You Can't Cheat an Honest Man (29 page)

On January 17, 1979, Internal Revenue Service agents seized all of the Church of Hakeem’s assets and effectively shut down the Dareto-be-Rich Program. At that point, at least 4,064 people had paid the membership fee and Rasheed had promised total returns of no less than $30.5 million. A flurry of civil and criminal charges followed.

At his criminal trial, Rasheed testified that money in bank accounts seized by the IRS, like all money invested in Church activities of any sort, had been obtained from member donations. He’d told Church members, investors and the IRS that he held this money as a “trustee.”

This wasn’t exactly true. Rasheed admitted that he’d converted money from the investors in the Church to his own personal use. The Feds had determined that Rasheed had purchased a yacht for $915,000 and transferred $1.5 million into accounts in his name at several local banks. In doing this, he’d ceased to be a trustee (if, in fact, he’d ever been one) and become a thief.

The IRS considers the money thieves steal as income and taxes it, just like legitimate money that working people earn. This was part of the reason the IRS had seized the Church’s assets—to collect $1,533,853 it concluded Rasheed owed for 1978.

In February 1980, Rasheed was convicted of six counts of mail fraud arising from his activities in the Church. He was sentenced to 15 years in a federal penitentiary.
In March 1980, the court certified a class action lawsuit in which burned investors could seek money back from Rasheed and what was left of his Church. They were able to proceed with the facts established by the criminal case. They won the case, but neither the church nor Rasheed had any money to collect.

In March 1981, the same federal court which had handled the criminal and civil cases against Rasheed considered a lawsuit the Church investors filed against the IRS. They wanted their yacht back.

One problem: The Feds had already sold the yacht. So, the investors wanted the $915,000 it had been worth when the IRS seized it. The court ruled for them, concluding that:

The question before this Court is whether the specific property obtained through the misappropriation of church membership fees and donations by means of a ponzi or pyramid scheme can be levied upon by the government for the purpose of satisfying the tax obligation arising [from] its passage into Rasheed’s possession. We think not.

The Feds eventually agreed to rebate the money it got for the yacht at auction back to the investors. The IRS was left with a $2.6 judgment against Rasheed—but no way to collect from the bankrupt perp. It was the same position the investors had been in a year earlier.

was the same position the investors had been in a year earlier.

year sentence in a federal prison, Rasheed was transferred to a San Francisco halfway house to serve the rest of his sentence. In prison, he had been a model inmate; once out, he reverted to his old ways.

In May 1986, Rasheed fled from the halfway house after depositing $178,500 in stolen checks into a Michigan bank account—and then writing more than $20,000 of checks on the bogus deposits. He was captured in San Francisco a short time later.

Back in federal court, Rasheed claimed that he’d merely left the halfway house as scheduled: “I had no intention of doing anything illegal. I was on the square.”
A few months later, after a trial in which the jury took 26 minutes to find Rasheed guilty of escaping the halfway house, he was sentenced to an additional five years in prison.

A Slightly More Subtle Approach

There’s no doubt that people trust their pastors and people they meet through their churches. Ponzi perps know this—and don’t usually hesitate to exploit this presumption of trust.

Exploiting the presumption of trust doesn’t require religious piety. It simply plays on the social element of church, which is infused with trust and optimism. This relieves the perp of any direct connection to religion—he or she can simply act like a well-meaning church-goer, who happens to trade silver futures or sell pre-paid phone cards.

Of course, the pitch is always strongest when the person making it is the pastor. More than anyone, he or she benefits from the trust and optimism people feel when they socialize with fellow church-goers.

Robert Tilton, a controversial Texas televangelist who bills himself as the “Pastor to America,” exemplifies the issues that arise when the social element of religion meets the mechanics of a Ponzi scheme.

Tilton has a background that suggests a Ponzi perp. A baby-boomer, he acted like James Dean—black leather jacket and minor scrapes with the law—in his Richardson, Texas, high school. Not much of an intellect, he bounced around Texas Tech University and several junior colleges. He talked about studying architecture but ended up working construction.

In the late 1960s, Tilton drifted to Los Angeles. There, he spent most of his free time going to parties and sampling the expanded consciousness of the West Coast drug culture.

On a trip home to Dallas in 1968, he met Martha Ann Phillips. They were married a few months later before a Justice of the Peace. The newlyweds spent their honeymoon dabbling in the just-starting New Age movement in and around Santa Barbara, California. By the summer of 1969, the Tiltons had moved back to Dallas. One night, two evangelical “Jesus freaks” knocked on their door. Tilton said he and his wife were “transformed” when one of the young men said, “Come with me, and I’ll make you a fisher of men.”

In 1974, after Tilton had been able to put away some money from working for a Dallas home builder, the couple decided to become itinerant evangelists. They sold almost everything they owned, bought a used travel trailer and a secondhand gospel tent. They hit the road with their two young children.

The family spent time on the revival-meeting circuit, preaching in small towns from north Florida to east Texas. After two years on the road, the Tiltons settled in Houston. There, Tilton worked with John Osteen, the pastor of a 7,000-member fundamentalist church. He still worked an occasional construction job to make ends meet.

In early 1976, Tilton had a “revelation.” He’d preach a message that combined conservative Christianity, New Age spirituality and entrepreneurial wealth-building. He went back to Dallas to start the Word of Faith Family Church—which was some leased space in a former YMCA building in suburban Farmers Branch. Word spread about “Brother Bob” and his unusual theology of prosperity.

Tilton encouraged his flock to follow his advice for making money in multi-level marketing and other bootstrap operations. This harkened back to early Protestant America, when material success was supposed to reflect God’s favor. Word of Faith’s annual budget jumped from about $27,000 in 1976 to $250,000 in 1977, $750,000 in 1978 and $1.8 million in 1980.

However, by the mid-1980s,
Success-N-Life
, the Tiltons’ television show, was sputtering. It was being carried on only six stations. He came to realize that his vibrant church sermons—described by one of his followers as “having the excitement of a close Cowboys game”— needed even more punch for his television audience.

Among his sources of inspiration, Tilton said, was TV real-estate pitchman and alleged Ponzi perp Dave Del Dotto. Rather than just talking about the righteousness of worldly success, Tilton started offering viewers specific stories of people who’d made it. “Sure, some people think the TV shows are kind of exaggerated,” says one supporter. “But you’ve got to realize who he’s trying to reach: the downand-out, the lowest of the low, the most desperate.”

In the mid-1980s, Word of Faith considered $6 million to be a very good year. Six years later, annual receipts exceeded $100 million and Word of Faith had 850 employees. Tilton’s annual salary was estimated at more than $1 million.

The Tiltons claimed to have 8,000 members in their church. But, more importantly, they received 220,000 letters a month from people who watched their television program. No longer a weak performer,
Success-N-Life
was carried nationally on 212 television stations. The show was seen in an average of 199,000 households each day.

But Tilton’s rapid growth and aggressive pro-business proselytizing had led to some disgruntled investors and attracted the attention of the regulators. In late 1991, Texas authorities told Tilton that his Word of Faith Family Church & World Outreach Center was being investigated on charges of consumer fraud. The state attorney general was seeking a court order to seize Tilton’s financial records...and was sharing his information with federal investigators.

In November 1991, the television news magazine
Prime-Time Live
aired a story that raised allegations of mail fraud in Tilton’s ministry. The news show portrayed him as a huckster of dubious pyramid schemes. Brother Bob angrily denied the charges and dismissed the news media in general as “agents of the devil.”

Criticisms about Tilton’s lavish lifestyle seemed to unnerve him. He and his wife stopped wearing their Rolex watches and driving their Mercedes-Benzes. But their efforts came a little too late to quiet their critics. “Tilton, in terms of just being an outright sham...is just awful. And he may be the only [television preacher] I’ve ever said this about,” said Jeff Hadden, a professor of sociology at the University of Virginia. “If Tilton believes himself, he has created the greatest act of self-deception of all of them.”
J.C. Joyce, a Tulsa lawyer who had become Tilton’s main spokesman, responded to Hadden harshly: “I guarantee you he has never set foot in Robert Tilton’s church. It doesn’t take any giant to critique something. Any fool can do it.”

Declining to say how much money Word of Faith brought in annually, Joyce said, “The church pays every single obligation it has on time. That’s the only thing that’s important. It doesn’t make any difference whether the church is making $2,000 or $100 million or $125 million.... All the man wants is to be left alone to preach.”

A New Age Profit Battles Ponzi Complaints

There are many parts of America, and the rest of the word, where traditional religion doesn’t have much influence. Even in these places, though, there’s the need for some framework of spiritual thought. Enter the New Age movement, which combines watered-down psychology with the softest elements of religion and mysticism and adds a dash of occult superstition. The result is usually an outlook on life that avoids guilt and emphasizes physical and emotional comfort.

Many people dismiss the New Age movement as a ridiculous product of West Coast flakiness. But it does create a religious-like trust in some. Ponzi perps know this.

In January 1995, the White House confirmed that Anthony Robbins, a California-based motivational speaker and New Age guru, was summoned to the presidential retreat at Camp David, Maryland, for a consultation with Bill Clinton.

The meeting became a subject of derision in Washington. “The president has had a lot of individuals come up and visit and talk with him at Camp David,” said a White House spokesman, trying to downplay the meeting’s significance. “Robbins is merely the latest on the list.”

Robbins Research International, the guru’s company, was a little coy in its response. A spokeswoman said: “Tony has a consistent policy. Any meetings he conducts, particularly with President Clinton, are private matters. They’re privileged, and he does not provide details.” This, of course, implied that the meetings with Clinton were regular occurrences.

The Camp David meeting was a rite of passage to legitimacy for Robbins, whose background was tarred with allegations that he was just a particularly glib (and, at 6’8”, particularly tall) Ponzi perp.

Robbins, who refers to himself as a “peak-performance consultant,” has often said his life’s work is helping people with “image problems realize their full potential.” He made millions of dollars from selling franchises that marketed his positive-thinking seminars. The business was lucrative; but it brought him legal troubles from disgruntled franchisees. Most of these former business associates made the same—or at least similar—complaint: breach of contract or fraud.

Many individual suits were filed in 1991 and 1992. Some franchisees charged that Robbins violated exclusivity rights given to franchisees in a particular region.

Some of these suits took these complaints a step farther and alleged that Robbins was running a Ponzi scheme. They claimed that Robbins’ California-based holding company was flooding the market with new franchises, effectively guaranteeing that existing franchises would never meet the profit levels originally promised.

In one suit—which eventually settled—Dallas, Texas, franchisee Larry Sergeant charged Robbins with violating his exclusivity rights in northern Texas and running a Ponzi scheme. Sergeant claimed that Robbins’ franchise delivered no goods or services, even though it had taken his $20,000.

According to Sergeant, Robbins set out to make money, not by selling the product in question (video seminars) but by attracting new investors (franchisees). Sergeant claimed that only Robbins could profit from the scheme. He and other investors criticized the video and audio tapes they’d received as “useless sales pitches.”

As a group, they charged that the product not only lacked substance and value, but the franchise plan was doomed to fail since franchisees did not receive the exclusivity promised them, nor any marketing or advertising backing from Robbins Research International. Sergeant told one newspaper:

Tony Robbins has made an art form out of stretching the truth, amplifying things, painting incredibly vivid pictures in three dimensions with you in them—with a smile on your face, your favorite music playing, seeing your favorite colors..... But sooner or later, he (cheats) everybody he does business with. And the thing that scares me is, he may get away with it.

While Robbins never lost a suit at trial, he settled many. By 1993, he had stopped selling franchises for video seminars. Unfortunately for Robbins, federal investigators also wanted a piece of him.

In 1995, Robbins settled charges by the Federal Trade Commission alleging that he had violated federal franchise laws. While denying any wrongdoing, Robbins paid a fine and fees of more than $221,000. He indicated that settlement was simply “the most prudent and efficient way to resolve this dispute with the FTC.”