How to protect your congregation from schemes

CORONA, Calif. — Hundreds of churchgoers are getting scammed out of millions of dollars each year and the numbers are growing.

"People never think it's going to be them," said Barry Minkow, who was hired by the Federal Bureau of Investigations two days after being released from serving eight years in prison for fraud. "Scammers are using their affinity within the church to gain trust and convince church members they will be more valuable to the kingdom because they'll be able to tithe on it.

"I've seen so much pain and suffering, loss of trust as a result of this," said Minkow, who offers his services free of charge to churches and goes undercover to reveal the perpetrators."

Minkow, who founded the Fraud Discovery Institute in San Diego, where he pastors a church, and Chuck Crites, who was recently defrauded out of half a million dollars by a fellow church member in Corona, put together a Fraud Awareness Kit.

The kits will be released Nov. 1.

Here are the basics to protect yourself, according to Minkow and Crites:

1. The church leadership should develop a policy on not participating in conflicts of interest, i.e., profiting from church members, before it happens.

2. Be aware. Acknowledge there are people out there wanting their money and who will damage the congregation spiritually.

3. Avoid financial dealings with other parishioners. It never works out well, Minkow said.

4. If it's too good to be true, then it is. Warren Buffet was making an unprecedented 24 percent a year on his investments. "If someone is promising you Warren Buffet type of returns, be careful."

5. Acknowledge that there are schemes out there and be aware of what they look like. Be able to identify them.

6. Realize that scammers are infiltrating our churches on boards and staff. An elder at Chandler Christian Church in Arizona schemed $350,000 out of the church-goers.

7. Take the time to teach parishioners about investments and how they work.

"We teach about finances by Larry Burkett, but we (as a church) don't take the time to teach our members about bad deals," Minkow said.

8. It's easy to give, but hard to get back. "Once in a while people get lucky—and some of their money back—but it's rare," said Minkow.

9. Don't lower your guard. Often the perpetrator will go directly to the pastor to receive his blessing on the investment opportunity.

"Then he will use the pastor's name to sell the product to other members saying 'if pastor …. condones it,' then people think it must be legitimate," Minkow said. "Church members then become subjective, and not objective. That's when you're dead. The subjectivity starts when people want to further God's kingdom with this income instead of asking the smart questions about how it works and investigate the promises."

Lastly, if you think you are not the next target, you will be.


The ponzi
The most popular of these schemes is called the ponzi scheme.

What is it and how does it work?

Ponzi schemes are a type of pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme. Ponzi determined that it was possible to take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons.

Ponzi promised investors that he could provide a 40 percent return in just 90 days compared to a measly 5 percent for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during a single three-hour period. Though a few early investors were paid off in order to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.

The Ponzi scheme uses the rob-Peter-to-pay-Paul principle. Money from new investors is used to pay off old investors. But eventually the money runs out and it collapses.

Ponzi schemes often have the following characteristics:

• The promoter promises very large returns on an investment, such as "double your money in 60 to 90 days."

• A "can't lose" scheme for making money that others have overlooked.

• Payments are made to a few early investors to prove that the investment isn't crooked (usually the pastor or person of influence). These fortunate few are known as songbirds, since they sing the praises of the scam to others, bringing in new victims eager to make the same kind of generous returns.

The Ponzi scheme collapses when the number of previous investors seeking a return exceeds the number of new investors bringing in additional money.

When people use the church to promote their business or increase their profits it (the church) becomes a den of thieves," Minkow said. "It takes away from our primary goal of sharing the gospel. If you only get one opportunity to ask someone a question are you going to ask 'Do you know Jesus?' or 'Do you want to invest in a plan that will make you lots of money?'"

Within the past two years, Minkow and his associates have uncovered 13 fraud schemes across the country with six more being investigated.

"I want to make sure our churches are not so vulnerable," said Crites, who funded the kits personally and does not plan on making profits from them. "It's a ministry."

The kits may be purchased by calling 1-888-300-8307.