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Utah County is hotbed for white-collar crimes

LDS members often seen as easy targets in 'affinity fraud'

PROVO — Utah County is nearly free of the violent crime seen in most metropolitan areas.

But when it comes to white-collar crime, Utah County is king.

Federal and state officials say the majority of the state's fraud schemes originate in the politically conservative 360,000-resident region just south of Salt Lake City.

Experts say the many get-rich-quick schemes involving real estate or crafty stock market investments target members of The Church of Jesus Christ of Latter-day Saints.

It is estimated that 85 percent of residents in Utah County are members of the LDS Church.

Called "affinity fraud," investigators say scam artists have been known to swindle the home equities and life savings out of fellow church members.

FBI agent Jim Malpede said such cases often don't become public largely because the victims are embarrassed they were sometimes swindled by somebody who worshipped in the same Mormon congregation, which is called a "ward" in LDS culture.

Such fraud — using church groups or cultural ties — costs Americans an estimated $10 million to $20 million a day, according to the FBI.

FBI agents in Utah estimate that between 60 percent and 70 percent of the financial fraud cases they investigate come out of Utah County. That includes security frauds and Ponzi, straw-buyer and illegal multilevel marketing schemes.

"Utah County, per capita, (has) to have the largest amount of it in the entire country," Malpede said. He added that at any given time the FBI is investigating from $50 million to $100 million in fraud scams in Utah County.

"Some of the larger (schemes) run out of Utah County take victims from all over the country and all over the world," he said. "One of the great things about Utah, about living here, is that you can generally trust the people. We have a very low rate of violent crime. It's mostly, 'Trust your neighbor, help people out when they need help.' It's just the nature of the area. What comes with that is a particular amount of vulnerability."

Although Utah County developer Gary Brinton did not heavily use LDS Church connections, according to court documents he allegedly relied on close ties to persuade 30 family members and friends, including his own parents, to participate in a straw-buyer scheme.

In what has been called one of the biggest financial scandals in Utah's history, Brinton cooperated with three First Security Bank officials to use the good credit of 30 people to secure residential loan money totalling more than $47 million, according to court documents.

Brinton's financial problems may cost him his two most well-known businesses: Seven Peaks Water Park and Trafalga Fun Center, which are both in foreclosure, according to Brinton's attorney, Charles Hanna. Those who tried to help Brinton may be left with their credit in ruin.

Michael Hines, director of enforcement for the Utah Securities Division, who also teaches about white-collar crime as an adjunct professor at the University of Utah, said "investors in Utah County may trust a little more than others may."

"If you have someone in Utah County coming to their neighbors with tatoos and a bandana, asking them to participate" of course they will say no. It's different if the person is in the same LDS ward, he said.

Hines said often the perpetrator of the fraud will ask victims to "pray" about the investment. "People need to realize that God is not a good investment adviser," he said.

"Some of the largest successful cooperations have been through affinity, through the church," Hines said.

Hines said it is always good business practice to research the investment to determine the risk. Upon some research, it may be determined the scheme is illegal, he said.

Last year, an Arizona man recruited three Utah County men to start a Ponzi investment scam from two companies called Cannon Capital Corp. and the Petral and Sun Co.

According to documents in Provo's 4th District Court, the group used their membership in the LDS Church to recruit victims in an illegal securities debenture.

Victims were promised a 50 percent-per-quarter return on their investments in a complex bank securities plan.

Investigators say original investors were being paid returns with money acquired from new "investors." Representatives told victims it was a "sure deal," court records say.

One Provo representative, Robert Morgan, told victims "the Lord had come to him and told him of this investment and the investment worked," according to court documents.

Morgan was charged in June with multiple felony counts of securities fraud, selling unregistered securities and being an unlicensed securities agent.

He is awaiting trial in 4th District Court.

The head of the scheme, Randall Watson Law, Mesa, Ariz., pleaded guilty in 4th District Court on Nov. 16 to 34 felony counts of securities fraud. He has not been sentenced.

Deputy Utah County Attorney David Wayment said his office has identified 11 victims, many of whom had invested life savings, totaling a loss of $5.8 million.

Charlene Barlow says a good number of fraud cases also are found in Salt Lake and Davis counties. However, Barlow, who works in the financial-crimes unit of the Utah Attorney General's Office, does notice the number of cases involving church-based relationships.

"It's sad that people will abuse their church relationship to do that," Barlow said. "We tend to trust the people we know, and we tend to trust the people we see every Sunday."

In the past, the LDS Church has warned its members against questionable investments.

At the April 2001 LDS General Conference, Elder M. Russell Ballard of the Quorum of the Twelve warned about members driving themselves into debt and seeking risky investments to make up for it.

"There are no shortcuts to financial security. There are no get-rich-quick schemes that work. Perhaps none need the principle of balance in their lives more than those who are driven toward accumulating 'things' in this world," Elder Ballard said. "Do not trust your money to others without a thorough evaluation of any proposed investment. Our people have lost far too much money by trusting their assets to others."

Church spokesman Cole Newell said the church published a booklet in 1992 called, "One for the Money" as a guide to steer members clear of "high-risk investments" and toward smart money management.

Hines said many people do not know how damaging white-collar crime can be.

"You can certainly rob somebody with a gun," Hines said. "But this is the only crime where you can actually steal the equity out of someone's home or their life savings."

Many investigators say victims of white-collar crime often experience a high rate of divorce and some attempt suicide.

Hines said the biggest defense against becoming a victim is education. The FBI, in cooperation with the Utah Department of Commerce, is distributing a list of "key phrases" often used in financial scams.

"This is not someone stealing your car overnight; this is what you've worked for all your life," Hines said. "And the weapon being used is trust."