KSL 5 News investigates affinity fraud connected to Sun Village Juan Dolio in the Dominican Republic

Lori Prichard reporting
Produced by Kelly Just

SALT LAKE CITY -- Utah has seen a recent rash of serious and expensive white-collar crime. In just the past seven years, the state has ordered companies and individuals to pay back more than $204 million to victims of securities schemes, and untold millions more have been lost in cases not prosecuted.......

KSL News investigated the role of what's called "affinity fraud." In many cases, that means the cost of mixing faith and fortune.

The pitch sounds perfect: a low-risk investment that can lead to a better lifestyle. It might sound too good to be true, but what if someone you trust--at work or in your church--tells you it is OK? Too many Utahns have learned the answer to that question the hard way.

Some Utah investors thought they were buying a piece of paradise they could enjoy and use to make money.

Layton resident Michael Coons said "yes" to the accommodations, completed and planned, at two ocean-side resorts Sun Village Puertp Plata and Sun Village Juan Dolio in the Dominican Republic.

"Five- and four-star accommodations, and it was absolutely gorgeous," he says.

Michael Coons, Impact investor

Coons put in about $155,000 into three separate investments promoted by a Nevada-based outfit called Impact Net Worth. One deal promised a 10 percent return on his money every three months. The other two investments gave him part ownership in a couple of condos.

Texas tax attorney David Reber became a fan of the projects.

"It's a beautiful resort," he says.

Reber paid $66,000 to own part of a hotel bungalow and collect quarterly interest payments of 12 percent. He believed his money was in good hands.

"I still remember the words ‘safe as a CD,'" Reber says.

For a year and a half, Coons received his promised interest payments. The steady money convinced him to invest that second and third time, but then the checks stopped.

Reber, on the other hand, says he never saw a dime.

Both men think their money may be gone for good. Looking back, both men blame themselves.

David Reber, Impact investor

"They work off personal relationships where there's a trust. And I called it, you know, 'Mormons stealing from Mormons,'" Reber says.

He and Coons both belong to The Church of Jesus Christ of Latter-day Saints. When they learned the project salesmen they were dealing with, and many others in the sales company were also LDS, the men dropped their guard.

"We had more trust in what was gonna happen, and that it was gonna work out for us, because there was a lot of LDS people involved," Coons explains.

In fact, so many LDS members were involved that when Coons visited the Dominican Republic, he was treated to some unusual and specific accommodations.

"They provided buses for us to go to church services," he says. "And all those that were LDS would get on the buses, and we'd head over to the local church and we'd go to church services."

Mixing business and beliefs is a scenario the director of the Utah Division of Securities, Keith Woodwell, sees all the time.

"It's insidious and unfortunate," Woodwell says, "but that's what works."

Woodwell says it's not just Utah. Nationwide, investors decide to buy into a product because they and the seller have something in common. Most often, says Woodwell, that thing is religion.

"Here, it tends to be the Mormon Church," he says. "But if you're in New Mexico, it's the Catholic Church. If you're in Alabama, it's the Baptist Church. So, it's everywhere."

Keith Woodwell, Director, Utah Division of Securities

Woodwell says a tight-knit congregation can provide the perfect setting to market a scheme. Those personal relationships blind potential investors; they miss the red flags and fail to ask questions.

"'Well, I know this person. He's like me,'[they think]. So, there's a certain level of inherent trust there," explained Woodwell. "And frankly, what we do is we con ourselves. We want to believe that it's true."

The one message Woodwell wants potential investors to understand is that you can never collect big rewards without taking big risks. Remember, Reber was told "safe as a CD."

"So when someone's trying to tell you something different, I would check your facts and be sure," Woodwell says.

Reber admits he did things backward--checked his facts after things went south. It didn't take him long to discover a long list of problems omitted from his sales pitch. He found complaints of unregistered securities, big commissions, clients not getting paid.

KSL News even found a lawsuit by state of Idaho against Impact Net Worth and its sales force. The suit declares the entire project "... a real estate scheme that defrauded investors."

"You need to do your own due diligence," Reber says. "You need to make an effort and not just be unsuspecting."

Impact Net Worth, its managers and sales staff have been named in several lawsuits. It will be up to the courts--state and federal--to decide what happened to investors' money and if fraud was involved.

KSL News did receive a written statement from Impact Monday. In it, the company says: "Impact had members of all faiths as part of its corporate culture and believes that religion should never be used in evaluating any investment or purchase." [CLICK HERE to read the entire statement]

The issue of affinity fraud has not escaped the attention of religious organizations. In fact, the LDS Church has warned members about people who may use relationships to promote investments. To read those warnings visit http://www.ksl.com/?nid=309&sid=8608529

Go back | Date: 10 Nov 2009
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