Immigrants Lose Large Sums in Investment Deals

Every Sunday, the Chinese worshipers at the Evangelical Formosan Church in Walnut would gather to share prayers, memories of the old country and advice on succeeding in what often seemed a strange, new land.

Many were immigrants who had come to the San Gabriel Valley from Taiwan with fortunes to invest, but suspicious and uncomfortable about the American ways of making money.

It was an ideal audience for John Chi, an enigmatic Christian developer who promised high interest and low risk for anyone willing to put money in his Irvine-based Trinity Valley Investment Corp.

“God has entrusted you with riches,” one of his salespeople told churchgoers. “The best way to protect and make God’s gifts grow is to invest them with TVIC. . . . I’m a Christian and would never cheat or hurt you.”

Hundreds of Chinese churchgoers heeded the call. Then last year Chi disappeared, as did as much as $50 million of investors’ money in what may be one of the nation’s largest scams of its kind.

As investigators sift through the records of the Trinity Valley collapse, what has emerged is a tragedy peculiar to the hybrid culture of the Pacific Rim, where the world of loose-and-easy California real estate speculation and the age-old ways of doing business among the Chinese met in a disastrous union.

Many investors--largely from Los Angeles and Orange counties, although also scattered across the country--have been left penniless and the trust funds of several Chinese churches have been crippled.

In a complex turn of events, the collapse of Chi’s empire also devastated the city of Bell, which relied on a card club Chi purchased with the investors’ money for a significant portion of its tax revenue.

“How could he just walk away?” asked Bell City Councilman George Cole.

A year after Chi’s disappearance, investors have found themselves caught in a tale of betrayal that they are only beginning to comprehend.

Officials say the investors may be victims of one of the nation’s largest “affinity scams”--schemes in which minority con artists prey upon their own people, banking on a distrust of the outside world and a natural inclination to do business with their own.

The experience has left many victims financially crippled as they struggle with how easily they were betrayed and grapple with understanding their own greed and blindness.

“I was forced to lie to my own brother,” said Wang, a woman who would only give her last name out of shame for losing nearly $1 million of her family’s money. “My parents entrusted their money to me and I lost it. I want to tell them what happened, but I just can’t. They’re very old and I am afraid the shock of losing their life’s savings would kill them.”

The phenomena of John Chi and Trinity Valley was in many ways a disaster tailor-made for Southern California.

He arrived in the state in the late 1980s, a land developer from Texas who said he came in search of opportunity after the Texas oil bust sent prices plummeting.

He was, in almost every way, the model entrepreneur--energetic, bright and savvy in the complex world of land speculation.

Chi, 40, had all the right credentials to do business with the anxious big money from the Far East, speaking Mandarin, Taiwanese and English. He jetted around town in a Mercedes 500 SEL with his wife, who was said to have been a Chinese singing star.

“He was power and he was smooth,” said Michael Montgomery, an attorney who helped broker Chi’s purchase of the card club in Bell. “He’d be the Chinese equivalent of Winthrop Rockefeller. He was what everyone was trying to become.”

Alan Ross Rothery, one of Chi’s chief lieutenants, is serving a 12-year prison term for embezzlement on an unrelated case. Rothery said in an interview from the federal prison camp in Lompoc that he believed Trinity Valley started as a legitimate development company, looking for profit on undervalued land.

But he believes that Chi, sometimes known by his Chinese name, Tai Nan, began to bend the rules when he decided to buy the bankrupt California Bell Card Club.

“It was like a giant hole swallowing everything,” said Rothery, who resigned from Chi’s company in early 1990. “The money was going to the casino and that wasn’t right.”

Chi’s alleged scheme was based on a series of transactions among several of his companies that gave the appearance that Trinity Valley was a thriving and secure investment, Rothery said.

Investors were given reams of information, including land appraisals, loan agreements and ownership documents that made the investments seem safe to the layman.

The majority of victims invested in a 363-acre development in Richmond, Calif., that Chi called “San Pablo Estates.”

In documents provided to investors, he claimed that the land was worth $50 million, although he had bought it for only a fraction of that amount, Rothery said. The value was based on an appraisal that assumed 1,143 luxury homes would be built on the land.

In reality, the land was worth far less than Chi claimed. The appraisal, according to some Richmond city officials, was meaningless because the land was so steep that building 1,143 homes was impossible.

What could be built on the land was irrelevant, in many ways, because little of the investors’ money was going toward its development.

Instead, much of the money was allegedly being channeled to cover the high interest payments to investors and, unknown to anyone outside the company, the card club that Chi had bought.

According to court documents recently filed in support of a warrant to search two of Chi’s offices, more than $10 million was transferred from Trinity Valley to the card club during a three-year period.

Chi also began selling stock in the newly renamed Regency Club card casino. The stock rose from just pennies a share to at least $2 before Chi disappeared last February. Chi held 30 million shares in the company, according to one major investor. How much money Chi made, if any, is unknown.

“I knew at some time or another, it would eventually be exposed,” said Rothery. “I reached a point where I was scared of signing anything.”

For all the complexity of the operation, Trinity Valley might never have gotten off the ground if it had not been for the pool of investors in Southern California--wealthy, entrepreneurial and tightly linked to money in the Far East.

Trinity Valley arrived at the pinnacle of the Chinese migration that created the nation’s first suburban Chinatowns of Monterey Park and Alhambra over the past 15 years.

Unlike the peasant laborers who came to California in the 1800s or the refugees who fled China after the Communist revolution, these immigrants were mostly professionals and entrepreneurs from Taiwan, flush with optimism and wealth from the awakening industrial power of their native land.

Like other immigrant groups, struggling to make sense of their new home, the Taiwanese often trusted each other most, and eyed the outside world suspiciously.

“We understand how we all have struggled to make it,” said a doctor who lost $500,000 to Trinity Valley. “It’s a prejudice I still have. You want to deal with your own people.”

For the newcomers, churches such as the Evangelical Formosan Church in Walnut filled a special role in helping them start new lives in America. They became islands of comfort, where they could worship in their own language and share a tight bond that sprang from being together in a foreign land.

Chi hired two well known Taiwanese Christians--Ye Sumei and Ruth Kau, the wife of the church’s former assistant pastor--who gave him access to the Christians’ circle.

Kau plied the flock with brochures filled with glossy photos of American flags, blissful American couples and American hundred dollar bills.

There is a sad similarity to the stories of investors who wholeheartedly believed their sales pitch.

Wang, who had invested $1 million of her family’s money without their knowledge, said that Trinity Valley was a hot topic at church. The company, she heard, paid high interest on investments--sometimes as much as 33% a year.

It was completely safe, she was told, because each investor was given a partial interest in the land, guaranteeing that if anything went wrong, they could recoup their money by selling the land. The company paid interest every month like clockwork.

Without telling her family, she invested $100,000 of their money, then another $100,000 of her own, then $500,000 from her parents and brother, and finally, $300,000 from her sister.

“I was very happy,” Wang said. “I received almost $11,000 a month in interest and whenever I would go into TVIC’s office to pick up my interest check, Mrs. Kau would always tell me how well the company was doing.”

Everything seemed to be going fine until word began to leak months after Chi’s disappearance that something was amiss at Trinity Valley.

Wang, one of the largest investors, had asked Trinity Valley to return $450,000 of her investment to pay off her mortgage, but was told to be patient while the company worked out a temporary cash problem.

Through June and July, she desperately tried to reach Kau and Ye, the two sales agents with whom she was familiar. Kau finally gave her an $8,000 check, although it bounced when Wang tried to cash it a month later.

The last she saw of anyone from Trinity Valley was at an angry meeting in Alhambra in which Kau broke down and told the crowd of about 70 investors that the company was in trouble.

Since that day in October, the banks have foreclosed on one of Wang’s properties and repossessed her car. She has managed to hold onto her home by borrowing from her brother, who still has no idea that the family’s money has been lost.

“All my money and property are gone,” said Wang. “I’ve even lost my family. My credit cards are all I have left and if I lose those, it’s all over.”

Besides the devastating effect of Trinity Valley on the Chinese community, what distinguished Chi’s rise and fall was how it touched other communities.

Within five months of Chi’s disappearance, the card club he was so intent on owning closed, leaving about 450 workers without a job.

Cole, the Bell city councilman, said the closing of the Regency Club came on top of serious cutbacks in state funding and several large liability settlements. The card club had been on track to provide up to $950,000 a year in tax revenue, a hefty chunk in the city’s $6-million budget.

After the club’s closure, the city of 35,000 residents laid off most of its maintenance crew, ended most street maintenance, cut back on neighborhood watch and drug education programs, and slapped a 10% utility tax on all residents.

Most frustrating for the city, Cole said, was that the card club was making more money than it had in years when it was closed. Because Chi could not be found to renew his state gaming registration, the card club was shuttered in August.

“It was on the upward bound. The business was actually growing,” Cole said. “All he had to do was sign a piece of paper.”

Despite the enormous losses, the rise and fall of Chi’s Trinity Valley Investment Corp. has gone largely unnoticed outside the Chinese community.

For months, many investors unfamiliar with American society and uncomfortable with speaking English, stumbled through local, state and federal bureaucracies, uncertain of where to turn. Some, deeply shamed by their losses or too broke to pursue the matter, resigned themselves to saying nothing.

It was only in December that investigators from the state Department of Corporations searched TVIC’s empty offices in Newport Beach and Bell, removing financial documents.

Investors say they have recently talked with FBI agents, although the bureau would neither confirm nor deny an investigation.

Some investors may never recover. Most of the $270,000 that Tsou Chia-shiang invested came from his mother’s pension. The rest was his savings from his growing engineering company.

When he learned of Chi’s disappearance, all he felt was blind anger. “It was more than just being mad,” he said. “I wanted to get even.”

But as the months have passed, the anger has given way to a sad acceptance. He has been unable to pay the mortgage on his home and his once flourishing business with 15 employees has been wiped out--a victim of the recession, he concedes, but one he says he might have saved with his $270,000 nest egg.

Now, as he sits alone in a chilly office packed with idle equipment, he is considering returning to his native Taiwan. There is plenty of work, he said, his friends are there and, most important, it is a new place to make a new beginning.

“I made a bad decision to trust the wrong person. For that, I should first blame myself,” he said. “My mother is understanding. I tell her that we will make it all back someday. I tell her that I will try my best.”

Affinity Fraud: Preying on Your Own

In recent years, law enforcement officials have noticed the proliferation of so-called affinity fraud--schemes in which minority scam artists prey upon their own people, banking on a distrust of others and a natural inclination to do business with their own. Here is how such a scheme usually unfolds:

The fraud begins with the recruitment of a sales force, usually with newspaper advertisements seeking “account executives, no experience needed.”

Sales people generally target customers who cannot speak English. The businesses rely on personal connections and word of mouth. There are virtually no solicitations by phone.

Customers are promised high returns and limited risk based on the notion that friends would never cheat each other.