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Church fund given 10 days to explain itself
More articles on this topic: Nakami Chi Group Ministries InternationalState securities regulators are giving owners of a non-profit company 10 days to explain why they should not be shut down, fined and ordered to pay restitution for an investment strategy targeting church members.
The Arizona Corporation Commission alleged in legal filings Wednesday that owners of Nakami Chi Group Ministries International sold bogus securities and misled investors about the scope and size of its assets in order to raise revenue.
“An issue like this is a very serious matter,” commission spokeswoman Heather Murphy said Wednesday. “I have never seen our securities division issue one of these (orders) and then reverse itself.”
Nakami owners Ed Purvis and Gregg Wolfe could not be reached for comment Wednesday. In earlier letters to The Arizona Republic, Purvis said he was philanthropic and only engaged in private contracts with private parties. He said the state had no jurisdiction in the case.
The commission has been investigating Nakami for more than a year over claims that it was making promises to fund Christian charities while paying investors 24 percent annual returns.
Agents with the Federal Bureau of Investigation confirmed last month that they were investigating whether Nakami functioned as a pyramid scheme, in which funds from new investors are used to pay returns to existing ones without a real revenue source.
FBI officials told The Republic that church members in as many as 10 states had invested several million dollars in Nakami. At least one pastor, church elders and congregation members at Vineyard Church in Avondale and Chandler Christian Church are among those who invested.
“This will be the first domino to fall in this case. And more will follow,” said Barry Minkow, a con-man turned pastor who first brought the case to federal authorities and assisted in the investigation.
Minkow, who runs a private investigation agency in San Diego called the Fraud Discovery Institute, said the case is unusual because of the support Nakami has received from churches.
“Despite the federal and state investigations, pastors at churches continued to insist nothing was wrong,” he said.
In the filing Wednesday, state regulators outlined two methods Purvis and Wolfe used to encourage investments.
They say Nakami told investors to form “corporations sole,” in which investment repayments were made.
The corporations are usually used by churches for holding assets, not for individual investment revenue. Purvis and Wolfe told investors the corporations would reduce their income-tax liability on investment returns, the state said.
Regulators also said Purvis and Wolfe told investors they could put their money into “bridge loans.”
“Purvis and Wolfe told {ellipsis} investors that the bridge loan investment funded short-term, high-interest loans to small companies,” regulators said in the filing.
The notice filed Wednesday gives Purvis and Wolfe 10 days to respond and request a hearing where they will be able to present a defense before an administrative law judge.
Murphy says the hearing strictly deals with state securities violations. “That does not mean there will not be any other (criminal) charges,” she said. “We routinely cooperate with other law enforcement agencies.”
In addition to Purvis and Wolfe, the commission accused Phoenix business owner James Keaton of being involved in the effort to defraud investors.
Keaton is the owner of ACI Holdings, where Purvis and Wolfe brought church members who asked for proof of Nakami’s holdings. Keaton has denied that he was involved in Nakami and said he had no idea that his company was being used as part of Nakami. Keaton’s lawyer said Wednesday that he will challenge the state’s case against his client because their accusations are without foundation.
One investor who had dealings with Purvis, Wolfe and Keaton said Wednesday’s action by the state was a long time in coming. “All I’ve ever been after is the truth,” former investor Tony Senarighi of Prescott said. “If you’ve been doing everything according to Hoyle, then what is the problem?”
Senarighi, who testified before the commission last month, said he and his son-in-law invested more than $150,000 and later got their money back.
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