2 of 7

In many of the cases Minkow uncovered, perpetrators encouraged victims to take a second mortgage on their homes to invest money in the scam. Victims were promised that in no time they would receive a 100 percent return on their investment and soon be set for retirement. For many soon-to-retire boomers, investments guaranteeing 40 percent to 80 percent returns seem to be the financial solution for their golden years. "The environment in California, in New York, in Chicago is ripe for that kind of deal," Minkow says.

Three kinds of investors are particularly susceptible to frauds, says Joe Borg, director of the Alabama Securities Commission. Investors who lost money because the '90s tech bubble burst are looking for other investments. Retirees are looking for safe investments, but cds, bonds, and mutual funds offer too little to live on. And those baby boomers approaching retirement who haven't saved enough are looking for high-yield investments to make up for lost time. Because of Wall Street's recent bust, they are hesitant to invest in traditional markets.

Because of the threat of terrorism, say both Borg and Minkow, the FBI appears to put less emphasis on white-collar crime. As a result, perpetrators are working harder than ever. Add the trusting atmosphere created by religion to the mix, and the combination is particularly dangerous.

Religious-affinity fraud is among the most common scams, according to both the Securities and Exchange Commission and the North American Securities Administrators Association (NASAA). Minkow agrees, saying that the regulators he works with see fraud in Christian circles as a particular problem. Borg says, "I've got cases going out my ears."

Affinity frauds target any close-knit group—united by race, religion, or a common interest. By posing as part of the group, perpetrators bet on the trust members have for each other. They learn the language and concerns of the group, build a sense of commonality, and then offer the "investment opportunity." By this point, many Christians instinctively trust this "brother in the Lord" and don't think it necessary to investigate.

Between 1984 and 1989, 15,000 people were swindled out of $450 million due to religious-affinity fraud, according to NASAA, which represents state securities agencies. After a spate of massive fraud was uncovered in 2001, NASAA looked again. They discovered that between 1998 and 2001, at least 80,000 people lost $2 billion in religious scams. Regulators told Christianity Today such fraud is still on the rise. Minkow is convinced that frauds are occurring right now in churches nationwide. "Too many cases have occurred," Minkow says. "It's time to say something."

The nature of affinity fraud makes investigation difficult. In some Christian circles, mistrust of the government is greater than mistrust of fraud perpetrators, even when victims learn they've been ripped off. Borg has helped shut down many religious-affinity frauds and knows first-hand the difficulty of investigating scams within churches. He helped shut down Greater Ministries International, which stole more than $500 million from churches and Christian investors.

next page... |  2 of 7

share this page

January 2005, Vol. 49, No. 1