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Utahns victimized in insurance scam

Con artists used religion to hook investors, FBI says

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It would seem to have been an investment tailor-made for members of the LDS Church:

A $1.6 trillion off-shore trust created by descendants of church founder Joseph Smith, guarantees of 100-percent annual returns on investments for 99 years, and sales meetings punctuated by expressions of faith and prayer.

But the FBI says it was a scam, one that stretched coast to coast and swindled people of all faiths of $50 million.

"It was not aimed at LDS people, per se," said Jan Caldwell, spokeswoman for the FBI in San Diego, which spearheaded the yearlong investigation.

"Rather, they (the con artists) appear to have adjusted their religious pitch based on their target . . . , whether it was Mormons or Baptists or Presbyterians or even atheists," she said. "Even though the Joseph Smith part remained consistent throughout."

The FBI is now asking for help in piecing together how the fraud might have worked in Utah and who might have been victimized.

"We are looking for pieces to the puzzle," Caldwell said. "It may be a small piece, but it is still a piece. We need people to call us if they know anything."

The Deseret News has learned that Utahns were victimized in the elaborate scheme, and one Utah County man apparently worked for the bogus company, called Good Samaritan Insurance Co. They have not yet been charged, but the man — as well as his father — are both suspects under federal scrutiny, the FBI confirmed.

The Deseret News does not name suspects until they are formally charged.

A joint investigation by the FBI, the Internal Revenue Service and the California Department of Insurance resulted in indictments last month against eight San Diego-area men, who are now charged with wire fraud, conspiracy to commit wire fraud and conspiracy to launder money.

Those charged include John Franklin Harrell, Kenneth Lorenzo Kempton, Kenneth Eugene Hodgell, Morris Sankary, William Job Leavitt Jr., Jack Reitz, J. Paul Anderson and Juan Gregorio Fuentes.

The mastermind behind the scheme, the FBI says, is Harrell, 69, who has no connection whatsoever to the LDS Church. Harrell used an intoxicating concoction of religion, conspiracy theories and anti-government rhetoric to swindle investors while creating a "cult-like investment fraud and money laundering criminal enterprise," the FBI said.

"He was very, very charismatic," Caldwell told the Deseret News. "He would have investors hold hands and pray, and he would instruct everyone in the room to hug and tell how much they loved each other."

And there were also testimonials of the philanthropic good that would come from the investments to be used for AIDS research and medical care for the poor, and there were admonitions to believe in Harrell's work, she said.

According to criminal charges and statements issued by the FBI, Harrell claimed to be in charge of an off-shore trust created by the descendants of Joseph Smith that he purported to be worth $1.6 trillion. The trust was comprised of "flight capital," and Harrell told investors his role was to convert the trust money into insurance instruments.

To do that, Harrell told investors he had to raise enough cash to start an insurance company, at which point the $1.6 trillion would be released to him to repay investors.

It might sound confusing, if not outlandish. But "it's hard to infuse logic into the illogical," Caldwell said.

John R. Kingston, FBI special agent in charge of the San Diego office, calls it a "classic P.T. Barnum case, the bigger the lie the more apt people are to believe it."

And whenever anyone challenged Harrell, "the more expansive the lies became," Kingston said, adding that Harrell exerted a cult-like control over the operation.

Caldwell added that Harrell openly threatened the lives of individuals he thought to be government agents, and he held "prayer meetings" at a conference center in Mission Valley where he would launch into anti-government rhetoric and advance conspiracy theories.

None of the investors' money was ever returned to them, the FBI says.

According to charges filed in U.S. District Court's Southern District of California, Harrell and the other defendants used the investments to pay for luxury apartments, chartered aircraft and expensive rental cars. The annual bill at one rental car agency was more than $300,000.

Sometimes potential investors were flown by private jet to San Diego, and other times Harrell would fly by private jet to the investor to make the final sales pitch.

Harrell reportedly paid his lieutenants daily with large wads of cash, often stuffed inside brown paper bags, the FBI said.

The criminal charges maintain the company never generated any revenues, only the money coming from investors that was then converted to personal use. The company had at least 30 "associates" from Oregon to Florida, operating out of Las Vegas and Dallas, as well as San Diego.

The Deseret News has learned one of those associates lives in Alpine, where many Utah victims also live.

The FBI estimates more than $30 million was lost to the swindle, but agents also believe the number could be closer to $50 million, the amount claimed in the criminal charges. The investigation is continuing, and more criminal charges are anticipated once more victims are identified.

Utahns familiar with Good Samaritan Insurance Co. or the defendants are encouraged to call their local office of the FBI. "We need the public's help," Caldwell said. "We know there are more victims out there."

E-MAIL: spang@desnews.com