Fraudsters who targeted churchgoers sanctioned; ordered to pay $11 million in restitution

Arizona Corporation Commission sanctions 3 Chandler residents over investment scam

MESA, Ariz. (AP) – The Arizona Corporation Commission has voted to sanction a Chandler couple and another city resident for their alleged involvement in a bogus church-based scheme that cost investors millions of dollars.

Edward and Maureen Purvis, Gregg Wolfe and their Scottsdale-based company — Nakami Chi Group Ministries International — were ordered to pay $11 million in restitution Wednesday and an additional $250,000 in administrative penalties.

The commission made its decision — a civil action — more than two years after it began investigating the trio in a scam that it said swindled more than 80 investors throughout 12 states.

– Source: Arizona Corporation Commission sanctions 3 Chandler residents over investment scam, AP via KOLD (Arizona, USA), Dec. 20, 2008 — Summarized by Religion News Blog

The Nakami fraud group targeted churchgoers in what is known as ‘Affinity Fraud‘:

Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups.

The fraudsters who promote affinity scams frequently are – or pretend to be – members of the group. They often enlist respected community or religious leaders from within the group to spread the word about the scheme, by convincing those people that a fraudulent investment is legitimate and worthwhile. Many times, those leaders become unwitting victims of the fraudster’s ruse.

These scams exploit the trust and friendship that exist in groups of people who have something in common. Because of the tight-knit structure of many groups, it can be difficult for regulators or law enforcement officials to detect an affinity scam. Victims often fail to notify authorities or pursue their legal remedies, and instead try to work things out within the group. This is particularly true where the fraudsters have used respected community or religious leaders to convince others to join the investment.

Many affinity scams involve “Ponzi” or pyramid schemes, where new investor money is used to make payments to earlier investors to give the false illusion that the investment is successful. This ploy is used to trick new investors to invest in the scheme and to lull existing investors into believing their investments are safe and secure. In reality, the fraudster almost always steals investor money for personal use. Both types of schemes depend on an unending supply of new investors – when the inevitable occurs, and the supply of investors dries up, the whole scheme collapses and investors discover that most or all of their money is gone.

– Source: Affinity Fraud: How To Avoid Investment Scams That Target Groups, U.S. Securities and Exchange Commission

Investment firm’s owners to repay $11M

The Arizona Corporation Commission on Thursday ordered the owners of a Christian investment company to pay back more than $11 million they allegedly swindled from more than 80 investors.

The five-member commission voted unanimously to sanction Edward A. Purvis; his wife, Maureen; Gregg Wolfe; and their company, Nakami Chi Group Ministries International. They will also have to pay $250,000 in administrative penalties.

Through their ties with three Arizona churches, Edward Purvis and Wolfe persuaded churchgoers to invest in their company, misrepresenting the return the victims would get on their money, regulators said.

The two men funneled the cash into offshore accounts and used it for cars, jewelry, a down payment on a luxury home, and to pay down gambling debts, regulators said.

– Source: Investment firm’s owners to repay $11M, Arizona Daily Star, Dec. 20, 2008

See Also

Ponzi’s Scheme: The True Story of a Financial Legend (book)
You Can’t Cheat an Honest Man: How Ponzi Schemes and Pyramid Frauds Work… and Why They’re More Common Than Ever (book)
Religion-based scams take Lord’s name in gain (article)

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Religion News Blog posted this on Saturday December 20, 2008.
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