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Entries in church (2)

Sunday
Aug052012

86-Year Old Former Church Usher Pleads Guilty To $3.5 Million Ponzi Scheme

An 86-Year old Georgia man pled guilty to charges he defrauded members of his church and gym out of more than $3 million in a Ponzi scheme.  Joseph Klos, 86, pled guilty to ten counts of securities fraud and agreed with prosecutors to serve one year in jail an pay $2.3 million in restitution to his victims.  Klos, who at 86 is believed to be the oldest individual since at least 2002 implicated in a Ponzi scheme, had originally faced up to 55 years in prison after being charged in April 2011 with twenty-eight counts of securities fraud.  According to the terms of his agreement with prosecutors, the one-year sentence is contingent on Klos fully satisfying the restitution order by the scheduled sentencing date of December 28.  Should he fail to fully repay his victims by then, the sentence changes to a sixty-eight month sentence.  

Klos was charged with using his companies, Stephen Klos & Associates, Genesis and Genesis II, along with his position as head usher at the Mercer Island Covenant Church to solicit investors, targeting elderly congregants,  Investors were told that their money would be used to invest in the stock market and could expect to receive annual returns of fifteen percent.  According to prosecutors, Klos told investors that the Bible did not advocate charging interest, and thus he chose to invest victim's money "out of the goodness of his heart."  In total, Klos raised approximately $3.5 million from his victims between 2004 and 2009.  Of that amount, Klos pocketed nearly $1 million, while over $2 million was returned to investors in the form of fictitious interest payments.  

Not surprisingly, this was the second time Klos had been accused of operating a Ponzi scheme.  Indeed, he had been barred from future association with securities institutions after being implicated in another Ponzi scheme in the early 1990's that raised more than $3 million from investors.  While the case was settled without an admission of guilty and Klos never faced criminal charges, he was ordered to repay nearly $400,000 in penalties.  

Sentencing is currently scheduled for December 28, 2012.  

Tuesday
Jun282011

California Man Charged with $1.75 Million Ponzi Scheme

A Miami man was arraigned Monday on charges that he operated a Ponzi scheme that ultimately cost investors $1.75 million.  Fidel Bermudez, 43, pled not guilty to multiple counts of grand theft and security fraud after being extradited from Miami where he was arrested on June 15, 2011.  

State prosecutors alleged that Bermudez solicited investors from the congregation at the Church of God in Simi Valley, California.  From 2004 until 2007, Bermudez promised high returns while assuring investors that their investments were risk-free.  As later investors placed their money with Bermudez, earlier investors were paid with these proceeds disguised as interest payments.

Bermudez faces up to 17 years in state prison if convicted of the charges.  Bail has been set at $500,000, and a preliminary hearing is scheduled for July 7.  From the charges levied against Bermudez, it appears that only state charges are currently pending.  Federal charges may be forthcoming depending on the nature of the scheme.