Scams targeting faithful on rise, state security regulators warn
August 10 2001 by Bob Allen , Associated Baptist Press

Scams targeting faithful on rise, state security regulators warn | Friday, Aug. 10, 2001
  • Are the seller and investment licensed and registered in your state? If not, they may be operating illegally. Call your state securities regulator to find out.
  • Has the seller given you written information fully explaining the investment? Documentation should be clear and accurate enough to allow you or a financial adviser to evaluate and verify the particulars.
  • Are claims made for the investment realistic? Some things really are too good to be true. Pie-in-the-sky promises often signal fraud. Use common sense and get professional, third-party advice when offered unusually high returns in comparison with other investment options.
  • Does this investment meet your personal investment goals? Whether you are investing for long-term growth, investment income or other reasons, any investment should be consistent with those goals.
  • Friday, Aug. 10, 2001

    Scams targeting faithful on rise, state security regulators warn

    By Bob Allen Associated Baptist Press WASHINGTON - Investment frauds that take advantage of people's faith are on the rise, state security regulators warned at a press conference Aug. 7. Three large cases alone combined for losses of nearly $1.5 billion, the North American Securities Administrators Association told reporters at the National Press Club in Washington.

    "I've been a securities regulator for 20 years, and I've seen more money stolen in the name of God than in any other way," said Deborah Bortner, director of securities for Washington state and president of the association, according to a press release on the group's Web site.

    In all, regulators identified 75 such cases affecting more than 90,000 victims and costing investors $1.8 billion in lost funds.

    That is up sharply from a previous study of the five years before 1989, when 15,000 investors nationwide lost $450 million in religious scams.

    In comparison, the Baptist Foundation of Arizona by itself took in more than $590 million from 13,000 investors before being shut down by state officials in August 1999.

    An agency of the Arizona Southern Baptist Convention, the Foundation began managing church building funds and some retirement accounts, investing much of the money in Arizona real estate. When property values fell sharply in the late 1980s, officers of the Foundation allegedly refused to admit losses, covering them up with paper transactions through a network of 120 shell corporations. They then aggressively solicited new investors, court documents charge, using their money to pay earlier investors, setting up an illegal Ponzi scheme.

    Investors, meanwhile, were promised a high rate of return, assured their money was safe and led to believe it was being used to advance Baptist causes.

    "That the Foundation's senior management could solicit hundreds of millions of dollars from investors, knowing that what they were running was nothing but a huge Ponzi scheme, is unconscionable," said Mark Sendrow, director of securities for the Arizona Corporations Commissions.

    Three former officials of the Foundation have pleaded guilty to criminal charges and are cooperating with investigators. Five others have been indicted on charges of theft, fraud and racketeering. Trial dates have not been set.

    Arthur Andersen LLP, the Foundation's auditor between 1984 and 1989, is also targeted in a number of legal actions for allegedly ignoring red flags that could have saved investors millions of dollars.

    "Even though this was terribly devastating and tested my faith - I was in deep depression and praying a lot - it did not destroy my faith," said Forrest Bomar, an investor with the Foundation. "I was reminded through prayer that I still had a lot to be thankful for - my wife, my family - even if we never recovered a penny of our investment."

    Bortner said investors shouldn't let their guard down merely because someone is appealing to their religion. "Always do your homework," she said. "Be as skeptical and as careful when you invest with someone who shares your faith as you would with anyone else."

    The press conference followed by one day the sentencing of Greater Ministries International founder Gerald Payne in federal district court in Tampa, Fla. Convicted of fraud and conspiracy, Payne was sentenced to 27 years in prison. His wife, Betty, was sentenced to 13 years. Other defendants were to be sentenced in coming days.

    Greater Ministries allegedly took in nearly $580 million between 1993 and 1999, promising investors that the church would double their money through divinely inspired investments in the foreign-currency market and gold, silver and diamond mines in Africa and the Caribbean.

    Nearly 20,000 people mortgaged homes, ran up credit card debts or cashed in retirement funds based on appeals to Scripture, such as Luke 6:38: "Give and it shall be given unto you; good measure, pressed down, and shaken together, and running over, shall men give unto your bosom."

    In another case, the IRM Corporation allegedly raised $400 million in at least five states selling bogus promissory notes and limited partnerships before being shut down by Michigan officials in May 1999.

    Operating what regulators called a classic Ponzi scheme utilizing a labyrinth of 120 affiliates, IRM allegedly recruited investors either in person or through church-related organizations, including religious radio and television programs such as the "Back to God Hour."

    In Michigan alone, officials say, more than 2,400 victims lost in excess of $80 million.

    Other high-profile scams described at the press conference took place in Tennessee, Washington state and Indiana.

    Utah was home to the most religious frauds, 11. Alabama and Wisconsin followed with six. Arkansas had five. Three each were reported in North Carolina, Oklahoma, Georgia, Maryland, Indiana and Pennsylvania. Washington, California, Texas, Missouri, Massachusetts, North Dakota, Maine, New York and Ohio each had two. Arizona, Illinois, Idaho, Tennessee, New Mexico, South Dakota and West Virginia had one apiece.

    Securities officials said con artists who use religion to promote their scams often predict an imminent financial or social crisis, claim they will reinvest a portion of profits in a worthy cause and equate faith in their organization with faith in God.

    "Cloaking an investment with religion can give it a false aura of safety," said Brad Skolnik, Indiana securities commissioner. "It's one thing to tithe or give an offering so that your money is used for good works. It's another thing if you're led to believe you'll get a monetary return. It's when people are promised earthly returns that we see a lot of fraud."

    Before making any investment, state regulators urged investors to ask the following:

    Copyright (c) Biblical Recorder Inc.
    8/10/2001 12:00:00 AM by Bob Allen , Associated Baptist Press | with 0 comments
    Filed under:

    Blog post currently doesn't have any comments.