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Affinity Fraud Investment Scams


God Works in Mysterious Ways, Scammers Don't

01/05 - AP - ROME, Ga. - A man accused of taking more than $8 million from churches and nonprofit organizations across the United States is defending himself during his federal trial.

Abraham Kennard - charged with mail fraud, money laundering, conspiracy to commit money laundering and income-tax evasion - delivered his own opening arguments, telling jurors that federal prosecutors charging him with fraud mistook "a dream for a scheme."

Prosecutors contend that Kennard headed up a multimillion-dollar advance fee fraud scheme from 2001 to 2002 that eventually involved 1,600 churches and other organizations in 41 states.

U.S. District Judge Harold Murphy ruled Monday that Kennard could represent himself, although the judge had a court-appointed attorney remain as "standby counsel."

"There is no law against praying and trusting God," Kennard told jurors Tuesday. "God is the biggest financial backer you can ever have. And that's who these people and Dr. Kennard put their trust in."

Prosecutors opened their case against Kennard and his brother, Laboyce - who also faces charges related to the scheme - with testimony of several bank officials who verified records to be used as evidence in the case.

Prosecutors allege that members paid to join the Network International Investment Corporation Inc. "Church Funding Project," which promised a forgivable loan or non-refundable grant of $500,000 for every $3,000 paid in membership fees.

They said that Kennard told members that a group of investors would fund the project, when in fact he had no investors and never intended to find any.

But Kennard told jurors he always intended to pay back members.

Giles Jones, attorney for Laboyce Kennard, tried unsuccessfully to have his client's case separated from Kennard's proceedings because of how the jury might react to Kennard representing himself in the trial.

Two others - Alvin Jasper, Kennard's half-brother and Jannie Trammel - pleaded guilty before the case went to court. They have agreed to testify for the prosecution against the Kennard brothers.

Co-defendant R. Scott Cunningham, the Dalton attorney accused of laundering Kennards money, will face charges at his own, yet-unscheduled trial.


Preacher accused in $9M church affinity pyramid scam

By ERRIN HAINES - ASSOCIATED PRESS WRITER

02/05 - ROME, Ga. -- The Rev. Abraham Kennard shared his dream of a string of Christian resorts with a few of his fellow black ministers. They told a few more. And the few more told a few more. And they all told their flocks.

Soon, congregations nationwide - many with only a few dozen members - were holding fish fries, sponsoring cake walks and throwing carnivals to raise the $3,000 they needed to invest in Kennard's company.

For their small investment, the faithful were assured, they would eventually get their money back more than 100 times over - up to $500,000 in a grant or a forgivable loan. What they actually got, prosecutors say, is duped.

Kennard, 46, was charged with bilking nearly $9 million from 1,600 churches in 41 states in just over a year. His month-long trial on 132 counts - from money laundering to tax evasion to mail fraud - ended Thursday and his fate now lies with a jury, which was scheduled to begin deliberations Friday.

The government argued that the charismatic Kennard took advantage of the nation's tight network of black churches to launch a fast-growing pyramid scheme.

"I know you can see clearly it was a scheme, all right. And for some 1,600 churches, it was a nightmare," prosecutor David McClernan told jurors during closing arguments.

Kennard, who represented himself, countered he's not guilty of anything.

"It's not a law against riding in a Cadillac if you don't want to ride in a Volkswagen," Kennard said in his opening remarks.

Kennard, prosecutors say, represented his Network International Investment Corp., based in Wildwood near the Georgia-Tennessee border, as a $25 million business with more than $100 million in investments.

About three-quarters of the investments would be used to build resorts and the rest would go back to the churches that paid the $3,000 fee. But the resorts were never built and, in most cases, the money was never paid out. The churches saw their big plans - for expansions, outreach programs, drug rehabilitation classes - dashed.

A sharply dressed Kennard criss-crossed the country on private jets and in limousines with a flashy promotional video in hand. But it was faith that sold Kennard's brethren on the deal. They in turn told their friends, nephews, cousins, brothers and, most importantly, fellow pastors.

"It wasn't about ignorance. It was about trust," said the Rev. James Cane of Victory Worship Center in Birmingham, Ala., one of several pastors who testified against Kennard.

"It was like a domino effect," added the Rev. Willie Robbins of the Greater Cathedral Worship Center in Nashville, Tenn., who helped spread the word to Cane and other pastors. "I had preachers telling me, 'I don't trust him, but I trust you.'"

Much of the money went to Kennard and his family. It bought cruises and more than a dozen cars, including several Cadillacs and Mercedes-Benzes, prosecutors said.

The vehicles, along with Kennard's assets, were seized by the government. Kennard also used the money to pay for the jets and limos he used during his trips to promote his program, according to prosecutors.

Kennard was tried along with his brother, Laboyce, who was charged with conspiracy to launder money. Prosecutors said he received more than $360,000 from his brother.

Laboyce Kennard's attorney, Giles Jones, said Thursday his client was only trying to start his own business and had no knowledge of his brother's church enterprise.

"They want to make a big deal that he stuck his head in the sand," Jones said.

The Kennards' cousin, Jannie Trammel, and stepbrother Alvin Jasper also were indicted but pleaded guilty and testified at Kennard's trial. Lawyer R. Scott Cunningham is charged with money laundering, but will be tried later.

Michael Trost, who was appointed as Kennard's lawyer but became standby counsel when Kennard chose to represent himself, said he believes Kennard intended to help the churches.

"In hindsight, mistakes were made and things weren't done as correctly as they could have been, but that's not a crime," Trost said.

Trammel, who served as Kennard's right-hand and often helped sell the program to preachers, said she was willfully blinded by her charismatic cousin.

"Because of my relation with him, I didn't see those red flags," she testified. "There's no question people were misled."


British fraudster gets 20 years for US church scam

07/07 - (Guardian Unlimited) British con artist Howard Welsh toured US cities like a modern-day snake oil salesman, targeting Christians with bogus investment plans and scamming his way to some £16m.

But his face ended up on the FBI's Most Wanted website and despite crisscrossing continents while on the run, he was today starting a 20-year stretch in a US jail.

Most of the 900-odd victims of Liverpool-born Welsh, 63, had one thing in common: they fell victim to his callous manipulation of their religious faith.

Welsh and his American girlfriend, Lee Hope Thrasher, 53, were based in the resort city of Virginia Beach, in the east coast state of Virginia, but from 1999 took the con on the road, targeting church networks.

They hosted euphoric, deeply religious three-day seminars in hotels while selling "divinely inspired" investments that promised huge returns while helping poor and disabled children abroad. "Do you have enough faith to see this through for a year?" one of Welsh's fliers asked.

Welsh, who styled himself as an "international businessman" and who had earlier tried less successfully to sell a "magical elixir", took inspiration from the infamous 1920s Chicago conman, Charles Ponzi.

Ponzi's signature scam was devastatingly simple. You attract a few investors and then quickly pay out high returns. This creates a buzz, and attracts more investors. Then you disappear.

Welsh and Thrasher - who was today jailed for 15-years alongside him at the district court in Norfolk, Virginia - disappeared from the Virginia area in the summer of 2002. A year later, prosecutors brought the first charges against them.

At some stage, the pair left the US, having wired millions of dollars to 13 destinations, mainly foreign banks in places including Lebanon, Switzerland, Nigeria, China and France. Investigators believe they spent time in Latin America and Africa, as well as Belgium and other continental European countries.

However, the end of the FBI hunt was not quite the stuff of Hollywood thrillers. Welsh and Thrasher were arrested by the Metropolitan police in November 2004 at a train station in the Shropshire market town of Whitchurch, near his elderly mother Doris's retirement home.

The pair appeared to have hidden or lost the money. US investigators have only recovered around £1.25m. Both were ordered today to pay $33, 543,153 (£16,486,990) in restitution.

It emerged this week that Welsh had told lawyers that he gave $31m to a Nigerian man called Femi Coker, who had claimed to work for the Nigerian Central Bank. Welsh said he met the Nigerian in Accra, Ghana, and that the money is still in a government warehouse and he will be able to get it back if he pays a "release tax", the Virginia Pilot newspaper reported.

Investigators soon established nobody of that name worked at the Nigerian Central Bank. The name Femi Coker features in a number of websites warning about Nigerian advance fee cons, the so-called 419 scams. Letters written by a Mr. Coker variously describe him as a "director of the ministry of agriculture" or an official at a Nigerian oil firm.

If Welsh did have the tables turned on him by another con artist his many victims might be forgiven for enjoying the irony.

Less than 5% of investors to Welsh's scams - some of whom were Britons - saw returns and a number were left in financial ruins. One elderly woman from Illinois, who has since died, lost around £4m, thinking she was investing in a new bank called Zialogic, which in reality was no more than a UK post office box.

"This was a massive fraud, stunning in both its length and breadth," said US attorney Chuck Rosenburg. "We are very pleased with their convictions."

After their arrest, the pair spent almost two years in UK prisons while fighting extradition but were finally sent to the US in July last year. The same month, in their first court appearance in the US, they insisted they were innocent and wanted to "get the truth out".

But three months into the trial they changed their pleas. Welsh admitted four counts, including conspiracy to commit mail and wire fraud. Thrasher pleaded guilty to three similar counts.

Before they changed their pleas, Paul Chandler, a Met officer, told the trial that the couple had rented a flat in Birmingham, for which Welsh had signed the lease with the name "Holmes Golden". There was evidence of other false identities at the flat, including a "James Bond".

The US Internal Revenue Service told the trial that Welsh had been looking at exploring "something with diamonds" in Ghana.

Thrasher, who previously worked as a victim-witness coordinator, met Welsh in 1997 and her father Harold told the Virginia Pilot that she was under the Briton's control and the family had failed to convince her it was all a scam. But perhaps the best illustration of Welsh's dangerous talent as a conman is the length of time that some of the victims retained faith in him. One investor of £60,000, Greg del Ferro, told the local newspaper, even as the trial was underway last July, that he still did not believe it was a con.

"It was about helping other people. That's what Lee Hope and Howard were stressing. By all means they made mistakes, but they are not the types to deceive or take advantage," he said. Mr. Del Ferro wondered whether the pair may have had problems after inviting the "wrong people" to invest.


Religion-Related Fraud Getting Worse

By RACHEL ZOLL - AP - 08/06

Randall W. Harding sang in the choir at Crossroads Christian Church in Corona, Calif., and donated part of his conspicuous wealth to its ministries. In his business dealings, he underscored his faith by naming his investment firm JTL, or "Just the Lord." Pastors and churchgoers alike entrusted their money to him.

By the time Harding was unmasked as a fraud, he and his partners had stolen more than $50 million from their clients, and Crossroads became yet another cautionary tale in what investigators say is a worsening problem plaguing the nation's churches.

Billions of dollars has been stolen in religion-related fraud in recent years, according to the North American Securities Administrators Association, a group of state officials who work to protect investors.

Between 1984 and 1989, about $450 million was stolen in religion-related scams, the association says. In its latest count - from 1998 to 2001 - the toll had risen to $2 billion. Rip-offs have only become more common since.

"The size and the scope of the fraud is getting larger," said Patricia Struck, president of the securities association and administrator of the Wisconsin Department of Financial Institutions, Division of Securities. "The scammers are getting smarter and the investors don't ask enough questions because of the feeling that they can be safe in church."

Cases in recent years show just how vulnerable religious communities are.

Lambert Vander Tuig, a member of Saddleback Church in Lake Forest Calif., ran a real estate scam that bilked investors out of $50 million, the Securities and Exchange Commission says. His salesmen presented themselves as faithful Christians and distributed copies of "The Purpose Driven Life," by Saddleback pastor Rick Warren, according to the SEC. Warren and his church had no knowledge of Vander Tuig's activities, says the SEC.

At Daystar Assembly of God Church in Prattville, Ala., a congregant persuaded church leaders and others to invest about $3 million in real estate a few years ago, promising some profits would go toward building a megachurch. The Daystar Assembly was swindled and lost its building.

And in a dramatically broader scam, leaders of Greater Ministries International, based in Tampa, Fla., defrauded thousands of people of half a billion dollars by promising to double money on investments that ministry officials said were blessed by God. Several of the con men were sentenced in 2001 to more than a decade each in prison.

"Many of these frauds are, on their face, very credible and legitimate appearing," said Randall Lee, director of the Pacific regional office of the SEC. "You really have to dig below the surface to understand what's going on."

Typically, a con artist will target the pastor first, by making a generous donation and appealing to the minister's desire to expand the church or its programs, according to Joseph Borg, director of the Alabama Securities Commission, who played a key role in breaking up the Greater Ministries scam.

If the pastor invests, churchgoers view it as a tacit endorsement. The con man, often promising double digit returns, will chip away at resistance among church members by suggesting they can donate part of their earnings to the congregation, Borg says.


Duped by faith?

Scam artists often find the church and its believers fertile ground for duplicitous dealings.

By SHARON TUBBS, Times Staff Writer - St. Petersburg Times - July 26, 2002

A scam always looks obvious from the outside. A wealthy Christian died in New York who, out of the goodness of his heart, made provisions in his will for believers all over the country to buy luxury cars for a couple thousand dollars each. By the grace of God, you can reap the blessings of this deal. Your car will arrive after the property is released from probate, which will take about a year. Make your cashier's checks payable to . . .

Yeah, right, you say. Suuuure.

But you're reading the story in the newspaper.

Now put yourself in a pew, looking toward the pulpit. The person discussing the plan is the same person whose advice you trusted to save your marriage, the one who encouraged you to live righteously, the one who prayed with you in times of trouble, the preacher whom you called "the man of God."

Federal authorities say hundreds of people across the country fell for the fictitious story of a man named John Bowers who died and left "miracle cars" for believers. The scam touched home when at least 20 people at Breakthrough Christian Center in St. Petersburg bought into it, too. More than a year ago, they borrowed money from relatives, took out loans and dipped into their savings for cars that don't exist.

These "miracle cars" netted more than $19-million from New York to California from October 1998 to June when the U.S. Attorney's Office arrested three people whom investigators say were the masterminds and charged them with conspiracy, fraud and money laundering.

As the story unfolded, people shook their heads and asked the same question many of the victims asked: 'How could they be so gullible?'

But authorities say scams targeting religious groups are unique. They make victims believe their investments go beyond material things. They manipulate the one thing they know they can find among people who believe in a God they have never seen -- faith.

* * *

Last August, the North American Securities Administrators Association arranged a news conference to warn people that religious investment schemes were more widespread than ever, after losses from just three national cases approached $1.5-billion.

One of them was the Tampa-based Greater Ministries International Church scam, which operated from March 1993 to January 1999. Authorities called it one of the largest pyramid schemes ever investigated.

Church elders promised to double investors' money in 17 months under a "Double Your Blessing Gift Exchange" and a "Faith Promises Program," thanks to gold mines and profitable overseas investments the church claimed it had.

But the funds returned to some investors actually came from money put up by investors at a later time. Last year, several church leaders received lengthy prison sentences for their roles in the pyramid scheme, which involved 18,000 victims who lost $448-million during the 1990s.

Other scams to bamboozle believers are continually under way -- each proving that when you think you've heard it all, you haven't.

In April, the former pastor of a Pittsburgh-area church pleaded no contest to 100 charges of defrauding the congregation, stealing church property and violating state securities laws in a highly publicized case featured on Dateline NBC. W. Michael Altman had been hired as pastor of the congregation, now known as Grace Christian Ministries, just a few months after his release from prison for submitting a false statement on a loan application at a bank in Birmingham, Ala., according to a story in the Pittsburgh Post-Gazette. Altman convinced 43 people to participate in an investment plan that caused them to lose about $355,500.

In March, Illinois law enforcement authorities arrested retired police officer Bill Bresnahan, 54, whom they say falsely told churchgoers he rescued bodies from World Trade Center rubble and prayed with survivors on Sept. 11. Teary-eyed believers put about $3,200 in the collection plate for the "hero."

* * *

Con artists gain the trust of their victims by professing that they share similar spiritual beliefs. They gain credibility by quoting Scripture and kneeling in prayer beside the very people they hope to cheat.

"One of the most effective sales techniques is to use word of mouth," said Les Henderson, who wrote Crimes of Persuasion: Schemes, Scams, Frauds. "Scammers use this to their advantage by infiltrating a known circle of those with shared interests. Once they convince one key person, they use subtle peer pressure to influence others who gladly relinquish decision-making to the recommendations of those they know and trust."

At Breakthrough Christian Center in St. Petersburg, the miracle cars scam played out like this:

Senior pastor Glenn Miller told his congregation last year that the car deal would be an "uncommon harvest" of blessings for their small storefront church. Members, some who had unreliable transportation or none at all, were told they could buy all kinds of cars on the cheap -- a 1998 Toyota Camry for $1,000, a Lexus for $3,000, a Cadillac Escalade for $6,500.

Church members took his endorsement as a guarantee. To them, he is a "prophet," a person who sees divine visions from God. Some never saw pictures of their intended cars, didn't know what color they would be, or whether they would be two-door or four-door cars.

Miller also told members that the Rev. Creflo Dollar, the well-known founder of Georgia-based World Changers Church International, with more than 20,000 members, had also participated in the deal and was expecting cars. That made Breakthrough members believe they were in good company.

A spokesman for Dollar recently told the St. Petersburg Times that not only had World Changers not participated in such a car deal, but that no one had ever even approached Dollar or church leaders with the idea.

* * *

Con artists gain the trust of their victims by professing that they share similar spiritual beliefs. They gain credibility by quoting Scripture and kneeling in prayer beside the very people they hope to cheat.

In late June, Calvester Benjamin-Anderson, a member who had taken out a $4,000 loan to buy a used Lexus and pickup truck wanted an update. She called a number listed on paperwork that came along with a receipt she got in the mail. Someone at the number referred her to a toll-free line. She dialed. It was a recording at the U.S. Attorney's Office in Missouri.

"There are no cars," the recording said. Four people had been arrested on charges including conspiracy, fraud and money laundering. Gwendolyn Baker, 51, of Memphis, James R. Nichols, 26, and Robert Gomez, 27, both of California were masterminds in the massive scheme. Corinne Conway of Missouri was also arrested.

Baker's was the name some Breakthrough members were told to put on their cashier's checks. According to federal authorities, Nichols posed as executor of the Bowers estate and, along with the others, collected millions since October 1998 for more than 7,000 vehicles that investigators say never existed. Investigators say that some of the victims' money was deposited into Nichols' player's account at a California casino.

* * *

Ashley Baker, a spokesman for the North American Securities Administrators Association, said there is a key to any religious scheme:

"They make faith in God synonymous with the investment scheme," Baker said.

Once that happens, victims are loath to concede that they've been taken. They believe giving up on their investment would indicate a lack of faith in God, Baker said.

And even when they do realize it was a scheme, they try to handle the matter among themselves, Baker said. "You're asking people to not only admit that they were duped, but that their faith was misplaced," he said.

After hearing from Benjamin-Anderson, Miller called a meeting of car buyers at Breakthrough. About 20 people showed up, several of whom had also bought cars for family members.

Some left the meeting believing that talk of a scam was an "attack of the enemy" and that their cars were still coming.

"There's two sides to every story," one member told a Times reporter.

The following Sunday, about 70 people gathered for worship. Miller, a stout man with white hair and a white pinstriped suit, sang along with his congregation.

Spent from the vigorous praise, he wiped the sweat from his brow with a bright yellow hand towel that coordinated perfectly with his yellow tie and handkerchief. Members had a joyous time last Sunday during the evening healing service, he said before starting his sermon. One woman came with legs two different lengths, he said. But by God's healing power, she didn't leave that way.

"A leg that was shorter than the other grew out to normal size!" Miller proclaimed, as amens and hallelujahs filled the room.

He had a word from the Lord this morning. That word is "pray."

"Pray, and don't get impatient," he said. "Prayer keeps the river flowing. Glory to the lamb of God!"

A miracle is about to take place at Breakthrough, he said. "You ought to tell somebody, 'I'm on my way!' "

Worshipers turn to their neighbors: "I'm on my way!"

"The Lord spoke to my spirit man and said, 'I have put the church, not only Breakthrough, but the body of Christ, through a test,' " Miller told the congregation.

Some people have failed the test by gossiping, complaining and "crying over a little piece of money," Miller said, apparently referring to the members who spoke openly about losses in the car deal.

You just don't know, he said, God's got "millions in store for you!"

The service took place inside a conference room at the Hilton in downtown St. Petersburg. The week before, Breakthrough had left its location inside a strip shopping center on 49th Street S in light of eviction proceedings. According to court records, Miller failed to pay landlord Ashok Shah nearly $32,000 in rent over three years.

Shah said Miller consistently failed to pay the monthly $1,800, not including taxes, he owed for three units since entering into the lease in June 1999. In the beginning, Shah said, Miller would tell him that members' checks had bounced and that the church would make good on its debts.

Shah, who is a Christian, said he believed Miller, who also said God would bless Shah "because I was blessing the church."

In a brief talk with a Times reporter, Miller said he knew little about the car deal. He said he didn't know whether it was a scam or not. Miller said, he also put money into the deal, but would not say how much or what the money was used for. He said he had heard from other sources that Dollar participated and relayed that information to his congregation. Miller said the roof at the strip shopping center leaked, but declined to talk about the eviction in detail.

* * *

Isabell Reivas, known as "Mother Isabell" to people younger than her 64 years, was not able to make it to church that Sunday. With two strokes, open-heart surgery and diabetes in her medical history, it's difficult for her to get around.

She doesn't drive. Still, she had been happy to hear about the car deal. A Toyota Camry for $1,000? She couldn't pass it up. Her daughter, who lives in the area and catches the bus to check on her mother, could use the car to take Reivas places. With the car, Reivas wouldn't have to pay the $7 to $10 per cab ride for trips to the doctor's office and to church -- money she couldn't afford on her Social Security check, she said.

Reivas said she asked family members to give her the money. Then, with the patience of Job, she waited. The car would come soon, she believed.

Only after calling another member for a ride in mid July did she realize it might not.

"Oh Lord, have mercy!" she said, wiping tears from her cheeks. "We scrambled to get this money . . . I just will pray and ask God to give me direction," she said, looking upward. "God is love. What else can I say? God is love."


 

 


 

 

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