Ponzi schemer preying on church members

Sunday, April 11, 2010 at 11:45pm
praying-hands-in-cuffs-vert.jpg

The next time you bow your head at your place of worship, your maker will likely understand if you choose to keep one hand on your wallet.

Last week, yet another Middle Tennessee man was indicted for running a Ponzi scheme. And, as in so many other cases here, he found his victims in church.

William W. Spencer, 67, a former financial adviser in Franklin, was hit with 11 counts of fraud in U.S. District Court for the Middle District of Tennessee last week. The charges, for mail and wire fraud, are based on Spencer’s alleged role in embezzling more than $1.4 million in client investment funds.

You could’ve seen it coming. In August, he was permanently barred by the Financial Industry Regulatory Authority for running schemes the agency said targeted elderly individuals, mentally and physically impaired individuals, family friends and, of course, members of his church.

According to the indictment, between December 1997 and November, Spencer allegedly operated an investment Ponzi scheme in which he borrowed and solicited $1.9 million from about 100 friends, clients and investors by promising annual returns of 10 to 12 percent.

Broken bread

If convicted, Spencer could find himself in a federal prison next to some other notable fraudsters. Like him, they have either admitted to or have been accused of using religion to gain the trust of their victims, all right here in Middle Tennessee.

The congregation of crooks already includes Gordon Grigg, now serving a 10-year stretch after his Ponzi scheme unraveled. He gained the trust of his victims through prayer and the recitation of Bible verses, according to testimony from his trial. At his sentencing, U.S. District Court Judge Aleta Trauger called him “more vicious than [Bernie] Madoff” for his use of religion to exploit his targets. Madoff, of course, is the king of Ponzi schemes.

Former Franklin politician and financial adviser Jeff Cassman has been missing since 2008, shortly after he was permanently barred from conducting business as a broker-dealer, investment adviser or insurance agent by the state of Tennessee.

He had agreed to pay restitution but instead took his wife and nine (maybe 10, according to some reports) children on the lam. The devout Catholic allegedly first used religion to gain his victims’ trust, and then to try to stop them from seeking legal recourse.

Believed to be hiding in Mexico, Cassman can now be found on the Tennessee Bureau of Investigation’s “Most Wanted” list and is facing a number of federal charges.

The Judas factor

While not yet full-fledged members of this dubious club, a good number of religiously inspired scammers could soon be going to chapel in the clink if the federal government gets its way.

Terry Kretz, of the defunct investment firm Hanover Corp., allegedly went after members of Madison’s Cornerstone Church. Known as a “godly man” and a pretty astute businessman to boot, Kretz allegedly promised a 2 percent return per month — a whopping 24 percent annually — to small-time savers who never could have accessed such high yields on their own. Some of the most respected members of the congregation were involved in Hanover’s subsidiary businesses; for instance, a church pastor was allegedly in charge of one sham enterprise.

Kretz is now under investigation. In 2008, Cornerstone Church was forced to give a bankruptcy trustee $50,000 in Kretz’s donations. That was just about the only hard asset Kretz’s company had left; the total cost of its collapse exceeds $20 million.

But leading the choir of alleged con men are Greg, Mark and Mike Manuel.

Never licensed investment professionals, they sold securities in the form of “investment accounts” and represented themselves as “financial professionals.”

On Feb. 5, in a bizarre attempt to avoid prosecution, the Manuel brothers declared themselves a “sovereign nation” in a report that aired on WSMV-Channel 4. The report accused them of swindling more than $200,000 from Debbie Smith, a former Christian singer.

Two people who likely would have been seated in the congregation of Ponzi convicts — were they not dead — are John C. Reed of Franklin and Robert McLean of Murfreesboro.

Reed died of cancer in June 2007, but his successor at J.C. Reed & Assoc., Barron A. Mathis, is alleged to have continued a Ponzi scheme Reed started. While Mathis is not known to have used religion, Reed allegedly used his faith-based connections to start the scheme.

Finally, there is McLean. He was so distraught over having to face his former investors that the morning he was supposed to answer questions about what happened to $40 million of their money, he committed suicide. He did so in a grassy field behind his church, the First Christian Church of Shelbyville.

All told, more than $65 million has been lost in alleged fraud cases over the last five years to Middle Tennessee men who used religion as a primary selling tool. And there are more who have yet to be discovered, according to federal officials.

Tony Gooden, an agent with the U.S. Postal Inspection Service, said just because someone sits next to you in church doesn’t mean he’s there for spiritual enlightenment.

“Do your homework. Investigate the credentials of those who want your money,” Gooden said. “Predators go where they can find their easiest prey. In financial crimes, that place is often a place of worship. People often let their guard down at church because they believe they are surrounded by like-minded religious people. That isn’t always the case.”
 

3 Comments on this post:

By: richgoose on 4/11/10 at 11:50

Cornerstone Church in Madison? Is that not the church where the convicted murderer Maury Davis holds religious services?

Is he involved in these ponzi schemes? The article did not say?

By: EThomasWood on 4/12/10 at 9:17
More info on the connection between the church and Hanover is here: http://www.nashvillepost.com/news/2006/10/26/hanover26oct -Tom Wood
By: richgoose on 4/12/10 at 2:02

Thanks, Tom Wood Somehow I missed that article in the Post. Very enlightening.

I got a chuckle out of Maury Davis comments. He has a bird nest right on the ground and certainly does not want his religious ponzi to be compromised.