Investment Fraud Affinity Church Scams using Religion Focused Faith-Based Ponzi Schemes
11/06 - (Ohio) - A former youth leader at the Church of the Open Door in Elyria was charged this week with selling $17 million in bogus securities to church members and others across the country.
Gary McNaughton used the money to buy 21 vehicles, including four Corvettes, two motor homes and a Harley-Davidson motorcycle, as well as boats and real estate and to pay credit card expenses, federal officials said.
Attorney Robert Gary, who represents four of McNaughton's investors, said his clients were not wealthy but were willing to trust McNaughton with their life savings.
"It was the belief that this was a faith-based investment and the church was behind him," the Lorain attorney said.
Church officials could not be reached for comment.
McNaughton, a 51-year-old Elyria man, is being held without bond pending a hearing Tuesday in federal court.
McNaughton's attorney, Carlos Warner, said it was too early to comment on the case. He said McNaughton should be released on bond.
Federal prosecutors said McNaughton should remain in jail because he is a risk to flee to Canada, where he has citizenship and financial ties.
McNaughton sold the unregistered securities for four years, ending in June 2003.
He told the 200 investors, most of whom were affiliated with the church, that the money would be invested with an individual in Canada using an unusual trading strategy.
A Tennessee couple whose family was involved with the Elyria church cashed in their pension as well as their disabled daughter's savings - about $25,000 in all.
They gave the money to McNaughton to invest.
"He was a very convincing kind of guy," said Gary, their attorney. "And no matter what, the money was always around the corner."
The family was forced to sell the house where they had lived nearly 30 years.
In 2004, a federal judge found that McNaughton was liable for $6.2 million in payments and interest owed to his clients after the U.S. Securities and Exchange Commission sued him.
The judge did not order him to pay the money back because he did not have it.
McNaughton had just $11,815.
McNaughton's financial problems continued last year, when he filed for bankruptcy.
He said he had $7,300 in assets and $1.2 million in debts. He owed the Internal Revenue Service $350,000 in back taxes.
Three Hebrew Boys Investment Fraud
Feds seize computers, records at 3 Hebrew Boys offices
By BEN WERNER - The State
(South Carolina) 9/07 - Alluding to the Bible story inspiring their investment firm’s name, leaders of 3 Hebrew Boys LLC have repeatedly said they will emerge from the legal firestorm currently embroiling them.
The heat on the firm’s leadership — accused of defrauding investors from 23 states out of $82 million — just turned up a notch.
Three months after facing state securities charges, federal agents seized computers and records from Columbia offices of the 3 Hebrew Boys — which authorities say is run by Joseph Brunson, Tim McQueen and Tony Pough.
“It is further my belief that the subjects have purposefully failed to comply with two grand jury subpoenas issued to them for records,” wrote FBI special agent Ronald Grosse in an affidavit requesting the court order to seize the equipment.
Since most of the funds collected by 3 Hebrew Boys came from out of state, Grosse wrote that this could be considered mail fraud.
The 3 Hebrew Boys lawyer, Hemphill Pride II, revealed his clients were the target of federal investigators in June.
But the search of the firm’s office last week was the first public act by federal authorities in this case.
Pride confirmed the federal search Thursday and that records were taken, but said he was not told what investigators sought.
Officials from U.S. Attorney Reginald Lloyd’s office also confirmed computers and records were seized, but declined to provide any details.
The 3 Hebrew Boys are accused by state and federal authorities of collecting money from investors mostly on military bases and in churches with promises of investing in foreign currency.
State and federal investigators allege the firm kept most of the money.
Brunson, McQueen and Pough each face state charges of selling securities without a license, brought by S.C. Attorney General Henry McMaster.
A judge froze $17 million in company bank accounts. The trio have pleaded not guilty and are free on bail.
According to the search warrant filed at U.S. District Court in South Carolina, FBI agents took four computer servers and a computer terminal from offices of Daniel Development on Horseshoe Drive, also run by Brunson, McQueen and Pough.