Schemes Net Millions From People of Faith

State securities officials warned investors Tuesday about the increasingly pervasive practice of religious “affinity fraud” schemes that have racked up millions by preying upon victims’ beliefs in God.

In the last three years, con artists in 27 states, including California, have taken advantage of at least 90,000 investors, regulators said. Deceived investors have lost more than $1.8 billion, according to authorities.

The admonitions from the North American Securities Administrators Assn. came a day after Gerald Payne was sentenced in Tampa, Fla., to 27 years in prison on federal charges stemming from an investment scam he ran through his Greater Ministries International Church.

Payne was convicted of fraud and conspiracy and his wife, Betty, was convicted and sentenced to 13 years in prison--after Greater Ministries took nearly $580 million from investors over the last decade.

“Scammers are getting smarter, investors are not asking enough questions . . . and the frauds are getting harder to detect,” said the association’s president, Deborah Bortner, who is the state of Washington’s director of securities.

“Con artists are clearly preying on the faithful more than ever before,” she added.

Officials described Greater Ministries and similar religious investment plans as Ponzi schemes, in which the money of new investors is used to make interest payments to earlier investors. Eventually, the system collapses.

The crucial tactic that perpetrators of affinity fraud employ is extending an individual’s religious beliefs to a belief in the investment’s validity, Bortner said.

“The con artist makes faith in God synonymous with faith in the investment scam,” she said.

Bortner also said the unwillingness of some investors to question the promises of prosperity offered to them and the “slick marketing videos” of fraudulent groups are contributing to the rising problem of religious fraud.

Forrest Bomar of Texas lost almost his entire investment--more than $200,000--to the Baptist Foundation of Arizona, which used 120 shell companies to allegedly bilk thousands of investors out of nearly $600 million. Arizona officials shut down the group in 1999.

Bomar said at Tuesday’s news conference that he and his wife were looking for a stable source of fixed-rate income in 1994 and were captivated by a postcard from the Baptist Foundation that promised a 6.75% return on investments that would be used “to do the Lord’s work.”

He transferred most of his life savings from a private brokerage account to the foundation. “I’m embarrassed in retrospect to admit this,” Bomar said, “but I never asked for an annual report or an audit report. I never called anyone. I never had any fear.”

After it became clear that he had lost his money, Bomar said he went through stages of denial, confusion, anger and finally deep depression.

Arizona’s top securities official, Mark Sendrow, said five officials from the Baptist Foundation have been indicted on 32 counts each of theft, fraud and racketeering and will likely be tried next year.

The Arizona securities division also has sued top accounting firm Arthur Andersen, which served as the Baptist Foundation’s auditor, for its connection to the investors’ losses. Sendrow said the firm “ignored a lot of red flags” and thus may have been “complicit to fraud.”

Arthur Andersen officials have strongly denied that the firm was party to the fraud, saying that the firm also fell victim to the Baptist Foundation’s scams.

Officials also assailed the scam of the Greater Ministries International Church, showing a video in which its founder, Payne, claimed that the group would serve as the “mineral bank” for several African nations and would make money by “cashing gold.”

Alabama securities director Joseph Borg said Payne lured investors with promises of hidden gold, silver and diamond mines in Africa and the Caribbean that God had revealed to the group.

“Payne claimed that, by direct intervention of the almighty, Greater Ministries had access to $40 billion in gold reserves just 15 feet under the ground in Liberia,” Borg said.

Bortner offered a number of tips for avoiding such schemes. She said investors should differentiate between investments and tithes or charitable offerings that are “not made with expectations of material gains”; be skeptical of offers connecting faith with investments; ask for written documentation about the investment; and call the state securities regulator to see if the seller and the investment are licensed or registered.

“Sound investments are based upon facts and research, not hope and faith,” Bortner said.