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Paul Drockton: Mormon Affinity Fraud Threatens Church and Romney
Failure to report and respond to corruption can cost a religious organization much of its donors' monies. Just ask the Catholic Church. Many Mormons pay 10% of their income to the Church in the form of tithes and offerings. Most would be very unhappy if juries started giving away their donations to victims of affinity fraud.
"Affinity fraud includes investment frauds that prey upon members of identifiable groups, such as religious or ethnic communities, language minorities, 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 schemes" or pyramid schemes, where new investor money is used to make payments to earlier investors to give the 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)
As the above demonstrates, in order for the "con" to work, it requires the support of those in Church leadership positions. Take the two affinity fraud cases now being prosecuted by the S.E.C:
"(Joseph) Nelson used his position of authority in The Church of Jesus Christ of Latter-day Saints to lull prospective investors," the complaint says. He served as a ward mission leader and a stake high councilor.
"Nelson actively targeted fellow LDS members, reaching out to them through church connections and during church functions, and many if not most of his investors are LDS members."
Joseph Nelson used new investors' money to pay old investors, pay associates, including his brother, and fund a lavish lifestyle, according to the complaint." (Source)
.... In December, two others were accused of using leadership positions in the LDS Church to further investment fraud.
Wendell Jacobson and his son Allen Jacobson were involved in a $220 million Ponzi scheme through their company Management Solutions based in Sanpete County, according to the SEC. Wendell Jacobson is bishop of a Snow College student ward. (Ibid)
The LDS Church issued the following statement:
"The Church of Jesus Christ of Latter-day Saints encourages its members to be honest in their dealings and conduct themselves with integrity. When someone preys upon the members of a congregation or community in order to get personal gain, it is a reprehensible betrayal of confidence, and its perpetrators are rightfully subject to criminal prosecution." (Ibid)
What the Church statement fails to address is the civil liabilities that criminals can bring on a religious organization. A good lawyer would need to simply prove that one of the General Authorities of the Church was aware of the criminal conduct, and failed to act to protect the interests of the Church members that were victimized.
Interestingly enough, Romney's professed Mormonism also makes the Church a political target. The FBI, which reports to the current Democratic Executive, seems to be currently doing an investigation of its own. One possible reason why the Mormon owned newsite, KSL.com, recently did an expose designed to discredit the Salt Lake City FBI field office.
In the event a smart lawyer could tie the Church higher ups to all these Mormon con-men, that operate with relative impunity within the Church until it is too late, they would have little effort involved in getting a jury to give out a huge financial award to the victims.
One other issue is the Church's structure as a corporation. Suing a corporation in America will soon be the lawyers' favorite past-time.
If I were Obama, I would be praying that Mitt Romney wins the Republican nomination.