Federal authorities arrested four members of an Inland Empire family and a Florida man Tuesday on charges that they swindled $160 million from evangelical Christians around the country, funneling much of it into offshore accounts and spending it on homes, a yacht and a helicopter.
The five allegedly ran a so-called affinity scheme, in which con artists prey upon the sympathies of groups bound together by ethnic, religious or other ties. Their scam, according to federal prosecutors and the Securities and Exchange Commission, was unusually far reaching.
"It's not just that it involved a lot of money," said Spencer C. Barasch, an SEC attorney in Fort Worth who investigated the case. "It involved dozens of Christian ministries and their followers throughout the country. In a lot of cases these affinity schemes are limited, but in this case it was truly nationwide."
The alleged linchpin, 47-year-old Gregory Earl Setser of Rancho Cucamonga, ingratiated himself with high-profile televangelists and pastors, Barasch said, including Irving, Texas-based Benny Hinn Ministries.
Billing himself as a fellow evangelist, Setser portrayed himself as doing God's work by enticing congregants to invest in supposedly lucrative import-export and real estate joint ventures, according to an SEC lawsuit and a criminal indictment unsealed Tuesday.
Investors were given a variety of assurances, the SEC alleged, including that their investments were risk-fee and that they could expect a return of 25% within three to six months.
Instead, over a period of 3 1/2 years, Setser used money collected from new investors to pay "profits" to earlier investors while siphoning off a large chunk of the money for himself, according to the indictment and suit. Such arrangements are commonly referred to as Ponzi schemes.
"Setser, a self-styled former minister and apostle of the Christian faith, is robbing Peter to pay Paul -- but only after taking a massive cut for himself, his family and his affiliates," the SEC said in its complaint, filed in federal court in Dallas. The agency said several Setser family members and affiliates "are active participants in the scheme or have unjustly received investor funds or assets purchased with investor funds."
Setser and the other defendants used money collected from investors to "support their own extravagant lifestyles," the SEC alleged, which included the purchase of houses, a yacht and a helicopter.
The indictment, returned earlier this month by a federal grand jury in Dallas, charged Setser and the other four defendants each with one count of securities fraud and two counts of money laundering.
The defendants were in custody Tuesday and hadn't yet hired lawyers. Several attorneys had been contacted about representing the defendants, including one who said Setser's wife denies the accusations.
Setser, who lives in the affluent Alta Loma section of Rancho Cucamonga, was chairman and chief executive of IPIC Investments Inc., a purported international trading concern, and related companies, authorities said. IPIC, initially based in Canton, Texas, later moved to Ontario; an affiliated company that supposedly handled real estate deals, Home Recovery Network Inc., was based nearby in Montclair. The companies could not be reached for comment Tuesday.
Also arrested were Setser's wife, IPIC treasurer Cynthia Faye Setser, 47, of Rancho Cucamonga; their daughter-in-law, IPIC accounting manager Charnelle Setser, 21, of Rancho Cucamonga; Gregory Setser's sister, Deborah S. Setser, 38, also of Rancho Cucamonga, who authorities say was involved in selling IPIC investments; and T. Thomas Henschke, 48, of Orlando, Fla., who managed IPIC's international operations and sold IPIC's stock to investors.
The defendants made their first appearance Tuesday afternoon before U.S. Magistrate Judge Stephen G. Larson in Riverside and were held in federal custody pending arraignment today.
Not indicted but named as a defendant in the SEC civil complaint was Charmaine Sears, 44, of Lake Elsinore, Charnelle Setser's mother.
San Pedro attorney Carmen Trutanich said he had been contacted about representing Setser. Trutanich said it was too early to comment on the case because he hadn't been officially retained and wasn't able to complete a review of the indictment.
Authorities said Cynthia Setser's case had been referred to Jan Handzlik, a defense attorney in the Los Angeles office of Kirkland & Ellis. Reached late Tuesday, Handzlik said he had been contacted but hadn't officially signed on to represent the defendant.
"We haven't yet reviewed the indictment," he said, "but she denies the charges."
According to the indictment, Setser and his wife had a federal tax lien filed against them in 1993 and filed for Chapter 13 bankruptcy protection, but never informed investors of those details. They also failed to disclose that IPIC forfeited its existence as a Texas domestic corporation in March 2002 for failure to pay taxes, the indictment said.
In addition, the SEC complaint named Eva Setser, 68, of Alta Loma, Gregory Setser's mother and IPIC's corporate secretary; and Larry Kuncl, 47, of Upland, Gregory Setser's brother-in-law and president of a manufacturing company that operated out of the IPIC offices in Ontario. The complaint doesn't accuse them of wrongdoing but seeks to recover investor funds they received, along with company records.
Times staff writer Kathy M. Kristof contributed to this report.