State securities cops warn about religious “affinity fraud”

Losses in Greater Ministries case feared at $200 million

WASHINGTON (September 1, 1999) – State securities regulators today issued 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.

“`In God we trust,’ it says on our money. Unfortunately, when it comes to money, we can’t afford to blindly trust our fellow man,” said Peter C. Hildreth, president of the North American Securities Administrators Association (NASAA) and New Hampshire’s Director of Securities Regulation.

Hildreth 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.

Some recent examples:
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, according to Michael Byrne, director of enforcement at the Pennsylvania Securities Commission. 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 didn’t 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, according to Texas Securities Commissioner Denise Voigt Crawford, victimized members of a church in Stafford. 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 (September), 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 members 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 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, says NASAA’s Hildreth. “Many people feel like they’ve lost out on the historic bull market on Wall Street and they need to catch up. Interest rates are at 20-year lows. Some retirees dependent on interest income are desperate. Con artists are poised to take advantage of the naïve, the gullible.”

To avoid becoming a victim of affinity fraud, before you invest, call your state securities regulator to check out the investment and the person touting it. Says Alabama Securities Commissioner Joseph Borg: “It may be a pyramid or Ponzi scheme known to regulators in your state or elsewhere. Ask for advice from third parties such as lawyers or accountants.”

Cautions Bradley Skolnik, Indiana’s Securities Commissioner and NASAA president elect: “Treat all investment tips—no matter where they come from—with skepticism. Just because someone in church—even the minister—says something about an investment is so, doesn’t make it so. Be very skeptical of returns that sound too good to be true because they probably are.”

For more information on affinity fraud, visit the NASAA website (www.nasaa.org) and look under “Investor Education.”
# # #

Additional Contacts:

Joseph P. Borg, Alabama Securities Commission, 334-242-2984
Michael Byrne, Pennsylvania Securities Commission, 215-560-2088
Charlie Neal, Texas Securities Board, 512-305-8300 (Victims are willing to speak with the press.)
Bradley Skolnik, Indiana Securities Commission, 317-232-6681

1999 Headlines, Newsroom