Investment fraud is never acceptable. But,
when
the scam is faith-based, it becomes particularly vile. |
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June 13, 2005 – "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, former president of the North American Securities Administrators Association. "When you invest you shouldn't let your guard down merely because someone is appealing to your religion or your faith," said Bortner, who also serves as the director of securities for Washington state. Gregory Setser, the ringleader of a Southern California investment gang that preyed on evangelical congregations, is awaiting trial on charges he raised more than $160 million through a classic Ponzi scheme. The Securities and Exchange Commission says Setser, his wife, sister, sister-in-law and mother-in-law, lured investors to put their money into a sophisticated program that promised high returns with low risks. IPIC International was a bogus manufacturing company that would use the money to buy goods like Chinese manufactured toys, vodka and condoms. The company would then resell them in the United States through well-known retailers like Mikasa, Michaels Stores, Costco, J.C. Penney and Pier 1 Imports. "The defendants represented that their principal was not at risk and they would receive a 25 percent return on their investment within three to six months," states the SEC complaint. As is the case with all Ponzi schemes, the Setsers' plan used money from new investors to pay off earlier participants. In reality, large chunks of the money are diverted for the benefit of the sponsors. Officials in California were able to seize and liquidate "toys" such as a yacht, helicopter, airplanes and vehicles. However, the assets raised were able to return to victims only a small portion of their investments. Last month, trustees representing the investors filed to distribute the remaining assets. On average, investors will receive about 15 percent of the funds they put into the program. That's not a bad return of principal compared to most religious investment scams. For instance, Jack Calvin used biblical references to lure more than 120 investors to put $2.8 million into high-yielding "Prime Bank" notes that would return as high as 20 percent per month. Working with a group called the "Moses Team" that included an airline pilot and a Long Island physician, Calvin used all of the money on luxury purchases including a house, car, motorcycle, hot tub and furniture. But not all of the money was squandered. Calvin also paid his daughter's tuition at cosmetology school with the ill-gotten gains. As so often happens with these frauds, victims were encouraged to "roll over" the returns from their investments to receive even bigger profits. That, in turn, ultimately caused some investors to get suspicious. Calvin had a simple way to calm their concerns. "When investors continued their demand, Calvin participated in morning prayer meetings by telephone," according to the SEC complaint. "Several investors have for more than a year maintained a ritual of a morning prayer meeting to pray for the return of their funds." Unfortunately, their prayers were not answered. "Always do your homework," reminds Bortner. "Be as skeptical and careful when you invest with someone who shares your faith as you would with anyone else." Affinity fraud -- including religious scams -- is a perennial on the list of investment crimes. Race, culture and religious beliefs often are the common threads used by investment criminals to get access to their victims. "Cloaking an investment with religion can give it a false aura of safety," said NASAA's Brad Skolnik. "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."
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