A former Sunday school teacher who allegedly used his tax preparation service to dupe victims in a $10 million Ponzi scheme has passed away - just months after a court-appointed bankruptcy trustee warned victims that a 3% - 4% recovery was likely. Jack Brown, owner of Soddy Daisy-based Brown's Tax Service ("BTS") and frequent preacher/Sunday school teacher at the Sale Creek Church of God, saw his business forced into involuntary bankruptcy in late 2012 amid mounting concerns from clients who had invested over $10 million with him. While Brown had initially refused to cooperate, recent reports suggested that he had been cooperating with bankruptcy trustee Jerry Farinash.
Using his relationship with clients of BTS, as well as his connections through his Sunday School teaching position, Brown began promising annual returns of up to 15% that were purportedly attainable as a result of his God-given gift as a successful stock day trader. The investments were memorialized through promissory notes, and while the first promissory note was issued in 1989, the pace quickened in 2003. By 2012, Brown and BTS had raised more than $10 million from investors.
However, mounting concerns began to materialize in late 2012 about the solvency of Brown's operation. These concerns were confirmed when a local attorney filed a petition to have BTS placed in bankruptcy, alleging that Brown had been operating a Ponzi scheme that had just collapsed. Rather than using investor funds to day-trade as promised, Brown was accused of misappropriating millions of dollars to purchase lakefront property that was lavishly outfitted with an indoor gymnasium, a golf simulator, a full bar, various games, several vintage automobiles, and even the authentic floor from the Boston Garden sports arena. In bankruptcy filings, Brown claimed only $1.4 million in assets while representing a yearly income of less than $30,000.
After the appointment of a bankruptcy trustee, Brown initially refused efforts to cooperate, citing his failing health. According to the trustee, Brown "refused to answer questions which would not be protected under the Fifth Amendment" while also claiming that his health has deteriorated to the point where he is movable only by ambulance. This lack of cooperation soon changed in March 2013, when Brown, appearing at a creditor's meeting telephonically from his hospital bed, confessed to operating the scheme. However, Brown maintained through his attorney that there was no money to return, because all the victims had not only been paid back, but some had profited handsomely from the scheme - hinting that the victims knew they were not paying taxes on their gains.
In the months following Brown's confession, the bankruptcy trustee accused Brown's son of participating in the scheme in what was called a "family Ponzi scheme." Additionally, Brown's wife has since invoked her Fifth Amendment right against self-incrimination numerous times.