Law Enforcement Issues Warning Of Religious Securities Fraud

mil gov, Feb 14, 2005

Sacramento, September 7, 1999 --The California Department of Corporations joined other state securities regulators today in issuing a warning about con artists who target members of religious groups. The warning follows state regulatory and law enforcement actions in recent months in securities fraud cases in which members of religious groups were targeted by schemers seeking to gain their trust by playing on their faith.

State securities regulators pointed to recent cases in Pennsylvania, Florida, Alabama, Indiana and elsewhere in which church members were allegedly defrauded by people they thought they could trust because the schemers claimed to share their religious faith. Securities regulators refer to it as "affinity fraud" when con artists target members of their own race, nationality or religious affiliation.

The Department of Corporations is cooperating with other states in a nationwide investigation focusing on religious and other affinity fraud, and has brought actions in a number of affinity fraud cases involving religious communities. In one of the most egregious recent cases, the Department worked with federal prosecutors to obtain a criminal conviction and an 11-year sentence against Patricia Deters, a California promoter who raised $7 million from various Christian churches by promising to double their investments in a program in which she would allegedly match their contributions.

The Department has listed affinity fraud in the Top Ten Scams list posted on its Website. In affinity frauds, members of ethnic, religious and professional groups are targeted by individuals claiming to be members or friends of those groups, relying on the fact that many people tend to trust those who claim to be like themselves and to want to help them get a piece of the American dream.

Some recent examples cited by other states: In October, trial is scheduled to begin in Florida for seven officials of the Tampa-based Greater Ministries International Church. They are charged in a 20-count federal indictment alleging conspiracy, money laundering and mail fraud. State securities regulators and prosecutors believe Greater Ministries operated a massive Ponzi scheme that may have defrauded more than 17,000 investors nationwide of as much as $200 million. Many of the investors were fundamentalist Christians, including Mennonites in rural Pennsylvania, Ohio and Virginia. They were told their money would double in installment payments made over 17 months or less. Investors were quoted Luke 6:38: "Give, and it shall be given unto you."

Greater Ministries officials told investors that state and federal securities laws did not apply to them because the investments were "gifts" to the Church and the payments from the church to investors, called "blessings," were not subject to taxes.

In Texas, a former Sunday school teacher, Renju Malayil Thomas of Missouri City, is being sought by the FBI on charges that he swindled at least 33 people, many of them church members, out of more than $1 million. Thomas victimized members of a church in Stafford, Texas. The victims, like him, were immigrants from India. Thomas and another man, Thomas Mathew, scheduled to go on trial in mid-September, allegedly got money from investors to buy nationally known stocks and then stashed the cash in their personal bank and brokerage accounts.

In Illinois, the Illinois Securities Department is investigating an oil and gas investment scheme in which the promoter targeted Christians by claiming he had built a device to find oil based on visions he had received from God. About 150 investors are believed to have lost more than $1 million.

In Wisconsin this month, Bernell Ross of Milwaukee will go on trial for securities fraud. Ross was allegedly going to create a local minority-owned and operated telephone company. To raise money for this venture, Ross targeted residents of the Milwaukee inner city, often going through local churches to reach parishioners. Hundreds of Milwaukee residents are believed to have invested. They were told that they would make money on the operations of the company and through a future public offering. Soon after the money was raised, the company, Intra Community Communications, filed for bankruptcy protection.

Religious affinity fraud can also be more general manipulations based on religious faith. In Indiana, for example, state securities regulators say elderly investors were duped into buying bogus promissory notes by three men, two insurance agents and an investment adviser, who often got on their knees and prayed with their victims to gain their trust.

In Alabama in late July, Wayne Gregory of Madison was sentenced to 30 years for bilking 30 retirement age investors out of nearly $6 million. At the sentencing hearing, Gregory was greeted with jeers and boos as he tried to apologize to his victims. The judge received many letters about Gregory, a former financial consultant. Many victims, the judge said, were drawn to Gregory because he was charismatic and had "Christian values."

In Pennsylvania earlier this year, several small Catholic churches were defrauded of about $1 million by an investment adviser-parishioner who had won the trust of parish priests.
Unfortunately, there is no shortage of potential victims. Securities regulators point out that since many people feel like they’ve lost out on the historic bull market on Wall Street, they need to catch up. With interest rates at 20-year lows, some retirees dependent on interest income are desperate and ready to believe the con artists poised to take advantage.
To avoid becoming a victim of affinity fraud, and before they invest, investors are encouraged to contact the Department of Corporations to check out the investment and the person recommending it. Checking with the Department could expose a pyramid or Ponzi scheme known to regulators in this state or elsewhere. Investors are encouraged to ask for advice from third parties such as lawyers or accountants and to not rely on promises of big profits at no risk. The Department of Corporations joins securities regulators nationwide in warning investors to treat all investment tips—no matter where they come from—with skepticism.