Texas trustee of IMB sent to prison on fraud charges
August 10 2001 by Mark Wingfield , (c) 2001 Baptist Standard Publishing Co.

Texas trustee of IMB sent to prison on fraud charges | Friday, Aug. 10, 2001

Friday, Aug. 10, 2001

Texas trustee of IMB sent to prison on fraud charges

By Mark Wingfield (c) 2001 Baptist Standard Publishing Co. DALLAS, Texas - Two weeks before he was elected a Texas trustee of the Southern Baptist Convention's International Mission Board, a federal warrant was issued for Russell Kaemmerling's arrest on 19 counts of fraud. Kaemmerling, a veteran worker in the so-called "conservative resurgence" within the Southern Baptist Convention, was elected an overseer of the SBC mission board June 13, 2000, while the convention met in annual session in Orlando, Fla. On that same day, Kaemmerling appeared on the program of the SBC annual meeting in Orlando, delivering the benediction for the afternoon session.

Also on that same day, a grand jury indictment against Kaemmerling was unsealed in U.S. District Court in Pensacola, Fla. That indictment, which portrayed Kaemmerling as the leader of a seven-man scheme to defraud investors of millions of dollars, led to his conviction on all counts three months later.

Kaemmerling, who maintains he is innocent of wrongdoing, continued to serve as an IMB trustee, however, until after he entered a federal penitentiary in Beaumont the last week of May.

IMB spokeswoman Wendy Norvelle said Kaemmerling sent in a letter of resignation from the board dated June 4. IMB administrators were unaware of his predicament until he was incarcerated, she said.

IMB President Jerry Rankin was out of the country and could not be reached.

Messengers to this year's SBC annual meeting in New Orleans elected a new trustee to replace Kaemmerling, whose term was not to expire until 2004.

Kaemmerling's legal troubles began well before his recommendation by the SBC's committee on nominations, which released its formal list of nominees April 28, 2000. Although the grand jury had not formally indicted Kaemmerling by that date, he had been the subject of an FBI investigation since early 1999, according to testimony given at trial.

Further, Kaemmerling and others related to the criminal fraud case had judgments rendered against them in civil court cases in 1997 and 1999. The plaintiffs in those cases also figured prominently in the criminal trial. In the 1999 civil case, a default judgment was handed down against Kaemmerling just one year before his nomination as an IMB trustee.

In that case, tried in U.S. District Court in Portland, Ore., Kaemmerling was ordered to pay Sealacota Trust $459,168 in damages plus punitive damages of $1.37 million. Sealacota Trust is one of several companies Kaemmerling and his co-defendants allegedly wronged in one of two complex investment schemes. Two years earlier, Kaemmerling and two of the same co-defendants were found liable in a civil case brought by investor Serge Chernay. That case, also tried in U.S. District Court in Pensacola but with a different judge, resulted in a $1 million judgment against Kaemmerling.

The federal criminal charges on which Kaemmerling eventually was convicted grew out of these cases and others. The criminal conviction is on appeal. The civil cases were not appealed.

According to one of the Pensacola prosecutors, the federal criminal charges were drawn up on only eight cases in which investors allegedly lost a total of $6 million. The total amount believed to have been lost through the two schemes allegedly exceeds $15 million, said Benjamin Beard, who was lead prosecutor in the 12-day trial against Kaemmerling and the others.

No obstacle to service Despite his earlier judgments in civil court, Kaemmerling was elected as an IMB trustee. And after his conviction in criminal court, he continued to serve as an IMB trustee for eight months.

Kaemmerling was elected to the IMB post during the last year his brother-in-law, Paige Patterson, served as SBC president. The SBC president does not directly control the trustee nomination process but does appoint the committee on committees, which in turn nominates the committee on nominations.

Kaemmerling is related to Patterson through his wife, who is a sister to Patterson's wife, Dorothy. Kaemmerling's wife also is a sister to Chuck Kelley, president of New Orleans Baptist Theological Seminary. There have been no allegations of any of Kaemmerling's extended family being involved in any way with the financial dealings for which he was convicted.

In correspondence with the Baptist Standard, Kaemmerling insisted none of his extended family "had any knowledge at all of the entire situation until just prior to the sentencing hearing in late November 2000."

Beyond his wife and children and a couple of close friends, "no one was aware, especially not Chuck Kelley or Paige Patterson," Kaemmerling said.

Because of his role as SBC president the year Kaemmerling was elected to the IMB, the Baptist Standard attempted to contact Patterson via certified mail for comment. In a letter dated July 27, Patterson's administrative assistant at Southeastern Baptist Theological Seminary responded that he was in Africa and could not be contacted.

The chairman of the committee on nominations in the year Kaemmerling was elected to the IMB was David Fannin, pastor of Nassau Bay Baptist Church in Houston. He was one of two Texans serving on the committee. The other was Wichita Falls layman Bill Streich.

Fannin said he was not aware of Kaemmerling's legal situation prior to his nomination and election. "If we had known that, it would not have gone anywhere," he said.

Streich also said he "knew nothing" about the matter until late last year, even though he has known Kaemmerling about 12 years. "When I asked him, 'Why didn't you tell me about this?' he said, 'I never took this stuff seriously.'"

Streich said he wouldn't have nominated Kaemmerling for the IMB post if he had known about the indictment or the earlier civil convictions.

"Had I known that Russ was involved in any kind of legal battle whatsoever, even had it not been criminal in nature or if he was not yet convicted, I would never have considered nominating him for any position," he said.

An early warrior In the early days of the fundamentalist movement within the SBC, Russell Kaemmerling's name was virtually synonymous with that political and theological agenda.

From 1980 to 1985, he was editor of the Southern Baptist Advocate, an independent magazine used to advance the fundamentalist agenda and criticize leadership of the SBC and professors in SBC seminaries.

In "The Baptist Reformation," conservative historian Jerry Sutton called the Advocate "the most effective communication tool in the early days of the conservative resurgence."

Sutton, a former Texan who now is pastor of Two Rivers Baptist Church in Nashville, Tenn., says in his history of the SBC conflict that the Advocate was "funded by the Criswell Center for Biblical Studies," now known as Criswell College.

At that time, Patterson was president of Criswell College, a post from which he became a co-architect of the modern fundamentalist movement in the SBC. In addition to editing the magazine, Kaemmerling worked behind the scenes to organize the fundamentalist get-out-the-vote effort in the SBC directed by Patterson and Paul Pressler.

Pressler, in his book "A Hill on Which to Die," mentions that Kaemmerling arranged for a block of hotel rooms for conservative messengers to the 1984 SBC annual meeting in Kansas City. "This was where we and the Pattersons stayed, along with many other conservatives," Pressler explained, noting that Kaemmerling had secured the hotel because it was not in the block of rooms managed by the SBC Executive Committee.

Moderate Baptist sociologist Nancy Ammerman also credits Kaemmerling and the Advocate with being highly influential in the early 1980s. "It provided very explicit instruction on attending annual conventions," she noted.

Research done for her book "Baptist Battles" found that in 1985, two-thirds of SBC clergy read the Advocate.

Kaemmerling dropped to a lower profile in 1986, when he was relieved of duties at the Advocate Dec. 30, 1985, for what he deemed "personal reasons." In an interview published in the Baptist Standard Feb. 12, 1986, Kaemmerling said he would pursue other avenues of work but remained in sympathy with the fundamentalist movement.

His departure was affirmed in the same article by Patterson, who said: "Russell, himself, for personal and family reasons, felt it best he get out, and I certainly concurred."

Kaemmerling moved on to a book publishing business, then a development job with First Baptist Academy, the private school run by First Baptist Church of Dallas. Later, he and his wife opened a travel agency in DeSoto, a Dallas suburb. And eventually, he began identifying himself as an investment consultant, according to court records and IMB documents.

He and his wife later became members of Southwest Baptist Church in DeSoto, where he was a deacon and served on the missions committee. There, he was an advocate of the church breaking its ties with the BGCT and aligning with the new Southern Baptists of Texas Convention.

But on the national scene, he remained out of sight-until his nomination to the IMB and his appearance on the SBC program June 13, 2000, three months before he was to face a jury in federal court.

Questionable investments Court records show that in the early 1990s, Kaemmerling became associated with two other men in brokering high-dollar investments. The two were Kevin Michael Kelly of Chicago and Ray Pope of Pensacola. Both Kelly and Pope were convicted of fraud charges along with Kaemmerling.

Little public information can be found about Kelly, who was based in Chicago. Pope was an attorney based in Pensacola, a former Baptist who was well-respected in the professional community and church circles.

In connection with at least four other individuals who played various roles, Kaemmerling and his co-defendants allegedly operated two fraudulent investment schemes, according to the grand jury indictment and testimony given at trial.

The indictment is 50 pages long and covers 19 counts of criminal conduct including conspiracy to commit fraud, interstate transportation of money taken by fraud and wire fraud.

Kaemmerling, who is identified in court documents as the leader of the business, was accused of luring investors with promises of extraordinary returns of up to 2,700 percent. These investments, he told his clients, carried virtually no risk, according to his own testimony at trial.

Also according to testimony given at trial, Kaemmerling told investors they could turn $500,000 into $40 million within 40 weeks.

The trio offered two investment vehicles, neither of which exists, prosecutors contended. In correspondence with the Standard, Kaemmerling insisted both investment vehicles were "legitimate, honest, straightforward and real."

The first was what they called a "high-yield leverage program" in bank debentures.

Kaemmerling and his associates claimed that they could purchase debentures or IOUs from foreign banks at a discounted rate and then resell those debentures to other foreign banks at a profit within days. Investors were told their money would not be used to purchase the debentures but would be used only as security to prove to the foreign banks that Kaemmerling and his partners could cover the cost. The investors were told their money never would leave the account set up by Pope as a holding tank.

In reality, prosecutors asserted at trial, investors' money left Pope's account and was divided among the perpetrators of the fraud. Kaemmerling acknowledged on the witness stand that not one of his investors in debentures ever realized a profit.

The second scheme involved the purported rental of U.S. treasuries. According to prosecutors, U.S. treasuries cannot be leased.

Nevertheless, Kaemmerling and his associates offered to lease such securities to investors for a one-year period with the promise of a high rate of return with little risk. To get their money back, investors were required to produce a "safekeeping receipt" from a reputable bank. The legal contract spelled out the conditions required for such a "safekeeping receipt" and stipulated that if such a document could not be produced within 48 hours, the investor would forfeit all his money.

According to Kaemmerling's own testimony at trial, not a single investor ever produced a satisfactory "safekeeping receipt." All investors in the treasury rentals lost the money they put up, he acknowledged.

One investor testified that he produced 10 "safekeeping receipts" but none of them were deemed acceptable by Kaemmerling and his partners. This testimony was given by Serge Chernay, a retired Air Force colonel who planned to use the return on his investment to provide medical supplies to Russia and the Far East. He lost $250,000.

Chernay received a default judgment against Kaemmerling and others in 1997 but never received any compensation, he testified. Testimony introduced in the Florida criminal trial stated that the judge presiding over Chernay's civil trial cited Kaemmerling and his co-defendants for contempt.

"The defendants have engaged in a clear pattern of contempt, and their conduct threatens to make a mockery out of this judicial system," wrote Judge Lacey Collier. "This court cannot allow the waste of judicial resources or the inconvenience to jurors which would result from holding a trial that the defendants chose not to attend."

Kaemmerling acknowledged on the witness stand that Chernay's $250,000 was divided between himself and Kevin Kelly because they had been "at risk" in the investment, which would only produce a profit beyond the second month.

He did not attend the civil court trial because he was running out of money and had an opportunity to provide for his family by leading a group of people on a trip.

Chernay's civil judgment against Kaemmerling was entered three years before Kaemmerling's nomination and election to serve as an IMB trustee.

Missing person A key figure in one of the civil cases filed against Kaemmerling was Scott Wolas of New York City. Wolas was an attorney with the law firm of Hunton & Williams and a broker until his mysterious disappearance in late 1995.

A New York grand jury has indicted Wolas for grand larceny in the first degree and other crimes, alleging that he absconded with millions of dollars from hundreds of investors. Prosecutors have alleged Wolas had links to organized crime. They also believe he resurfaced in the Orlando, Fla., area in 1997 and committed additional acts of investor fraud.

Wolas was a partner in the ill-fated investment schemes for which Kaemmerling was found liable of mishandling investors' money in Oregon civil court. That case was brought by Sealacota Trust.

Part of Kaemmerling's defense in his criminal trial was his assertion that Wolas stole $1 million Kaemmerling had arranged to invest through him. That's why Kaemmerling was unable to fight the civil case brought against him in Portland by Sealacota Trust, he said.

In correspondence with the Standard, Kaemmerling reasserted his contention that Wolas was the source of much of his troubles. Kaemmerling said he cooperated with legal investigations into Wolas' alleged criminal activity and turned over his own records for examination.

However, evidence presented at trial showed Kaemmerling operated at least two corporations for which he kept no financial records. These corporations were Star Financial and Southwest Financial Services. Prosecutors suggested that money passed through these two corporations to two travel companies owned by Kaemmerling.

Further evidence presented at trial showed that Kaemmerling personally received at least $800,000 from the various investment offerings. Where that money went is unclear, other than Kaemmerling's assertion that his resources had been drained by seeking to defend himself against previous court cases.

In correspondence with the Standard, Kaemmerling said he chose not to fight the Oregon civil judgment because he was "insuring that I would have enough funds to fight any serious legal issues that arose" later.

"The default was entered based on an affidavit from a dead woman on behalf of an illegal business trust," he said. "I have been assured that when this is all over, it will be a simple matter to get that reversed, and I have not put my physical or financial resources in that direction."

Kaemmerling also told the Standard he sees himself as a victim of a government conspiracy. He referred to a book titled "The Tyranny of Good Intentions," which he said "demonstrates how the federal government is abusing power, manufacturing evidence and prosecuting non-criminal activity as if it were criminal just to gain convictions."

The appeal of his criminal conviction is based on several wrongs that allegedly occurred during the trial, according to Kaemmerling and his Dallas attorney, James Moon.

Kaemmerling contends evidence that would have exonerated him was not allowed to be used in the trial. Further, he said, "the U.S. attorney simply took several names, strung them together, manufactured evidence ... and was able to get a conviction after a lengthy trial."

Character witness Throughout the trial, both Kaemmerling and Pope made reference to their religious involvement. Kaemmerling told how he attended Southwestern Baptist Theological Seminary and became a pastor, about his work as editor of the Advocate and his work with First Baptist Church of Dallas.

Pope told the jury how he met Kaemmerling through a mutual acquaintance and how the two men came to be friends as they discovered they both were engaged in similar Baptist causes.

In the end, however, the purported piety of the co-defendants proved to be a stumbling block. At the sentencing hearing Nov. 30, 2000, Judge Roger Vinson said he found Kaemmerling's conduct at trial to run counter to his religious presentation.

"With respect to Mr. Kaemmerling, his testimony, I have noted that I did not find his testimony to be truthful and consistent with the overwhelming weight of the evidence of the case, and that has been confirmed by the jury," the judge said. "I will simply count the number of occasions, 28 separate occasions, Mr. Kaemmerling gave testimony that was untruthful during the course of the trial. I consider this to be an obstruction of justice."

Beard, the prosecuting attorney, responded to Vinson's declaration later in the sentencing hearing.

"He has intentionally hurt people for his personal gain in contradiction of what he says he stands for," Beard declared. "He has put in a bad light every other individual of like position. ... What Mr. Kaemmerling did here is all the more terrible because he holds up his entire life as a hypocrisy."

As he waits in federal prison in Beaumont, Kaemmerling continues to maintain his complete innocence of any wrongdoing. And he insists that he will be exonerated on appeal.

"I will state plainly that I have never taken any money illegally," he told the Standard. "The business transactions we brokered were legitimate and real with positive results both possible and intended."

(EDITOR'S NOTE - Jim Newton provided additional research and reporting for this article. This article, published in the Aug. 6, 2001, issue of the Baptist Standard, is a copyrighted article and may not be reproduced in part or in whole without permission from the publisher. Other media outlets are free to quote from the article; however, due to the legal issues involved in this report, the article may not be edited and reproduced without express permission from the Baptist Standard.)

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8/10/2001 12:00:00 AM by Mark Wingfield , (c) 2001 Baptist Standard Publishing Co. | with 0 comments
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