Faith-Based Investment Scams Fleecing Followers of Billions
When Forrest and Lee Bomar became tired of the volatility of their stock investments a few years ago, they turned to their church for guidance.
The Baptist Foundation of Arizona, an investment program that targeted Baptists and purported to lend money to build Baptist churches and retirement homes, had just sent them a postcard. The offer: a fixed-rate investment that promised a competitive return and the spiritual bonus of “doing God’s work” with their money.
Over a period of years, the Bomar’s invested 90% of their life savings--money that’s now lost to what securities regulators call “God fraud.”
“It seemed like the best of two worlds,” said Forrest Bomar, a retired telephone worker from Palestine, Texas. “Between Lee and I, this money represented 65 years of work and savings.”
The Bomars are by no means alone. The Baptist Foundation victimized some 13,000 people, state regulators charge, hitting faithful in every state and several foreign countries. And it’s just one of many such frauds that use God’s name to prey on the religious.
This type of fraud is proliferating at an alarming rate, state securities regulators said at a recent news conference.
Over the last three years, about 90,000 Americans have lost roughly $1.8 billion to frauds that use God as a lure, according to the North American Securities Administrators Assn., a group representing state securities regulators nationwide.
Those numbers have soared since securities regulators last looked at the problem. In a 1989 study, regulators found that $450 million had been lost by about 15,000 investors over a five-year period.
“In a shorter period of time, more people were scammed and a greater amount of money was lost,” said Marc Beauchamp, executive director of the securities administrators association. “It is a major concern to state securities regulators.”
As with most types of frauds, the statistics probably understate the problem. Regulators count only the frauds they’ve uncovered and say there undoubtedly are many that haven’t been detected.
The surge in religion-oriented frauds is attributed to several factors, including an overall rise in so-called affinity scams, regulators said. To target their pitches, affinity-scam promoters use some specific knowledge and a sense of belonging and trust within a group--be it a church or fraternity, school or profession. Unsuspecting victims often are used to help sell the bogus investment through word of mouth.
Many investors find out too late that the generous returns they receive early on came from money invested by new participants, a classic Ponzi scheme.
Examples are legion, regulators contend.
A group called IRM Corp. used face-to-face recruiting through church-based organizations and advertising on religious TV and radio to solicit new members for its investment program. The money from new investors went to make payments to previous investors and pad the pockets of promoters, regulators said. By the time the scheme was uncovered, some 2,400 investors had lost about $400 million, regulators said.
In another scam, Gerald Payne, the now-convicted promoter of Greater Ministries International, called his investment program “Christian Social Security,” said Joseph Borg, director of the Alabama Securities Commission.
Investors didn’t have to understand where the profits were coming from, Payne told them. They simply had to have faith and “their money would multiply like the loaves and fishes,” Borg said.
“If you had to question it--if you needed proof--you obviously didn’t have the faith to be a member of their plan,” Borg said. Payne told investors, “You don’t question; you believe.”
Payne was sentenced in early August to 27 years in prison for fraud and conspiracy. His wife, Betty, was sentenced to more than 12 years in connection with the Greater Ministries scam, which took nearly $580 million from tens of thousands of investors.
Another scam in Tennessee that was linked to religion took in $3.9 million from members of predominantly African American churches. In Washington state, a scam targeted Quakers. In Indiana, three men who would kneel to pray with their victims are accused of selling worthless promissory notes to seniors. Hundreds of similar scams are operating nationwide and internationally, Borg said.
“There was a God-inspired loan program in Alabama that didn’t utilize any radio, TV or anything. It ended up with 32,000 people sending them money. We had victims from all over the country and 12 or 14 foreign countries,” Borg said. “It was all by the power of the Internet and word of mouth.”
A handful of themes are common in religious-oriented frauds, said Deborah Bortner, director of securities in Washington state. She said the promoters frequently:
* predict imminent financial or social crises, in some cases based on their reading of biblical prophecy;
* say investors’ money will be used to promote a worthy cause;
* equate faith in their investment programs with faith in God.
In retrospect, Texas victim Bomar says he realizes that’s where he went wrong.
“It is a misnomer to apply the word ‘faith’ to the investment world,” he said. “I would try to be more objective when considering investments and separate [return expectations] from genuine faith and love of God.”
Bortner said should take precautions to avoid religious-oriented frauds. Individuals need to find out whether the broker or promoter is licensed and registered with state securities regulators and whether the investment is registered. Investors also should understand the nature of the investment product and why their money is expected to grow. Reasonable investment expectations should be based on finance, not faith, Bortner said.
Beware of anyone touting “safe” or “guaranteed” investments with unusually high returns, she added. Too-good-to-be-true claims are almost always just that.
“I’ve been a securities regulator for 20 years and I’ve seen more money stolen in the name of God than in any other way,” Bortner said. “Be as skeptical and careful when you invest with someone who shares your faith as you would with anything else.”
Times staff writer Kathy M. Kristof, author of “Investing 101" (Bloomberg Press, 2000), welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof @latimes.com. For past Personal Finance columns visit The Times’ Web site at https://www.la times.com/per fin.
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The last three years have seen a big rise fraud linked to religion. These five states had the biggest prosecutions of such schemes in 1998 through 2000, ranked by dollars lost by the victims.
State No. of victims Dollars lost Arizona 13,000 $590.0 million Alabama/Ohio* 20,000 $578.0 million Michigan 2,435 $400.0 million North Carolina 640 $57.0 million Oklahoma 10,000 $50.0 million U.S. 90,825 $1.85 billion
* joint prosecution
Source: North American Securities Administrators Association.