Preying on the faithful: Though Mormons often victims, LDS Church skips fraud-prevention event

Salt Lake Tribune ^ | May 2, 2010 | Tom Harvey

[Colofornian]

Southwick, Koerber, Hammons and Mowen -- a gallery of Utahns convicted or facing criminal charges for involvement in some of the state's biggest fraud schemes.

But the four represent only a sampling of the problem that has wracked Utah in recent years as the recession has pushed more schemes into the open.

Frustrated by the wave of fraud that by one estimate took $750 million out of Utahns' pocketbooks last year, regulators, law enforcement officials and attorneys are organizing a free "Fraud College" next month in Utah County for the public to call attention to the problem and to try to combat it.

But the one player that all agree has to lend its loud voice to the proceedings if they are to be as effective as possible will be largely silent -- the LDS Church.

This is Utah, after all, where The Church of Jesus Christ of Latter-day Saints claims about 60 percent of residents as members. Beyond the numbers, there is the church's organization into close-knit local wards led by male authority figures where members' social and religious lives revolve around shared beliefs in the sacredness and uniqueness of their religion.

Those characteristics make Mormons vulnerable to what regulators and government investigators label "affinity fraud" in which groups who through shared associations develop bonds of trust that can be easily exploited by con artists. Though other faiths are similarly vulnerable, that is particularly true in the insular Mormon culture of Utah.

"There's this notion that if you pay your tithing and do what you're supposed to do, the windows of heaven will be open to you and God will pour you out a blessing such that there's not room enough to receive it," said Keith Woodwell, a church member and director of the Division of Securities, the state's chief investigator of investment fraud. "So it's very easy for someone who has [fraud] as their motive to use that doctrine and say, 'Look, you're a member in good standing and you pay your tithing and you're entitled to be blessed.' "

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Choosing not to participate » But the church, after initially signaling to organizers that it would be a key player in the fraud conference that is drawing representatives of other faiths, has chosen not to send a high-ranking authority to speak.

A church spokesman declined to say why it was not participating.

Mark F. Zimbelman, a Brigham Young University professor of accounting who teaches a class about how frauds are committed, will be the LDS member on the interfaith panel at the Fraud College. But he said will not be speaking for the church.

The church's decision is a disappointment for organizers, who wanted a strong LDS presence to send a message about safe investments.

"I don't think any church has done enough, including the Mormon Church," said attorney Brent Baker, a former Securities and Exchange Commission lawyer and a specialist in securities fraud cases.

Discouraged by the level of fraud in Utah and the inability of government to deal with the problem, Baker and fellow attorneys, state regulators and others saw the Fraud College set for June 30 at Utah Valley University in Orem as a way educate Utahns and give them the tools to evaluate pitches and make decisions about whether to invest.

The sessions will include an interfaith panel in which representatives of several faiths are scheduled to participate. But organizers saw the involvement of the LDS Church as crucial, given the level of fraud perpetrated in its ranks and what many perceive as its muted response to the problem.

"I think more needs to be done" by the church, said Francine Giani, a church member and executive director of the state Department of Commerce. "A couple of years ago we saw a statement that was read over the pulpit that I was happy about, but we should see more and we should see it often."

In a written statement, LDS Church spokesman Scott Trotter said church leaders have been warning members for years about the dangers of fraud and get-rich-quick schemes. "These messages have been delivered over the pulpit in General Conference, in official letters from church leadership, and in articles found in official church publications," he said.

Even without an official LDS presence, Fraud College organizers think they will still be able to put on a credible event. The one-day session will feature panelists speaking on various aspects of investing and on investment fraud. Gov. Gary Herbert will be the keynote speaker. Spokeswoman Angie Welling said the governor agreed to participate because he's concerned about the issue.

"Too often Utahns are very quick to simply trust those people in their inner circles, whether it's through church affiliation or any other social or recreational group," said Welling, adding that the governor will talk about the importance of research before investing.

Barbara Bowden knows the pitch all too well. She and members of her family invested about $1 million with a former LDS bishop, mostly because of his standing in the church.

"Bill Hammons reached a great deal of people in the church, and I know he did perpetuate the fact that he was a bishop or had been a bishop and that was first and foremost your reason for trusting him,"said Bowden.

Hammons of St. George is facing trial this year on 10 felony fraud-related charges for allegedly helping bilk dozens of people out of tens of millions of dollars. Hammons, who denies he knowingly participated in a crime, was the largest fundraiser for VesCor Capital, the entity associated with what appears to be the biggest financial fraud case in Utah history.

VesCor owner Val E. Southwick, who is serving a lengthy prison sentence for his role, displayed LDS symbols in his Ogden office, and was known to sometimes push his Mormon temple recommend across his desk at potential investors. Southwick has been excommunicated, the church confirmed on Friday.

State regulator Woodwell would like to see the church treat fraud as a violation of as sacred relationship.

"I'd love to hear a very clear statement that this is a relationship of scared trust that you have with your ward members, stake members," he said. "And to abuse this relationship of trust, to take advantage of someone financially, is not just a crime but that it is really a reprehensible and an egregious abuse of that relationship. And it should be treated in the same way the abuse of other sacred relationships are treated. It's just like spousal abuse or child abuse."

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Worst in the country » Fraud is a long-standing problem in the state, stretching back decades as it ebbs and flows, coming back each time with a vengeance, said James Malpede, who Leads the FBI's white-collar crime unit in the state. Utah has lost its ranking as the top state per capita in fraud but it remains a huge problem.

"I'd say per capita it is one of the worst in the country," said Malpede.

How bad? The agency is mostly limiting itself to investigating cases in Utah involving $20 million or more.

"Most of what we're working on is $25 million and up, and a lot of what we're working on is $100 to $150 million and more," said Malpede.

Attorney Baker said he came up with an estimate of the amount of money Utahns lost to big fraud schemes in 2009 based on cases in which charges have been filed and those he knows of where no actions have yet been brought.

"I did a rough calculation of Ponzi schemes I saw over the last year that came through Utah and I would say it was at least $750 million."

Mike Hines, chief of enforcement at the Division of Securities and a 20-year veteran of fraud investigations in Utah, said state and federal officials are limited in what they can do in educating people about how to avoid affinity fraud.

"As I step back as a regulator I look at it this way. If the trust within the affinity causes the harm, the affinity has some responsibility in helping us solve the problem," he said. "As regulators, we can't do it. We can't catch their attention."

The Fraud College is intentionally being staged in Utah County, which in the past decade or so has become a center for fraud in the state.

"There's a much higher percentage of cases in Utah County or that touch Utah County," said Malpede of the FBI, who was assigned to Provo for a time.

Rick Koerber, who has pleaded not guilty to 20 fraud-related charges in federal court, operated out of Utah County with an real estate investment operation the government says raised at least $100 million. Jeffrey Mowen also was a Utah County resident. He is in jail waiting trial on charges of fraudulently taking about $10 million of investor funds.

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Focus on Utah County » Officials say there are several reasons for Utah County's heightened profile. One is the growth of wealth over the past 20 years as the economy prospered before the recession and the corresponding rise in home prices. This left many would-be investors with the belief they had available funds that could return big profits.

Attorney Mark Pugsley, who handles securities cases and recently served on the advisory board for the Division of Securities, told about one man who was soliciting investments for Mowen in Utah County that is 77 percent LDS.

"They just used the ward list and went straight down and made phone calls to everybody. Next to each name where they successfully raised money they wrote a dollar figure in the margin," said Pugsley, who also blogs about fraud in Utah at utahsecuritiesfraud.com.

Two fraud-related phenomenon particular to Utah and more so to Utah County are the recruitment of returned missionaries into what turn out to be illegal activities and the creation of investment programs based on multilevel marketing models.

Returned missionaries often come back with enhanced communications skills and thick skins but in recent years have been met with fewer employment options because of the recession, Baker said. Other young people also are caught up in scams when they are recruited to raise money for businesses, he said.

"You have this 18- to 25-year-old segment that frankly is being recruited as lieutenants and ultimately perpetrators or perpetuators of the fraud," he said.

He would like to see the church debrief missionaries about the dangers of being caught up in a fraudulent activities as they seek employment after their church service.

Regulators say another type of fraud particular to Utah County involves multilevel marketing in which participants recruit others into an investment, who then recruit still others, with each level receiving a return from the investment of those recruited after them.

Plenty of companies use that marketing plan legitimately, but recruitment of people into some types of "business opportunities" within the multilevel marketing business model often crosses legal lines, and participants become victims and participants in the crime at the same time.

"In the securities industry you rarely hear of multilevel marketing of fraud programs," said state regulator Hines. "But [in Utah] we hear of them with regularity."

All of this fraud is taking a toll not just on individual Utahns but on the state's economy and its future. Millions of dollars have been drained that could have gone to legitimate businesses or even into relatively safe investments.

"All of those hundreds and hundreds of millions of dollars leak out of the legitimate investment system and just disappear," said attorney Baker. "That can't go to fund the company that has the next cure for cancer or the new clean energy company, nor can it go into safer market-based products like mutual funds."

[svcw]

To answer the next question coming up : yes.

[Tennessee Nana]

And the question is...

LOL

[Tennessee Nana]

he teaches unto her the law of my priesthood, as pertaining to these things, (D&C 132:64)

So the priesthood holders must be polygamists ???

Oh thats rich...

So SLC has NO legitimate priesthood holders...

If theyre not in polygamy theyre not priests according to Joey Smiths mormon doctrine...

ROFLMBO

[Tennessee Nana]

WOW its amazing whats really in the “quad” isnt it ???

[Tennessee Nana]

I’ve been mowing my lawn today...

(Push mower...though the kids have been griping for years for me to get a rider...)

I FEEL good right now...great exercise...

The ground is soaked but with all that rain last night...

If i hadnt done some of it today, I’ll have a jungle again by tomorrow...

Its hot and sunny today...

The grass is growing rapidly as I type...

:)

[Elsie]

Thanks for that bit of text from the D&C.

And what is CRAZY about these threads; is that MORMONs moan and complain when we ANTI's post THEIR Scripture!

[Elsie]

according to the law when I commanded Abraham to take aHagar to wife. (D&C 132:65)

Read your BIBLE, MORMONs (it's part of your standard works) and you will NOT find thsat GOD commanded Abraham to do any such thing.

His WIFE Sari (bless her soul, for wanting to help GOD out with His slow coming Promise) offered her slave to him!

[Elsie]

So the priesthood holders must be polygamists ???

Well; if you BELIEVE that GOD really gave that scripture to Joseph Smith, then YES.

[Elsie]

Me, too!

Mine is PUSH (help with the worn out self-drive mechanism) to get around the small things so the big rider can come into play.

After I did the grass part, I went to the woods to whack down the spring plant jungle that is in there.

Found a few more dead trees that need to come down.

(I’ll bet that UB won’t cut ANYthing GREEN at his place!)

[svcw]

,-)

[Jack Hydrazine]

Do you have a Mormon ping list by any chance? I’d like to be on it and read those complaints when they are posted.

[Utah Binger]

We had three or four cottonwood trees come down this past winter with the global warming five feet of snow. Thanks Al.

Anyway, our hired hand (me) is still working on cutting them up and hauling them away. The Kubota has been very useful. Finally we have started to see some green and even cut the grass once already. Turned on the sprinkler systems last week and the next night it went down to 15 degrees and froze and broke all of the exposed bush sprinkler heads. All the apple trees are showing some color this week but I fear the frost.

Nothing like the good folks in Tennessee are going through right now.

BTW I think I'll buy some property in Fredonia Arizona. Two reasons: 1) So I won't have to answer that question "Where you From?" I say Utah, they say "you a Mormon?" and 2) So I can develop a small retirement community for folks just like me that want to support the efforts of Arizona. Land is very inexpensive there plus the Arizona legislature is actually made up of normal people.

Only twenty minutes away.

[truth_seeker]

Gee. I am not nor have ever been a Mormon.

I wasn’t trained by Xerox or IBM or some other superior sales training system.

I was however involved with a big corp. that routinely lied to clients, as a matter of course.

Arthur Andersen was crooked; just like Enron.

A few years ago financial institutions intentionally loaned money to people they had strong reason to expect would not/could not repay.

Clerical workers inside these firms were promoted based on proficiency making files of forged and fraudulent documentation, for said loans.

The government encouraged this practice. Rating agencies took front end fees, for groups of such loans. Accountants (CPA firms), Attorneys, Securities Brokerages all took front end fees for such loans securities.

Tammy Faye Bakker and her streaming makeup, and Benny Hinn should be warning enough to not trust every “spiritual” solicitation, from church people living in splendid oppulence.

IMO America and its institutions - corporate, governmental and others - have become untruthful as a basic characteristic.

Dishonesty is as American as apple pie.

[Colofornian]

according to the law when I commanded Abraham to take aHagar to wife. (D&C 132:65) Was that Joey Smith who commanded ???

(Yeah, what a sea-change of Smith a dozen or so years before that...)

March, 1830. Smith is reciting an early "commandment" (he called it the "Book of Commandments" when it was published in 1833...before its name was changed to "Doctrine & Covenants"...Smith is dictating Chapter XVI of that "book", vv. 25:
I command you, that thou shalt not covet thy neighbor's wife.

By 1844, Smith had married about 11 already-married women! My how things changed so fast for Joey.

[greyfoxx39]

Check your FReepmail

[Elsie]

We had three or four cottonwood trees come down this past ...

I had one take out our power just 2 hours ago!

Well... not a COTTONWOOD...

I was just working in the barn as a front moved thru and I thought the power problem was a LONG way off.

I fired up the generator and waited.

My Daughter-in-law left for town to get some food and called b ack and said a tree had ripped out the line; just about the same time the repair crew had disconnectged the broken wires.

As you can see; I'm up and running again.

[Utah Binger]

As you can see; I'm up and running again.

Let the Elsiethon begin!

[Tennessee Nana]

I had two huge centuries old Oak trees in my front yard...

They were much higher than the house..

I called my property Two Oaks...

About 15 years ago we had a tornado and one of the trees split in half...

It fell on an angle to the house so luckily it missed the house by about 4 feet...

The remaining half battled on bravely...

After about 5 years the other half fell down in another storm...

So now my place is called One Oak...

BTW if I lived in CA the whackos would have been here to give the tree a funeraL...

:)

[Utah Binger]

The large cottonwood, second from the right side fell and wiped out the side of the large poplar tree in the middle, barely missing the Living History Museum. Also when it fell it caused the bank of the irrigation ditch to collapse. I was certainly happy that all my Mormon neighbors immediately came to help. That was because the irrigation ditch stopped running and everybody down stream had no water. Courtesy Carolyn Lord who made the watercolor in 1999.

[Elsie]

When we moved here 5 years ago, there were a couple of GIANT oaks on the highway route. Just those two, in a plot of grass - close enough for branches and roots to intertwine.

They were MASSIVE! I'd guess two grown men could barely encircle them.

At night, there was a sign about 200 feet away that was lighted. When the evening mist/fog was right, their silhouettes would loom in the darkness; being backlit by the light that missed the sign.

One day, on my trip to town, I saw that one had fallen: away from the other.

After a couple of days, the fallen one was gone: nothing but some chips and sawdust to show it had ever existed.

I used to see the single one, standing so proud still, but alone. Alone now, to conjure up tree memories of it's sibling (no doubt), remembering the storms they'd survived together - the icy weight of winter sleet, the leaf rending hail of the midwest. And yes, the warm days of spring and the the squirrels and the birds and the shedding of fall leaves.

How could I get teared up over a dumb tree?

I guess MY mortality was (is) looming as well.

Someday I'LL be gone. Will there be enough chips and sawdust left of me to bring back memories?

The now single tree stood there for two more years, silently being sentry over the corner intersection until, it, too, gave up the ghost and toppled to the ground.

How so like mates who've been left behind when the other passes. They, too, soon join the one with which so much of their life was with.

Why have I been permitted to see those trees?

Why hadn't they fallen just five years sooner? After all, that would be just a blink in their over 100 year existence - years that saw young men topple other trees for their field of crops - crops put in with horse and hand.

Years that saw the dirt road turn to gravel, to asphalt - the farms maintained by machines now - the land giving way to homes and families.

Last night I lost a tree. It took out the power line for about 5 of us folks - 5 families.

A temporary disruption in our lives that served to emphasize the fickleness of it all.

---

Why am I sounding like Solomon this morning?

Go feed the goats and release the chickens and enjoy GOD's blessing in the time I have left.

L8R