pedley was sentenced to three years in prison. His father — who had four previous fraud convictions — fled to Mexico following the indictment, and was imprisoned there on unrelated charges.

Rumors trickled back to the United States that the elder Pedley had died while incarcerated. But his body never turned up, leading many American law-enforcement officials to believe he had bribed his jailers to help fake his death. “We got a report that he had died in a Mexican prison, but there was nothing to support that,” says Edwin Tomko, a former federal prosecutor who drew up the indictments against the Pedleys.

After he was released from prison, the younger Pedley began doing business under a new name: Tzemach Ben David Netzer Korem. In 1993, through associates in Canada, he met Elvira Gamboa, a Manila-born divorcée who had begun dabbling in gold-mining concerns. Gamboa says she immigrated to the U.S. in 1973, and worked as a blood analyst in Bay Area medical laboratories. Upon meeting Korem, she says, she was intensely drawn by the beauty of his spiritual state, and decided to give up material things for a life of religious cultivation. “I was tired of making money,” she says.

But this couple was not destined for asceticism, and worldly ventures were soon in the works. Gamboa says they hatched the idea of securing a homeland for the faithful. “I can help you get an island, because in my country we have lots of islands,” she recalls telling Korem, who had previously laid claim to the remote Colombian island of Malpelo. “As long as we're doing what is righteous.”

Melchizedek claimed as its new territorial capital one of the Karitane Islands in the South Pacific. The island was uninhabited, and for good reason, since it is completely submersed for part of the day. “By high tide, you better get out of there,” says Gamboa, who acknowledges she has never personally visited the land mass.

French testing of nuclear weapons on South Pacific atolls prompted another declaration of war by the Dominion in 1995. Rather than the spiritual challenge issued to California banking officials, the Dominion threatened the French with old-line Soviet nuclear weapons it claimed were hidden by Melchizedekian allies in the Carpathian Mountains. This brinksmanship was ignored. France, like almost every other sovereign nation, has never recognized Melchizedek's existence. (The Dominion did succeed in establishing diplomatic ties with a single country, the landlocked and impoverished Central African Republic.)

The Dominion eventually expanded beyond its underwater seat of government to claim more land: three more tiny Pacific islands and portions of Antarctica. After annexing its polar territory, the Dominion began listing among its senior officials a figure with the surname “Penguini,” a touch that a veteran California fraud investigator describes as “cute.”

What was the point of such a lovingly detailed fiction? The Dominion of Melchizedek, according to government authorities, was intended to act as a sort of mothership for con artists worldwide, issuing fake banking licenses, passports, and other documents to lend a veneer of official authenticity to fraud schemes. “Everything about it is phony,” says John Shockey, former head of the fraud unit for the U.S. Comptroller of the Currency.

In 1995, a man calling himself Gerald-Dennis Sayn-Wittgenstein-Hohenstein, who claimed to be a prince of the Dominion, was thrown in jail by a judge in Hong Kong for trying to pass a bogus $319,000 check from a Melchizedek-chartered bank. Jeff Reynolds, Melchizedek's secretary of commerce, was sentenced to four and a half years in federal prison on charges related to insurance fraud in Texas in 1996.

As for the car-loan episode that first put the Dominion on California officials' radar, Gamboa insists it was a misunderstanding. At the time, she says, she and Korem were living in a cabin on a riverbank near Mount Shasta. The inspiration for “Bankasia” was simply a combination of this salient geographical feature — the “bank” from riverbank — with a reference to the continent on which she was born. She has a harder time explaining why “AG,” a suffix that stands for Aktiengesellschaft and refers to German financial institutions owned by shareholders, was included in this new identity.

Asked whether there could be any truth to Gamboa's claim that the Bankasia incident was an innocent mix-up, Sayre-Peterson, the state banking official, chuckles derisively. “They definitely knew what they were doing,” he says.

After the tumultuous 1990s, Gamboa and the Dominion entered an era of relative peace. Gamboa says she relinquished Melchizedek's presidency not long after declaring spiritual warfare on California, and has not closely followed her nation's business since then. She and Korem eventually settled in the South Bay with a son, Hazemach.

Scamming associated with Melchizedekian plenipotentiaries has continued, on and off, but Gamboa stayed off the radar of finance authorities until June 2009. That was when the SEC filed a claim against her in U.S. District Court for the Northern District of California, alleging that she had engaged in a four-year scheme to manipulate stock prices for the ZNext Mining Corporation, which was also called Pearl Asian Mining Industries, Inc. In a series of press releases and financial disclosures from 2004 to 2008, the SEC asserted, Gamboa touted revenues of up to $37 million from a remote gold mine in the Philippines. In 2006, she announced that an expansive new ore-refining system would further save the company $10 million per year, increasing returns to shareholders.

According to the complaint, however, ZNext/Pearl Asian was nothing but a shell company. Gamboa did appear to be involved in some form of mining activity in the Philippines. However, her purported mine site was surrounded by private property, and had been inaccessible until 2007 — three years after she began boasting of the mine's success. “The site is located in a remote, mountainous region that was periodically affected by rebel activity,” the SEC complaint stated. “Moreover, other than a claimed small scale mining permit for 49 acres, the company has yet to obtain approval from the Philippine government to mine the site.” According to investigators, the refining mechanism that spurred excited press releases in 2006 was in fact a $595 machine for purifying scrap jewelry, purchased over the Internet, that was broken when delivered.

Scams similar to this one, involving penny stocks — stocks that have a very low value or are thinly traded — are known in the financial world as “pump-and-dump” schemes. Because of the low price of penny-stock shares, their value is easily distorted by lying about a company's activity.

A perpetrator of this type of fraud can issue millions or billions of shares, send out a string of press releases proclaiming advances for the corporation that bode well for future revenue, wait for share value to jump, and then sell vast amounts of worthless stock at a profit. For instance, the SEC alleged that after ZNext sent out a press release falsely declaring that a new cash dividend was available to shareholders, the corporation's stock value jumped from just over 13 cents per share to 21 cents per share.

Gamboa's line on all this is that she was betrayed from within by a corporate lieutenant who “wanted to take over my company.” This malcontent, she asserts, made misleading statements to the SEC to damage her, and her past declarations that the company was thriving were accurate. She claims the gold-refining machine is “not a little dinky one,” and was purchased in China for $160,000. Any fraudulent manipulation of ZNext's stock value, she says, was carried out by her husband without her knowledge.

SEC officials, while they declined to reveal the details of their investigation, say they have independently verified all the facts set forth in their complaint. “This was a pump-and-dump scheme,” says John Bulgozdy, senior trial counsel at the SEC's Los Angeles office. “She did this so she could sell stock and profit.” In 2006 alone, according to court records, Pearl Asian Mining Inc. — which changed its name to ZNext in 2007 — brought in $1 million of revenue from stock sales, more than half of which Gamboa “misappropriated … for her personal use.”

Gamboa never showed up in federal court to contest the government's accusations, and U.S. District Court Judge Vaughn Walker ordered a default judgment against her totaling $1.8 million — a $650,000 fine for the ZNext corporation, and $1.18 million for Gamboa personally — in August 2010. Gamboa was also permanently barred from selling penny stocks. Gamboa, who tells SF Weekly she has at least $1.5 million in liquid assets, has not paid the fines. She says she hopes to find a lawyer to get the decision reversed.

Trading in Pearl Asian/ZNext mining stocks also brought unwelcome attention to Korem. In the summer of 2010, he was arrested and thrown in Santa Clara County lockup as part of Operation Broken Trust, a nationwide crackdown on small-time investment fraud. The feds alleged that Korem had conspired to promise illegal kickbacks to a stockbroker if he would buy shares of ZNext, thus inflating the price, and that he had also created spurious press releases in a manner similar to Gamboa. After being extradited to Florida, he pleaded guilty and was sentenced to two years in the Federal Detention Center in Miami.

Gamboa says she no longer has contact with Korem, who she claims cheated on her and carried on his criminal activity without her knowledge. “I'm not lucky with men,” she says. They have not divorced, and some legal authorities familiar with their activity speculate whether they were ever married. The question is not simplified by the potential applicability of Melchizedekian matrimonial law.

Indeed, documents filed in Korem's most recent fraud prosecution indicate that the man known by so many aliases (eight are listed in the federal docket) was leading a parallel life, complete with its own set of esoterically named loved ones, to the one he conducted in the Bay Area with Gamboa and Hazemach. In February of this year, Sadia Barrameda, the proprietor of a fashion boutique in Brentwood, Calif., presented a letter to the federal court in Miami begging for leniency in Korem's sentencing. “David Korem is many things,” she wrote. “The most important from my perspective is that he has been an excellent father to our 6-year-old son, Tzedeq.”

Like Gamboa, San Francisco real-estate investor and former Palo Alto auto shop owner Eric Diesel has a knack for telling wildly improbable stories with a straight face. In May, when he sat down with a reporter to talk about how $302,000 of his money allegedly ended up in Gamboa's hands, he sported jeans, a necktie, and long, dark hair tied at the back in two looping pigtails. “I know this all sounds crazy,” he says. There is truth to this: Diesel's tale, like other subplots in Gamboa's saga, seems to come straight from a Hollywood film script too preposterous to be made.

Diesel says he loaned $302,000 to a Los Angeles businessman named Robert Rooks, who he says had plans to redevelop the Queen Mary, an ocean liner docked off Long Beach, as a tourist attraction. (Rooks, who was successfully sued for securities fraud by the SEC in 2002, could not be reached for comment.) After some time, Diesel became convinced for various reasons that his money was not in good hands and sought to have it returned. To help him, he turned to Gamboa, with whom he had spoken about potentially investing. Gamboa says she knew Rooks from his previous business dealings with her husband.

Last year, Diesel's $302,000 was allegedly transferred from Rooks' possession to a bank account under Gamboa's control. This is perhaps the last fact about their relationship that Gamboa and Diesel do not fiercely dispute. Gamboa asserts that she acted as Diesel's caretaker last year, helping him to cope with drug and alcohol addiction and putting him up in various Bay Area hotels while managing his money. Diesel, by contrast, says he never had problems with intoxicants, and that she had a gang of Filipino thugs keep him confined in hotels for months while she burned through his cash.

In the spring of this year, Diesel, who says he is now homeless, began making reports of theft to various law-enforcement agencies and sending long e-mails to Gamboa and many people she knows, demanding his money back. So far, authorities have taken little interest in the case.

Redwood City Police Officer Joshua Chilton says Diesel has been unable to provide him with concrete evidence of theft or fraud, and that his office has closed its investigation of the case. “I've asked him on multiple occasions for documentation, and all he's given me is gibberish,” Chilton says. “Maybe there's a nugget in there someplace, but it's been long lost in the din of all these threats going back and forth between all these people.” He says he has advised Diesel to pursue the case against Gamboa in civil court, rather than as a criminal matter.

Assistant U.S. Attorney Richard Robinson, who is based in L.A. where Diesel used to live part time, acknowledges in a phone conversation that Diesel has been in touch with him but says his office has not launched an investigation. “He did bring some allegations to my office and we declined to pursue them,” he says.

Frustrated, Diesel began contributing extensively to a Wikipedia article depicting Gamboa as an inveterate con artist. She did not react kindly.


Diesel interpreted this as physical intimidation. “It's very scary to have a threat to have your hands cut off after you've been kidnapped,” he says. Gamboa says her words were taken out of context. “I didn't tell him I'm going to cut it,” she says with a shrug. “I said the devil will cut it. Because I cannot talk to him rational. He is irrational, so I use my spirituality. I use my God.”

SF Weekly was unable to verify Diesel's account in its exotic particulars — the Queen Mary connection, the role played by Rooks, the allegations of kidnapping. But one thing is not in question. Gamboa openly admits that she has Diesel's money, of which she says just over half is left after various bills for his medical and lodging expenses were paid last year. However, she says she is holding it in anticipation of punitive monetary damages that will be levied against him when she takes him to court for defamation — over his claims that she took his money.

“It's $160,187,” she says, indicating the residual amount. “But I'm not going to give that to him because he's going to be charged for punitive damages for what he has done to me.” Anything left over after these expected damages are paid, she insists, must go toward his psychological treatment. “I will pay the rehab and the patient center,” she says. “He has to go to a healing center. He is insane.”

Diesel says such statements are part of a ploy by Gamboa to discredit him. As a character reference, he directs SF Weekly to Paul Fleiss, a Los Angeles pediatrician and the father of Heidi Fleiss, the notorious “Hollywood Madam” who was arrested in 1993 for running a prostitution ring catering to celebrities. The elder Fleiss pleaded guilty in 1995 to helping his daughter launder money from the operation.

In a telephone conversation, Fleiss says he has known Diesel for four or five years. He describes him as “a very smart man” who appeared to be fairly wealthy when they met, and who enjoyed buying gifts for his acquaintances. “He is a little extravagant,” Fleiss says. “He would hike in the park with bare feet, and he would wear two ties. He was very eccentric. He met a lot of people, and he was very friendly to all of them. A lot of Koreans.”

As her own reference with regard to the Diesel saga, Gamboa directs a reporter to Gustavo Xar, a Guatemalan mover who helped transport some of Diesel's property from a house in Southern California to storage in Redwood City under her supervision. Xar, who has been copied on the dozens of antagonistic e-mails that have flown back and forth between Gamboa and Diesel over the past few months, expresses an agnostic view of the pair's relationship. “I don't know which one's lying and which one's not,” he says in thickly accented English during a telephone interview from Arizona, where he now lives and works. All that he remembers from the moving job, he says, is eating lunch at a Chinese restaurant in L.A. last year with Gamboa and Diesel. At the time, they seemed like good friends.

Gamboa has flirted with bizarre fraud schemes on and off for at least two decades, and continues to attract a flow of cash from unwitting investors. How does she do it? Experts say this is not unusual. Financial crimes of all sorts are resource-intensive to investigate and difficult to prove. Korem was most recently apprehended only after one of his associates ratted him out to the federal government, allowing agents to record a phone conversation about illegal activity related to ZNext stock. Penalties in civil court can serve as a deterrent, but are less effective when a defendant decides, as Gamboa has, to ignore the legal proceedings against her.

Penny-stock fraud, which involves a virtually unregulated market easily accessed by anyone with an Internet connection, is notoriously tough to police. “It is fairly easy for a person with limited capital to acquire a shell corporation and then use that corporation to engage in a pump-and-dump scheme, if that person has the ability to tell a compelling story,” says Ryan Dwight O'Quinn, a former federal prosecutor who directed the South Florida crackdown that led to Korem's arrest. (He declines to say whether Gamboa was ever investigated by his office.)

Gamboa appears to have gone a step further. She doesn't just tell a compelling story; she lives a fantastic one. From her bogus island nation to her questionable overseas gold mines, Gamboa has more or less protected the borders of an enigmatic empire of suspect business ventures. Over lunch at a Salvadoran restaurant in downtown Redwood City on a recent afternoon, she says she has the strength to deal with future challenges, whether from Diesel or federal agents, in part because of the hardships she has already faced.

Last year, she says, amid the stress of the SEC proceeding and the arrest of her husband, she suffered a serious aneurysm. When asked what her resulting condition was, she responds without missing a beat.

“I died.”

You died?

“I died. At least, that's what I call it.”

She says she was dead for three days, not unlike another well-known religious leader, and then returned to the world of the living. Pressed about the details of her resurrection, Pearlasia Gamboa, aka Elvira Gamboa, aka Pearlasia, aka Bae Catiguman — princess of peace, declarer of war, past president of a country that does not exist — simply bats her dark eyelashes and smiles.

“It was a miracle.”

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