Fraud in the name of God
Securities regulators see sharp rise in religious-based scams
By Brock N. Meeks
MSNBC
WASHINGTON, Aug. 7 — At the intersection of old-time religion and old-line Ponzi schemes some 90,000 people in three years have been bilked of nearly $2 billion by con artists promising unearthly rewards from divinely blessed investments, state securities regulators said Tuesday, adding that the scams are “rising dramatically” across the U.S.
THE TREND IS NEFARIOUS. Con artists tap the pockets of accepting and often non-questioning religious-minded people with malicious and unrepentant intent, the regulators said. The scams are spread mostly through quasi-religious meetings where God, Gospel and greed are mixed in an intoxicating cocktail promising earthly financial rewards of heavenly proportion.
“Pretty soon you are going to be financially free because you… [and your wife are] going to have money to go do something for God,” is how former house-painter- turned-minister and now convicted con artist, Gerald Payne put it during a video-taped pitch for his now defunct Greater Ministries International church.
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“How many of you realize that if you sow sparingly, you’ll reap sparingly?” Payne exhorts on tape. “And eight years gone by… God’s made millionaires of some.”
Payne claimed to have divinely inspired knowledge of where gold, diamond and platinum mines could be located in the Caribbean and in Africa. He also claimed that God divinely inspired his investment strategy. Between 1993 and 1999 Payne took in nearly $580 million while promising investors that the church would double their money.
Payne was sentenced Monday to 27 years in prison on fraud and conspiracy charges; his wife, Betty, was sentenced to nearly 13 years in prison. Other convictions are imminent, regulators said.
“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 North American Securities Administrators Association (NASAA). “The scammers are getting smarter…[and] harder to detect,” Bortner said.
CON ARTISTS FOR CHRIST
“I asked if he was a Christian and he said he was,” said retiree Forrest Bomar of the man that sat with him and his wife in the living room of their Arizona home. The fact that the man was also a Baptist like the Bomars and was representing the Baptist Foundation of Arizona was icing on the cake, Bomar said of the man that reverently, prayerfully, siphoned nearly all of the couple’s $236,166 retirement fund into what Arizona regulators call one of the largest, most complex faith based Ponzi — or pyramid — schemes in the state’s history. Ponzi schemes basically use money from new “investors” to pay off existing participants, eventually leaving victims holding the bag.
“I’ve seen more money stolen in the name of God than in any other way,”
— DEBORAH BORTNER
Director of securities, Washington state “I was foolish enough not to ask to see an annual report,” Bomar said, his eyes tearing up and his voice quivering. Although he fell into a “deep, dangerous depression,” over having lost his money, Bomar refused to think of himself as a victim. “If we can prevent this from happening again… to others, then it will have been worth it,” he said.
“My faith was tested, not taken,” Bomar said, a tear trickling down his cheek.
Regulators closed down BFA and it declared bankruptcy. At the end the company had a web of 120 shell companies through which it ran a twisted series of real estate sales that cooked the books, making it appear to investors as if the company was turning a profit.
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BFA defrauded $590 million from some 13,000 investors nationwide, said Mark Sendrow, director of securities for the Arizona Corporations Committee. Sendrow also said the state has brought suit against Arthur Anderson, BFA’s auditors. The accounting firm “ignored a series of red flags and tips from people close to the Foundation, making them complicit in the fraud,” Sendrow said.
Sendrow declined to comment on detail about Arthur Anderson’s culpability but hinted that responsibility could reach into the top levels of the company. Arthur Anderson has denied any allegation of wrong-doing in the case.
FAITH, FRAUD AND THE INTERNET
Incidents of faith-based fraud are rising dramatically, officials said. In 1989, a NASSA/Council of Better Business Bureau survey found that 15,000 investors lost more than $450 million to religious-based scams in the five preceding years. The losses in the BFA case alone surpassed that in both numbers of victims and money lost.
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And the scams have jumped from cut-rate conference rooms in aging hotels and revival-type religious services held in small congregations to the anonymity and global reach of the Internet, said Joseph Borg, director of securities for the state of Alabama.
Borg cited the recent example of the Internet-based MN Partners out of Phoenix City, Alabama, where from a period of October 2000 to January 30th “without the benefit of radio, TV or advertising — just the Internet — 33,000 people from over 16 countries sent money.”
The pitch? “Faith-based loan programs, ‘gifting’ loans,” Borg said.
However, because the coordination among state and federal agencies is improving and the technology to track online scam artists is getting better, “We’re able to shut down things a lot quicker,” Borg said. “In a number of other Internet-related scams, due to coordination among the states we’re now in a position to issue orders even as they start up.”
In the MN example, “The return to investors will be approximately 72 percent because we were able to get to that money before it left for off-shore,” Borg said.
But technology and constant vigilance don’t mean an end to the problem.
“Are we going to get ‘em all? Definitely not,” Borg admitted. “Are there some out there that are going to scam people? Sure. I don’t think [the scams] are going to go away. I think that as we get better at it, as communication gets better, as the technology gets better, I think we’re going to see a lot more orders coming down and shutting these [online frauds] down,” Borg said.
SEC LAGS IN ENFORCEMENT
At the federal level, the Securities and Exchange Commission hasn’t been as aggressive on faith-based scams as the states, Borg said.
“In my opinion, in a lot of these cases because of the religious aspect, I think perhaps there is some reluctance on the part of the SEC to get fully involved,” Borg said, although the SEC was helpful in his case against Payne’s Global Ministries International.
Often it’s a situation of who has the best case and where are they in the investigation, Borg said. “If the SEC has a case in my state I may defer ... so I don’t use up my valuable resources.”
PREYING ON THE FAITHFUL
Payne had a “novel interpretation” of Luke 6:38 that says, in part, “Give, and it shall be given unto you,” Borg said. Though he cited scripture and claimed guidance from God, “He showed nothing but contempt for the people that gave him money,” Borg said.
Court documents in the GMI case alleged that Payne was planning to buy an island and stockpile military surplus weaponry including grenade launchers and land mines.
With con artists “preying on the faithful more than ever before,” NASAA’s Bortner said, why are such scams so successful?
“First, the con artist makes faith in God synonymous in faith in the investment scam” talking about how God has “anointed” a particular investment practice, Bortner said. “Second, because investors accept claims of divine guidance they don’t ask or demand details about the investments.”
Bortner said that such people should be careful to distinguish between tithing or giving offerings to a church and investment schemes that play on a person’s religious beliefs.
“Putting money in the offering plate isn’t an act where you’re expecting a tangible return” on your money, Bortner said. And when it comes to investments with someone that shares your faith, “be as skeptical of it as you would with anyone wanting you to invest,” Bortner said.
And make a quick call to the state securities regulators to see if the person or group is licensed to sell securities. “It’s a five-minute call,” Bortner said. |
