Category Archives: LDS Church

Fleecing the Flock: The Big Business of Swindling People Who Trust You

Posted on by Mark Pugsley

This a repost of a great article on affinity fraud that appeared in this week’s Economist Magazine.

____________________________________________________

Fleecing the flock

The big business of swindling people who trust you

Jan 28th 2012 | SALT LAKE CITY | from the print edition

WITH a nudge from their pastor, the 25,000 members of the New Birth Missionary Baptist Church near Atlanta opened their hearts, and their wallets, to Ephren Taylor. And why not, given his glittering credentials? Mr Taylor billed himself as the youngest black chief executive of a publicly traded company in American history. He had appeared on NPR and CNN. He had given a talk on socially conscious investing at the Democratic National Convention. Snoop Dogg, a rapper, had tapped him to manage a charitable endowment.

So when Mr Taylor’s “Wealth Tour Live” seminars came to town, faithful ears opened wide. Eddie Long, the mega-church’s leader, introduced Mr Taylor at one event with the words: “[God] wants you to be a mover and shaker…to finance you well to do His will.” Mr Taylor offered “low-risk investment with high performances”, chosen with guidance from God. Continue reading →

New Criminal Charges Filed Against Rick Koerber

Posted on by Mark Pugsley

The U.S. Attorneys has office filed a new indictment against Rick Koerber, who is alleged to have run a Ponzi scheme that took in more than $100 million from Utah investors.  Last week a federal grand jury returned a new 20-count indictment alleging that Koerber engaged in widespread investment and tax fraud.

According to an article in the Salt Lake Tribune last week, this new indictment follows a federal judge’s decision in July to throw out a key piece of evidence in Koerber’s case.  ”Assistant U.S. Attorney Stewart Walz previously said the ruling by U.S. District Judge Clark Waddoups affected a “significant” part of an existing 22-count indictment alleging fraud, money laundering and tax evasion by Koerber in his operation of FranklinSquires Cos. and related real-estate investment businesses.”  This ruling meant that prosecutors had to file a new indictment containing small changes to a section of the indictment describing the alleged scheme and artifice to defraud. Continue reading →

Yet Another Local Ponzi Scheme Indictment – Newport Financial

Posted on by Mark Pugsley

Michael Smith and his son Quintin Smith have each been charged with six counts of securities fraud and one count of pattern of unlawful activity, all second-degree felonies, in connection with a furniture loan company they owned called Newport Financial.  According to a Salt Lake Tribune article published today they have been accused of “bilking investors of hundreds of thousands of dollars — one while serving as counselor to an LDS stake presidency — in a fraudulent furniture-financing scheme that targeted, among others, a prominent University of Utah football coach.”

The indictment alleges that the Smiths promised a return of 18 percent to gain investments of at least $1.8 million from 18 victims.  Their biggest investor was Norm Chow, the offensive coordinator for the University of Utah’s football team, who invested $500,000. Continue reading →

Lessons to be Learned from Jeffrey Mowen

Posted on by Mark Pugsley

Tom Harvey reported in the Salt Lake Tribune yesterday that Jeff Mowen finally pled guilty to one count of wire fraud and will spend ten years in prison.  I have not previously written about Mr. Mowen, but now that he has pleaded guilty I feel like I can write about it.  I met with Jeff Mowen several times when he was trying to hire me as his defense attorney.   He never actually hired me and he certainly never paid me a dime, but I am not going to reveal any potentially privileged communications in this post. Continue reading →

The Dangers of Being a “Finder” – Another Conviction in the VesCor Ponzi Scheme

Posted on by Mark Pugsley

Yesterday William J. Hammons, 66, was convicted of seven of nine criminal charges by a jury in St. George, Utah.   Hammons was one of the largest finders or feeders of investors to Val Southwick and his company VesCor, which is now known as the largest Ponzi scheme in Utah history.  He recommended the investment to members of The Church of Jesus Christ of Latter-day Saints in Las Vegas, where Hammons served as a bishop, and in St. George, Utah.  The St. George investors included neighbors, church members, Hammons’ partner and his parents-in-law.   What he did not tell these people was that in exchange for these referrals he received substantial “referral fees” or commissions from Val Southwick.

In his defense, his attorney, Clifford Dunn (who was an interesting choice because he is not an experienced criminal defense attorney), tried to convince the jury that Mr. Hammons was just an innocent bystander.  According to the Salt Lake Tribune, Hammons testified “that he was unaware that VesCor was a fraud, that he didn’t seek out investors and never officially worked for the company.  Instead, he cast himself as just another investor who was paid only referral fees.”   Continue reading →

Man dupes friend, others out of more than money – ksl.com

Posted on by Mark Pugsley

This is a repost of a story that appeared yesterday on ksl.com.

December 16th, 2010 @ 7:33pm

By Jasen Lee

SALT LAKE CITY — For much of his life, Eric Nelson had been a person who saved and planned for his family’s future.

After doing so diligently for more than 20 years, he now finds himself trying to recover from “acute financial stress” brought on by his dealings with an admitted fraudster — a man who turned the lives of Nelson’s family and many others upside down by stealing tens of thousands of dollars from each, not to mention their hopes for better lives.

On Dec. 20, Fasi Filiaga Jr., 49, is scheduled to be sentenced after pleading guilty to four counts of securities fraud. In March, Filiaga was charged with misusing over $2 million in funds from investors, including Nelson, who believed they would receive high returns using trading techniques they would learn from Filiaga.

Nelson said he lost thousands, which has put an intense financial strain on his family, though he is “solvent.”

“I’ve put myself in a bit of a financial crisis (and) I’m still in it,” the 46-year old Lindon father of four explained. “With … some hard work I’ve been able to do some restructuring.” Continue reading →

Do religious people make easy targets for scams?

Posted on by Mark Pugsley

The Salt Lake Tribune published an article today on whether religious people make particularly easy targets for scam artists.  The article concludes that they do because “a swindler who professes the same faith, or belongs to the same congregation, has an easy time of earning trust, however misplaced. Duped investors, meanwhile, also hesitate to suspect or report on one of their own.”

The author also quotes a professor from Notre Dame named David E. Campbell,  co-author of the new book “American Grace: How Religion Unites and Divides Us,” who concludes that religious people tend to be more trusting of others.  In an interview, Campbell said “the strong social networks found in some faith communities, such as ‘the tight bonds among Mormons,’ seems to make them especially vulnerable to fraud.”

Just more confirmation of what I have been saying in this blog from day one.

© 2010 Mark W. Pugsley, all rights reserved.

Support Senator McAdams New Fraud Litigation

Posted on by Mark Pugsley

If you or a family member have been affected by investment fraud, please call your Utah House and Senate representatives and urge them to support Senator McAdams‘ bills.  I have met with him several times to discuss these bills and I think he is really on the right track.  UPDATE: On September 17th The Salt Lake Tribune issued an editorial supporting these bills.

As reported by the Salt Lake Tribune today, State Senator Ben McAdams is proposing four bills designed to crack down on scam artists and securities fraud in Utah:

  1. A bill to strengthen penalties for defrauding a vulnerable adult such as someone with dementia and expand the scope of felony penalties for so-called affinity fraud to include relationships of “special trust,” including relatives, religious leaders, landlords, employers and doctors.
  2. A bill to reward whistle-blowers who have knowledge about companies that are defrauding people (similar to the whistleblower provisions in the new Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,).
  3. A bill to expand the fair-credit act to apply more broadly in mortgages to protect consumers.
  4. A Medicaid change allowing private litigation against health providers who bill for services they never provide, such as wheelchairs or crutches.

I think these are terrific ideas, and the Utah Division of Securities is supporting them as well.  In particular I like the one that provides for enhanced penalties for religious leaders (among others) who use their positions of trust to perpetrate fraud on others.

  • Final Text of Senate Bill 101
  • Final Text of Senate Bill 100

    • Former Mormon Bishop and Art Collector Will Spend 12 years in Prison

    Posted on by Mark Pugsley

    Today there was yet another article about an individual who held a position of trust in the LDS Church and used that position to commit fraud.  U.S. District Judge Marcia Krieger sentenced  Shawn Merriman to 12½ years in federal prison this afternoon for defrauding 67 victims out of $21 million.  Merriman was a Bishop in the LDS Church in Colorado and raised the money from friends, neighbors and fellow church members.  The government seized roughly $4 million in fine art , antique cars, sports memorabilia and animal trophies collected on his safari trips when they arrested him.

    One of my favorite parts of this story is the fact that before he was caught Mr. Merriman put together some sort of a traveling exhibit for his art called “The Renaissance of Faith in Art,” which included about two hundred prints by Renaissance artists including Rembrandt van Rijn, Albrecht Durer, Lucas van Leyden and Peter Paul Rubens.  The exhibit was primarily displayed in LDS wards and stake centers in Denver.  Even the Mormon Times wrote a glowing article about this guy and how his art collection promotes the Church.  He has now been excommunicated.

    The SEC’s Complaint against Mr. Merriman can be read here.

    Good Article on Affinity Fraud Among LDS Members

    Posted on by Mark Pugsley

    There was a great article in the Las Vegas Review Journal today about the problems of affinity fraud among LDS Church Members titled “Thieves in the temple: How ‘affinity fraud’ hurts LDS church members.”  Definitely worth a read.  Among other things, he writes, “In Utah, fraudsters exploiting a connection to the LDS church and its close-knit families have separated an estimated $1.4 billion from victims in recent years, according to the state’s multi-jurisdictional Securities Fraud Task Force, which currently is working more than 100 cases. . . Fraudsters commonly start veiled sales meetings with prayers, sometimes spending as much as 90 percent of a pitch discussing Scripture before turning to the business at hand: separating squares from their savings by promising them, for instance, up to 10 percent monthly returns on their “risk-free” investments. In one case, a law enforcement source reports watching a rain of tears flow from one fraudster’s eyes as he described the profits investors might put to good use in their lives and their religion.”