Four Kentucky residents have been sentenced to prison and ordered to reimburse a church they bilked out of nearly $200,000 in what prosecutors described as a classic pyramid scheme.
U.S. District Judge Joseph R. Goodwin acknowledged that most of the four defendants have few, if any, assets left to repay the First Assembly Church of God of Matewan, W.Va.
The Matewan church said it invested $199,800 with John S. Holtzclaw and three other Kentucky residents. The money was part of a $375,000 settlement from the U.S. Army Corps of Engineers, which condemned church property for construction of a flood wall around Matewan.
The money was for construction of a new church, said the Rev. Kenneth Greene, pastor of the church.
Holtzclaw, who received the stiffest sentence of the four, was ordered to serve three years and five months in prison. He was convicted in July, along with Jerry L. Horn of Lancaster, Ky., and Joyce Morfey and Donald Estes of Somerset, Ky.
According to prosecutors, the pyramid scheme involved selling gold coins minted by the U.S. Treasury.
Pyramid schemes rely on a continual supply of new investors, who are asked to find others to take part. Although the schemes usually are referred to as “investments,” the money never actually is invested. Instead, new money coming in is used to pay off earlier investors.