Ex-pastor gets prison for scams
Feb. 14, 2004
ReligionNewsBlog.com • Thursday February 19, 2004
SAN FRANCISCO — Financial scam artist and former Napa pastor Sherman S. Smith was sentenced Friday to 37 months in prison.
The 57-year-old Smith, who was a pastor at Napa Valley Baptist Church from 1986 to 1993 and a successful author of Christian-themed financial self-help books, pleaded guilty to one count of securities fraud in June. He was originally charged with 17 counts of mail fraud and six counts of money laundering. The sentence he received Friday is the maximum allowable for his crime under federal sentencing rules.
In October, he reached an agreement with the Securities and Exchange Commission that prohibits him from ever becoming an investment adviser or associating with one.
That agreement did not prevent him from recently becoming involved in a Florida development project, Royale Resorts, which he said would allow him to repay his victims.
Prosecutors charged that Smith used two companies, the Donne Corporation and Sherman S. Smith & Associates, to defraud investors, who were sometimes churchgoers. In part, he promised large returns on purchases of Donne Corporation stock, which was unregistered. He also diverted funds into his personal account.
In addition to the prison term, Smith was also sentenced to three years of supervised release during which he would need the approval of a probation officer before he takes on new debt, takes a position of fiduciary responsibility, or operates a new business without approval, among other terms.
He also must pay restitution to Anita Walters in the amount of $1,768,300 as well as additional restitution totaling approximately $3 million to 37 other victims.
He is required to surrender himself into custody within 60 days.
U.S. District Judge Susan Illston, who sentenced Smith, said, “The concept that money was taken in the context of pastoral activities is outrageous.”
The assistant U.S. attorney who prosecuted the case, Jeffrey L. Borenstein, said, “What Mr. Smith did was he used his expertise as an investment advisor and mixed it with his religious, pastoral leadership activities to encourage people to trust in him. S He has in effect operated a corporate-type ponzi scheme.”
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