Sen. Chuck Grassley’s Media-Based Ministries “witch hunt” is over! To many prayers are answered…

November 2007 was when it began – the “witch hunt” that is – started by Sen. Chuck Grassley, R-Iowa, when he sent a massive informational request to six major media-based ministries.

Substantial financial inquiries were sent to:  Joyce Meyer Ministries, Benny Hinn of World Healing Center Church, Randy and Paula White of Without Walls International Church, Eddie Long of New Birth Missionary Baptist Church, Kenneth and Gloria Copeland of Kenneth Copeland Ministries, and Creflo and Taffi Dollar of World Changers Church International/Creflo Dollar Ministries.

When the Grassley issued his extensive financial requests cries erupted from many in the various segments of the faith based community.  Claims that Sen. Grassley was over reaching rang far and wide and many suggested that the separation of church and state was at play here.  I, as a business ethics speaker, on the other hand felt that full disclosure was appropriate.  If you had nothing to hide, then why resist?  Obviously, some listed above agreed.

The issue Grassley was investigating was weather the tax exempt status of the ministries should be revoked based on the lavish lifestyles ministry leaders lead.

According to a CNN article written by Eric Marrapodi:

The review by the committee did not impose new rules on the religious organizations or suggest they be stripped of their tax-exempt status. But it did bring to light compensation practices that may raise eyebrows in the non-profit community and lead to a discussion of new tax policies for religious organizations.

“The staff review sets the stage for a comprehensive discussion among churches and religious organizations,” Grassley said in a prepared statement. “I look forward to helping facilitate this dialogue and fostering an environment for self-reform within the community.”

SO WHO COMPLIED?

Two of the six ministries contacted were willing to fully comply:  Joyce Meyer Ministries and Benny Hinn of World Healing Center Church.  Both groups reported that they were working on reforming financial practices of their respective ministries.

Again the CNN states: “Committee staff members Theresa Pattara and Sean Barnett wrote in the staff review, “The reforms undertaken by Pastor Hinn and Joyce Meyer are extensive and are to be commended.” Joyce Meyer Ministries, based in St. Louis, went so far as to join the Evangelical Council for Financial Accountability.”

Randy and Paula White of Without Walls International Church, Eddie Long of New Birth Missionary Baptist Church, and Kenneth and Gloria Copeland of Kenneth Copeland Ministries submitted incomplete responses to the senator’s questions.

Atlanta-based Creflo and Taffi Dollar of World Changers Church International/Creflo Dollar Ministries did not participate at all, declining the senator’s requests, according to released correspondence between Grassley and Dollar’s attorneys.

GRASSLEY REPORT FINDINGS:

A 61 page report was presented and can be found here –  SFC Staff Memo to Grassley re Ministries 01-06-11 FINAL.

“While the majority of churches and religious organizations operate with policies and procedures that make them accountable to their members, it is the small minority that don’t that are subject to scrutiny by the members and the public, including the press. These outliers present tax policy issues for consideration,” the review said.

Grassley made the following comment as this phase of his worked seemed to come to an end, “The challenge is to encourage good governance and best practices and so preserve confidence in the tax-exempt sector without imposing regulations that inhibit religious freedom or are functionally ineffective.”

QUESTION:

Do you think that the actions taken by the six ministries was appropriate and sufficient?

YOUR COMMENTS ARE WELCOME!

Former Pastor Vaughn Reeves sentenced to 54 Years in Prison for Religious Ponzi Scheme!

Former pastor Vaughn Reeves, a southern Indiana church financier was sentenced to 54 years in prison for pocketing millions of dollars that investors believed would be used to build churches.  Oh God…another Ponzi scheme!

While his attorney Dale Webster said, “There’s going to be an appeal on a lot of grounds,” investigators said Reeves and his three sons used their now-defunct company, Alanar, and sales pitches that included prayers and Bible passages to dupe about 11,000 investors into buying bonds worth $120 million secured by mortgages on construction projects at about 150 churches.

OK…so what happened?  Well…according to court documents, Reeves and his sons diverted money from new investments to pay off previous investors, pocketing $6 million and buying two airplanes, sports cars and vacations.  A classic Ponzi scheme – using new money to pay off prior commitments.  Prosecutors have said the case was a prime example of affinity fraud, in which scammers prey on people who share a common interest, such as religious affiliation, ethnicity or age.

Actually, in my analysis – the folks who were scammed fell into the PIT.  In other words, they fell prey to three components that make it easy for victims to become victims.  Promise – Illusion and Trust.  In this case, the trust was based, in part, on the fact that folks trusted Reeves et. al. to do what they said, after all it was done in the name of religion – God.

According to the Indiana Business Journal – “What they did in their company hurt a lot of people,” said Jack Newman, 73, of Terre Haute, a retired vice president of marketing who said he invested about $26,000 with Alanar and so far has recovered just 20 cents on the dollar. “Justice needed to be served.”

One of the victims who testified at Tuesday’s sentencing hearing said he wasn’t able to buy health insurance after investing $600,000 in church bonds from Alanar, Sullivan County Prosecutor Bob Hunley said. As a result, Steve Duncan testified that he went blind after developing an eye condition that would have been preventable.

Sentenced to consecutive six-year terms for each of the nine fraud counts, Hunley alleged that he victimized about 2,900 investors who lost a total of $13.1 million.  Among aggravating factors, Special Judge Dena Martin found Reeves targeted people over age 65 and used religion to influence them, Hunley said.

Alanar used a modified Ponzi scheme in which it diverted investors’ money from their building projects to speculative investments and to interest payments on other bonds, according to the Indiana Secretary of State’s Office, whose Securities Division assisted prosecutors in the case.

Alanar encouraged church members to sell the bonds to fellow congregants using sales pitches that included prayers and Bible passages.

“Never sell the facts, sell warm stewardship and the Lord,” Alanar training materials said, according to the Securities Division.

It makes no difference from what walk of life we come, people (not all thank God) will find ways to dupe or scam others.  Often I am asked in various media interviews what people can do to avoid becoming a victim of a Ponzi scheme like this.  The answer is easy – in a sense – (1) don’t fall for offers that seem ‘too good to be true’ – that is the first classic sign of a scam; (2) check out the documentation and do your due diligence – don’t fall for the illusion of a good con artist (they are not called that for nothing) and (3) keep a healthy distance from any one you’d invest your funds with.  The closer they are to you and the more that ‘trust’ is a factor, the more important it is to check it from every angle.

Reeves like Bernie Madoff will likely die in prison.  That’s a steep price to pay for some life luxuries that are short lived.

YOUR COMMENTS ARE WELCOME!

What have all the Ethics gone? Seems that Fraud is rampant! Business Ethics expert Chuck Gallagher comments

All too often I’m asked, especially as we review this past year on the anniversary month of the disclosure of Bernie Madoff’s fraud, whether fraud should decrease since we are more focused on ethics and ethical choices. Unfortunately, as I see it the answer is a resounding no!   Yet, the Ethics Resource Center in their new 2009 biennial National Business Ethics Survey reported a surprising conclusion:

We behave better in bad times.  “Contrary to what one might expect, misconduct declines in turbulent economic times and rises when the pressure’s off,” the report says.  When asked about specific abuses or ethical lapses – such as misusing company resources, lying to outside stakeholders or falsifying time or expenses – a smaller percentage of U.S. workers observed problems this year compared with the 2007 survey, taken before the recession began.  “Yet our research suggests that the improvements in ethical conduct will be temporary,” warned the ethics center’s CEO, Patricia Harned.

As I review ethics issues weekly I must say that I have a hard time believing in the validity of their survey.  Just look at these stories reported on here the first two weeks of this month.

Patricia Wilson, 57, of Draper, Virginia, has pleaded guilty to embezzling more than $167,000 from the Memorial Christian Church where she had served as the church bookkeeper for 9 years. Prosecutors alleged last April that Wilson diverted most of the monies from the Church’s building fund but also from it’s general fund.

Casey Jane Goebel, of Indio, California, was arrested last week for allegedly embezzling at least $250,000 from Hyde’s Air Conditioning where she had been employed as a bookkeeper. According to authorities, Goebel’s thefts ocurred between August 2007 and July 2009

Robin K. Ramey, 48, of Huntington, Ohio, pleaded guilty to charges she embezzled some $185,000 from the Huntington National Bank where she was a longtime employee, ultimately rising to the level of supervisor. Ramey caused at least 86 wire transfers in bank funds to be sent to her personal checking and saving accounts. If the plea agreement holds, Ramey will be ordered to spend two years in prison and repay the bank. She is scheduled to be sentenced on January 21, 2010.

Jessica Harmon, 32, of Lowell, Michigan, has been charged with embezzling more than $100,000 from a unnamed local law firm where she had been employed apparently in a bookkeeping position. The thefts reportedly occurred over a 3 year period. Specifically, Harmon faces charges of embezzlement of more than $20,000, uttering and publishing and using a computer to commit a crime. Harmon, who had been employed by the law firm for 10 years, allegedly made unauthorized withdrawals from firm accounts and wrote herself extra pay checks.

Capt. Michael Dung Nguyen, 28, of Beaverton, Oregon, pleaded guilty Monday to theft and money-laundering charges related to the theft of some $690,000 in cash intended for relief and reconstruction in Iraq. Nguyen was the U.S. Army battalion civil affairs officer in Muqdadiyah, Iraq and had been entrusted with cash designated for local commanders in Iraq and Afghanistan for urgent humanitarian relief and reconstruction. He was indicted last March on charges of theft of government property, structuring financial transactions and money laundering. The thefts occurred between April 2007 and February 2009, according to the indictment. He spend some of the money on luxury vehicles, among other personal items.

Three components come together when a fraud, like the ones reported above, take place.  NEED – OPPORTUNITY and RATIONALIZATION.  In the cases above – I cannot speak to the first and third component – Need and Rationalization, but in each case the fraudster exploited a weakness or put another way – found an OPPORTUNITY.

Patricia Wilson used her trusted position as church bookkeeper (9 years no less) to  exploit what was likely a weak system of internal controls for Memorial Christian Church.  Likewise, two other bookkeepers, Casey Jane Goebel and Jessica Harmon, used their positions of trust to embezzle funds from their employers.  Robin K. Ramey stated, related to her embezzlement, “Why it took so long is that (the bank) doesn’t usually check there.”  Finally, Capt. Michael Dung Nguyen had been entrusted with cash to benefit members of the US military.

What was common in each of the cases above – TRUST.  Did each of the fraudsters know better?  Sure they did!  Were they at one time ethical – I would guess so.  Yet, in each of their lives they made choices – choices that clearly reflect unethical behavior and consequences that are life changing that follow.

As a business ethics speaker, I often state to audiences – Every Choice Has A Consequence.

COMMENTS ARE ALWAYS WELCOME.  If you knew either of the individuals mentioned above – perhaps you’d be willing to share what motivated them to make the choices they made.