Papers bulge from a thick file held by Monica Barshop, a Miami Beach resident. She’s crammed the manila folder with copies of letters to financial regulators and even pointed notes to President George W. Bush and Florida Gov. Jeb Bush.
Barshop’s letters and phone calls to elected officials all sound the same theme. She seeks help recovering $25,000 she and her husband William lost in an investment scam. Victims, including the Barshops, dropped a total of $180 million in a bogus company that operated through churches in Florida and other states.
”I want the crooks in jail. I want churches involved to return the money. I want my 25k back in my possession,” Barshop said.
Lured into the investment by a church-going neighbor, the Barshops are victims of a classic affinity crime.
Also known as Ponzi schemes, affinity scams typically involve fraudulent pyramid operations in which criminals exploit and prey on the faith and fellowship ties that exist in churches, neighborhoods and other close-knit groups.
Florida, with its mix of new immigrants and wealthy retirees, is a magnet for affinity crimes and regulators statewide are now tracking schemes targeting different groups.
”Anyone can take advantage of anyone within a [close-knit] group,” said Mark Mathosian, financial administrator with the state Office of Financial Regulation. It’s a popular fraud. It’s going to continue.”
As more churches and community groups offer legitimate investment clubs and wealth planning seminars, wolves are also joining the financial fold. But in the comfort of a fellowship hall, would-be investors often ignore warning signs that would be quite vivid in other settings. Red flags include unregistered securities promising high returns, but low risks — an impossible combination — or investments opportunities that lack independent research or oversight.
PROBLEMS IN CHURCH
”You let your guard down in church,” said Glenn Gordon, associate regional director of the Securities and Exchange Commission in Miami. ‘It’s sad. People of the cloth have not always proven to be honest with their use of investors’ funds.”
And either as unsuspecting victims or co-conspirators, high-profile members of an organization may initially receive handsome rewards for their personal investments. That apparent success sparks others to join the investment club.
For instance, Monica Barshop joined a church-based investment scheme based on the enthusiasm of a neighbor in Orlando, where the Barshops lived before moving to South Beach. The Barshops were mesmerized by their friend’s tale of financial opportunity.
”You had a layer of comfort because she was investing,” said her husband, Bill Barshop.
Others in their circle of friends invested sums ranging from $35,000 to $100,000 in IPIC Investments, a company that supposedly operated a successful export-import business.
Investors were told that the funds were invested in assorted products such as condoms, glass and paint.
The Barshops read brochures on IPIC and even called the company to ask questions. Satisfied, they invested $10,000 in IPIC, a Texas company with operations in Florida. After 90 days, the Barshops received a financial statement — later shown to be fraudulent — showing a 30 percent return on their initial $10,000. Encouraged, the couple invested another $15,000.
But the Barshops are still trying to recover that $25,000 investment. In an indictment filed in a Texas Federal court by the U.S. Department of Justice and the Securities and Exchange Commission, the government charged the principals of IPIC with fraud and money laundering as part of an investment scheme that targeted churches, ministries and other religious organizations. With Florida-based contacts, the company was run by Gregory Earl Setser, a former minister from Texas, and various members of his family.
A court-appointed receiver is now attempting to recover the funds for victims. But Bill Barshop is skeptical about the outcome.
”You have thousands of people and everyone is trying to chase a black hole,” he said.
Other affinity crimes involve loan schemes. For instance, in April 2004, Roselina Flambert of Miami pleaded no contest to fraud charges in an advanced fee loan scam that targeted members of the Haitian immigrant community in Collier County, according to Robert Tamras, a financial investigator for the state.
Flambert collected advance loan fees from 15 Haitian immigrant families and promised access to a government mortgage/housing program for low-income families, according to state officials.
”They never received their mortgage loan and they never received their money back,” Tamras said.
Florida regulators are currently investigating an affinity scam operating in Miami’s Haitian community, but declined to disclose information about that case.
In other scenarios, a third-party company with community connections will promote a so-called lucrative opportunity to a church or organization. Bogus promoters will even tout pooled investment accounts as a ”loan” to the church.
Black groups and Christians were the target of a recent $16.5 million Ponzi scheme, according to the Miami-based regional office of the Securities and Exchange Commission. In connection with that case, the SEC issued a restraining order and froze the assets of Orlando-based W.L. Ware Enterprises and Investments Inc. and its principal, Warren L. Ware in January 2004.
A Fort Lauderdale-based attorney, Michael Goldberg of Aikerman Senterfitt, is the court-appointed receiver in that case and operates an information hotline (1-866-898-2039) and a website to reach out to victims of that scam.
”This is an area we are concerned about and I suspect we will bring other cases,” said Gordon of the SEC.
In a similar case, securities regulators in 2002 closed down a Miami investment firm that allegedly targeted novice black investors, many from South Florida’s Jamaican community. A.B. Financing and Investments, and its principal executive Anthony W. Blissett, allegedly cheated investors out of $31 million.
In late 2003, Blissett pleaded guilty to four counts of securities fraud and one count of selling unregistered securities.
He was sentenced to five years in prison.
But combating affinity fraud — especially in religious or tight-knit groups — is not easy according to enforcement officers. In some communities, for example, residents distrust government agencies and are reluctant to verify information or report fraudulent operators.
”The people who are victimized refuse to believe they are victimized because of their personal relationships,” said Bob Rosenau of the state office of Financial Regulation.
In one church-related scheme in the Jacksonville area, promoters have even launched an e-mail campaign to smear government efforts to stop the scam. In e-mails, the SEC is portrayed as the Devil, according to Robert Finn, a Jacksonville manager in the state office of Financial Regulation.
South Beach residents Bill and Monica Barshop agree. In the aftermath of the IPIC fraud indictments, they have since confronted their former neighbor in Orlando, who was bullish on the investment program. Those conversations have not been pleasant. Fueled by faith, their former neighbor has chided the Barshops for being greedy and seeking repayment. She remains committed and involved in the church. But the Barshops have no illusions.
”I feel so deceived,” said Monica Barshop.