Monthly Archives: September 2010

Support Senator McAdams New Fraud Litigation

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If you or a family member have been affected by investment fraud, please call your Utah House and Senate representatives and urge them to support Senator McAdams‘ bills.  I have met with him several times to discuss these bills and I think he is really on the right track.  UPDATE: On September 17th The Salt Lake Tribune issued an editorial supporting these bills.

As reported by the Salt Lake Tribune today, State Senator Ben McAdams is proposing four bills designed to crack down on scam artists and securities fraud in Utah:

  1. A bill to strengthen penalties for defrauding a vulnerable adult such as someone with dementia and expand the scope of felony penalties for so-called affinity fraud to include relationships of “special trust,” including relatives, religious leaders, landlords, employers and doctors.
  2. A bill to reward whistle-blowers who have knowledge about companies that are defrauding people (similar to the whistleblower provisions in the new Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,).
  3. A bill to expand the fair-credit act to apply more broadly in mortgages to protect consumers.
  4. A Medicaid change allowing private litigation against health providers who bill for services they never provide, such as wheelchairs or crutches.

I think these are terrific ideas, and the Utah Division of Securities is supporting them as well.  In particular I like the one that provides for enhanced penalties for religious leaders (among others) who use their positions of trust to perpetrate fraud on others.

  • Final Text of Senate Bill 101
  • Final Text of Senate Bill 100

    • Former Mormon Bishop and Art Collector Will Spend 12 years in Prison

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    Today there was yet another article about an individual who held a position of trust in the LDS Church and used that position to commit fraud.  U.S. District Judge Marcia Krieger sentenced  Shawn Merriman to 12½ years in federal prison this afternoon for defrauding 67 victims out of $21 million.  Merriman was a Bishop in the LDS Church in Colorado and raised the money from friends, neighbors and fellow church members.  The government seized roughly $4 million in fine art , antique cars, sports memorabilia and animal trophies collected on his safari trips when they arrested him.

    One of my favorite parts of this story is the fact that before he was caught Mr. Merriman put together some sort of a traveling exhibit for his art called “The Renaissance of Faith in Art,” which included about two hundred prints by Renaissance artists including Rembrandt van Rijn, Albrecht Durer, Lucas van Leyden and Peter Paul Rubens.  The exhibit was primarily displayed in LDS wards and stake centers in Denver.  Even the Mormon Times wrote a glowing article about this guy and how his art collection promotes the Church.  He has now been excommunicated.

    The SEC’s Complaint against Mr. Merriman can be read here.

    Good Article on Affinity Fraud Among LDS Members

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    There was a great article in the Las Vegas Review Journal today about the problems of affinity fraud among LDS Church Members titled “Thieves in the temple: How ‘affinity fraud’ hurts LDS church members.”  Definitely worth a read.  Among other things, he writes, “In Utah, fraudsters exploiting a connection to the LDS church and its close-knit families have separated an estimated $1.4 billion from victims in recent years, according to the state’s multi-jurisdictional Securities Fraud Task Force, which currently is working more than 100 cases. . . Fraudsters commonly start veiled sales meetings with prayers, sometimes spending as much as 90 percent of a pitch discussing Scripture before turning to the business at hand: separating squares from their savings by promising them, for instance, up to 10 percent monthly returns on their “risk-free” investments. In one case, a law enforcement source reports watching a rain of tears flow from one fraudster’s eyes as he described the profits investors might put to good use in their lives and their religion.”

    Why Mortgage Fraud Often Involves Affinity Fraud

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    A 10-count federal indictment was unsealed by the FBI and Thursday that charges Utah resident Christopher D. Hales with mail fraud, wire fraud, and bank fraud and with money laundering in an alleged mortgage fraud scheme. The indictment was one of many that have been investigated by Utah’s new Mortgage Fraud Task Force.

    According to the FBI’s press release Hales and others conspirators “executed a scheme to produce income from false appraisals to artificially inflate the purchase price of the residences. Hales arranged to purchase the homes through straw buyers and took the false equity proceeds stemming from those sales for himself, the straw buyers, and the co-conspirators.” Continue reading →