The Salt Lake Tribune, Jan. 18, 2003
BY MICHAEL VIGH, THE SALT LAKE TRIBUNE
Though Utah members of the LDS Church are routinely targeted by con artists and ripped off — sometimes of their entire life savings — church leaders have been reluctant to warn their members, federal authorities say.
On Friday, federal investigators announced a large-scale investigation of a scam in which hundreds of Utahns — most of them members of The Church of Jesus Christ of Latter-day Saints — may have been swindled out of more than $100 million in seven separate schemes.
Scam artists “take advantage of the fact that LDS Church leaders are generally reluctant to get involved in the financial affairs of their members,” said Utah U.S. Attorney Paul Warner. “Thus, fraudulent solicitations can often occur without members being forewarned.”
While investigating the charges announced Friday, Warner said, authorities have noted “the overwhelming number of victims whose first encounter with the fraudulent solicitor is at a church or religious event, specifically the [LDS Church].”
Before LDS leaders will allow investigators to caution members about the scams in church settings, they have asked for “more evidence” that there is a problem, said Chip Burrus, head of the Salt Lake City office of the FBI.
“Clearly, we know it’s a problem,” said Burrus, who said he has spoken to church security officials. “There are a lot of people who are getting whacked by people they trust.”
In a statement, spokesman Dale Bills said LDS Church leaders teach members to be prudent in their financial dealings.
“Members are encouraged to analyze financial opportunities on their own merits and not invest solely on the personal recommendation of a friend, neighbor, relative or fellow church member,” Bills said.
During a news conference Friday, investigators announced charges against seven people accused of setting up Ponzi schemes, in which early participants are paid with money from later investors, that victimized Utahns. Warner said the schemes were sold as investments in purported prime bank instruments or high-yield ventures.
More charges against other defendants could be forthcoming.
“There is a new climate of aggressive federal enforcement toward these frauds,” Warner warned. “We will vigorously investigate and prosecute these matters to the fullest extent of the law.”
The elderly historically have fallen for the schemes, prosecutors said, but in recent years lawyers, accountants, financial planners and CEOs have bit on them.
Prosecutors say the schemes generally work like this: Investors are solicited by sham companies with promises of profits of between 5 and 10 percent per month.
The con artists tell the victims they are going to invest the cash in a “secret” program that involves trading a financial instrument — prime bank notes, midterm notes or corporate bonds.
The opportunities are only available, the solicitors say, because they have “high-level” contacts in the banking world. Investors must sign a nondisclosure agreement to protect the secret arrangement.
Investors believe the opportunities are genuine because early investors are paid the promised rate from later investors. In the end, the scheme collapses and the victims realize it is a sham. In some cases, victims have lost their life savings.
Those arrested and charged in the frauds include:
* John Kirk Dixon, of Utah County, indicted Thursday. Dixon allegedly told investors that if they invested in a company called Net Solutions, they could expect to receive profits of up to 44 percent. Prosecutors say investors lost $1.5 million.
* Ronald Keith Bassett, 42, of Lindon, was charged Thursday with 12 counts of conspiracy to commit fraud, transportation of stolen money, wire and mail fraud, and money laundering. Prosecutors say Bassett established a sham company called 4NEXCHANGE in which people could purportedly invest in foreign currency. The approximate net loss to investors, prosecutors allege, was $20 million.
* Brian Jeffrey Carroll, address unknown, also was charged Thursday with one count of wire fraud for allegedly running a high-yield investment scam in which he promised investors returns of up to 1,000 percent.
* Randall Law, 50, who was indicted last week, pleaded guilty in 2000 to 34 counts of securities fraud and racketeering in Illinois. In the new case, he allegedly stole approximately $2.5 million, mostly from Utah investors, via his company Cannon Capital, later called Aquarius Water.
* Two others, Mark Beach and Tracy Buhler, both of Provo, have pleaded guilty in separate scams in which they allegedly bilked investors out of millions of dollars. Beach is awaiting sentencing and Buhler received a sentence of 24 months in federal prison.
* Richard Barlow, 66, of Salem was indicted in December on 81 counts of mail fraud, plus additional counts of tax evasion, failure to file tax returns, and aiding and abetting. He allegedly persuaded 650 people to invest in a company called Acquire Venture and bilked them out of more than $25 million, prosecutors say.
In addition, five prime bank schemes were investigated in 2002 that resulted in investment losses of more than $17 million in Utah County.
County Attorney Kay Bryson said it is apparent that Utah County residents — an estimated 88 percent of whom are LDS — “seem to be particularly vulnerable. We have a very trusting population.”
Thieves also play on the anti-government sentiments of some Utah investors, telling them regulators will lie to them and misrepresent the legitimacy of the prime bank market.
Authorities on Friday repeated the warning, “if something looks too good to be true, it probably is.” They say potential investors should ask plenty of questions before they participate, and plan to run a series of cautionary public service announcements.