Preying Through the Pulpit

Bishop Edwin J. Derensbourg thought the new parishioner with the Rolls-Royce and flashy clothes would bring a measure of prosperity to his modest United Christian Fellowship church in Palmdale.

The parishioner, Phoebus Vincent Smith, said he wanted to make African Americans like himself rich through savvy investments. Derensbourg didn’t know much about investing, but he reasoned that if “Mr. Vince” could help members of his black church prosper, his collection basket would reap dividends.

Derensbourg invited Smith to address the men’s group at the church and became the first of about 10 in the congregation to invest. Within six months, the pastor said, his investment had paid back thousands of dollars in cash, and he was driving around in a blue Rolls-Royce, a gift from Mr. Vince.

A few months later, the minister said, the money petered out, Smith became hard to find, and his conscience was gnawed by the belief that he had become an evangelist for a scam.

“He was taking care of me so other people would get into this thing,” Derensbourg said.

Law enforcement officials say the rueful bishop has plenty of company these days: Promoters of get-rich-quick scams have increasingly targeted black congregations, often offering help with church finances and lining pastors’ pockets as steps toward fleecing the faithful. Some operators have taken to pulpits themselves.

“It’s a particularly insidious type of fraud because it goes right to the heart of the trust relationship that people have with each other,” said Texas Securities Commissioner Denise Voigt Crawford. “We see it a lot in African American churches.”

All races and religions are vulnerable to con artists who play up ties to tightly knit groups, according to an association of state securities regulators, which in 2001 warned of a rise in faith-based scams. In Southern California, these so-called affinity schemes have targeted Mormons, Scientologists, Jews, Korean immigrants and devotees of Christian televangelists.

African Americans may be especially vulnerable, however. A study released by the Federal Trade Commission this year found that among major ethnic and racial groups, only American Indians fall victim to financial fraud more often than blacks.

The study didn’t address why this occurred, but fraud experts say African American churches are targeted because many of their members have accumulated savings but have limited experience with putting that money to work.

“Our community is not as educated about investments,” said Craig York, an African American investment counselor with Los Angeles-based Operation Hope, a nonprofit organization that provides economic literacy programs in urban areas.

Just how bad the problem has become at black churches is unclear, said James Kohm, a consumer fraud expert for the Federal Trade Commission. But so many North Carolina congregations were targeted recently that state Atty. Gen. Roy Cooper organized a “church scam summit” last summer.

“Exploiting the bonds of trust that pastors have with their congregations is a cruel and effective trick,” Cooper said. “People believe in their pastor, and when their pastor gets taken in by the fraud, the whole church becomes vulnerable.”

In November, federal regulators shut down an alleged investment fraud that they say raised $26 million by targeting black churchgoers in Southern California. Officials said more than 1,000 people were duped into investing after being promised returns of 20% the first month and 10% a month thereafter.

The operators preyed on congregations including West Angeles Church of God in Christ and First African Methodist Episcopal Church, both in Los Angeles, and Faithful Central Bible Church in Inglewood, said Lisa A. Gok, an attorney with the Securities and Exchange Commission in Los Angeles.

In a civil suit, the SEC said Christiano Hashimoto of Riverside hired black sales agents who promoted the scheme by word of mouth at the churches and by feting hundreds of African Americans at a Ritz-Carlton Marina del Rey dinner.

Hashimoto and his attorneys did not return phone calls. He and several executives at his companies declined to provide information to investigators, the SEC said in a court filing.

Bishop Charles E. Blake of the West Angeles church expressed dismay that people would fall for what he said were age-old cons.

“Everybody should be in general agreement that anyone, anywhere, promising 20% the first month and then 10% a month is telling you something that’s too good to be true,” Blake said.

“Mr. Vince” Smith and his wife, Saundra, a onetime member of Blake’s church, were making just those kinds of promises when they arrived in the Antelope Valley a few years ago, according to a lawsuit filed in Los Angeles County Superior Court.

Investors were told that they could double their money in as little as two months, according to the suit, which was filed by two couples who met Smith through the Antelope Valley Christian Center in Lancaster.

The church’s pastor, the Rev. Tom Pickens, recalls Smith driving around town in older Rolls-Royces and Bentleys, often dressed in furs and floppy hats.

“Being a pastor, you see all kinds of people coming to your church, and you do your best not to judge people,” Pickens said. “But when I first saw him I thought, ‘Hmm. I better watch this guy.’ He must have had a ring on every finger of each hand. He was like money walking.”

Smith attended a church retreat at a Valencia hotel in August 2002, where he recruited Monica and Vince Bias as investors and later agents, according to the suit they filed July 20. The suit, also filed by church members Terry and Earl Johnson, alleges that thousands of victims invested millions of dollars with the Smiths. It doesn’t specify how much money was lost, but it accuses the Smiths of repeatedly breaking promises to repay the investors with interest.

The suit claims the Smiths collected millions of dollars on “the pretext of investment in real estate developments.”

The attorney for the Smiths, John Williamson of Simi Valley, said that his clients were indeed investing in real estate and that Phoebus Smith, who has filed for divorce, plans to repay the investors with profit from a planned 80-home housing development in Lancaster.

In his response to the suit, Williamson denied all its allegations and contended that the plaintiffs, as agents for the Smiths, had “authorized and/or ratified” the actions the suit describes and have “unclean hands.” Superior Court Judge Teresa Sanchez-Gordon ordered the dispute into mediation, with trial set for May 2006 if no settlement is reached.

The city of Lancaster has given tentative approval for the housing development, according to public works chief Randy Williams, but a long list of plan details must be submitted and approved before ground can be broken. Westlake Village developer Craig Morse, a new partner of Smith’s, said he expected construction to begin by spring.

Smith should make enough in the coming two years “to pay everybody back and still put a little money in his pocket,” Morse said.

Det. David Lingscheit of the Los Angeles County Sheriff’s Department is skeptical. Lingscheit said he began investigating the Smiths last year in response to complaints and seized their records during a search of their office. He said he found “no evidence of any profits from investments -- or any investments at all,” except the undeveloped Lancaster land.

Lingscheit served a search warrant in November on a Quartz Hill office that Smith had used and found records of thousands of investors around the country. In the end, the detective said, a wide range of people, not just black Christians, were burned in “a straight-up Ponzi scheme” that used money from new victims to pay off earlier investors.

No criminal charges have been brought against the Smiths. Neither Phoebus Smith nor his estranged wife could be reached for comment.

Williamson denied that his clients were running a Ponzi scheme. He said the Lancaster housing development, after being delayed by problems including flooding concerns and a recently lifted lien on the property, had been greenlighted.

The Superior Court lawsuit includes as exhibits more than a dozen fliers that Smith circulated for various enterprises, including Mr. V & S Investments and the Antelope Valley Banking System. Several emphasized that participants could boost their returns by recruiting other investors.

One flier targeted church leaders, saying ministers could use profit to pay staff salaries, launch media ministries or buy robes for the choir.

Another took the opposite tack, seeking investments from “players, pimps, macks, hustlers, ballers, slangers, bangers” and others “so you can be free from illegal activity.”

As the buzz about Smith grew, the Rev. Pickens said he became a doubting Thomas. Smith paid clients in cash, Pickens said, and offered him the use of a Rolls-Royce. Pickens said he declined the car and began telling congregants to steer clear of Smith, who left his church and joined Derensbourg’s shortly afterward. Despite his warnings, more than a dozen of his church members invested and lost money, Pickens said.

Roger Egans said it was the allure of a Rolls-Royce -- and faith in a church acquaintance -- that led him to Mr. Vince.

Egans, a postal worker and aspiring minister, said he was down on his luck and living in a Pomona trailer park when he saw an ad in a black church newspaper promising to give “classic Rolls-Royces” or $20,000 in cash to eight “men and women of God” who promoted investments for the Smiths. “By the time I called in, the secretaries said they already had given away one Rolls-Royce,” he recalled.

After a phone conversation with Saundra Smith, whom he had met years before at West Angeles Church of God in Christ, Egans said, he decided to entrust her with $2,362 -- “about all I had” -- on the prospect of getting paid nearly five times that much over 14 months in a “home buyer” program.

“I thought that if it worked, it was the thing that would get me out of the trailer and maybe help get me a building to start my own church,” Egans said.

In the 18 months since, he said, he has yet to earn a cent.

At Phoebus Smith’s last known business address in Quartz Hill, Danielle Dvorak recalls a steady stream of people pounding on the locked door of his office suite, which had the title of Rich Men’s Club stenciled on the window.

Dvorak, a receptionist for a construction company next door, said she never saw the door being answered. Sometimes, she said, the visitors would come to her office to see if they could get any information.

“The people would come in here crying, talking about trusting the wrong people. They said God made them do it,” she said.

In September, Smith stuck a note on the office door saying he would be back in a week, although Dvorak said she never saw him return. The note ended: “Thank you and God bless.”

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Times researcher John Jackson contributed to this report.