Ravell Call, Deseret News
SALT LAKE CITY — An LDS Church spokesman weighed in on the state's fight against affinity fraud Wednesday, comparing perpetrators of fraud to child molesters.
Fraud is not a new problem, and leaders of various churches and other public figures have warned their communities for years to be wary of those who would entice them to part with their savings without great care and careful assessments, said Michael Otterson, managing director of public affairs for The Church of Jesus Christ of Latter-day Saints.
"This is especially challenging because perpetrators of affinity fraud, like child molesters, are predators who exploit one of the things we value most: the trust that makes our communities what they are," he said.
The half-day event titled Fraud College was organized to address the growing issue of fraud in Utah, particularly affinity fraud, where scammers target potential victims through a common bond such as friendship, ethnic or religious affiliation. Since 2010, approximately $2 billion has been lost by investors to con artists using various scams, including insurance fraud, Internet fraud and Ponzi schemes, according to the state Division of Securities and the FBI.
Ponzi schemes typically promise high returns to investors, but the scammer uses money from new investors to pay off initial investors. Among the most recent cases in Utah involved a con artist named Travis Wright, who bilked more than 175 investors out of $145 million in what was called Waterford Funding. The Draper man was sentenced last month to 10 years in federal prison.
“Anytime there is a promise of guaranteed returns that are not dependent upon market forces, our antenna needs to go up,” said panelist Scott Thorley, assistant U.S. attorney for Utah. “Anytime there is a suggestion that market forces don’t really apply to this investment … for extended periods of time, our antenna needs to go up.”
He said the lack of suspicion by investors can sometimes lead to those otherwise reasonable people becoming victims of fraud.
Fellow panelist Jennifer Moore, an investigator with Securities and Exchange Commission, said perspective investors should always assess the risk of potential investments very carefully.
"Don't risk more than you can afford to lose," she said.
During his remarks, Gov. Gary Herbert told the audience of about 350 that Utah faces "a significant problem when it comes to fraud."
"The intent (of fraud) is to deceive you for the purpose of taking away something that you have — usually that's money. When it comes to our business dealings, we need to trust and verify," he said. "We need to take those precautionary steps (so) before we open up our wallets that we do our appropriate due diligence."
Otterson said the LDS Church recognizes the significance of the problem and is deeply concerned about the harm it can cause. To combat the pervasiveness of affinity and other fraud, the church has increased its efforts to teach its members and to encourage them to live by sound financial principles, as well as to avoid the dangers of financial predators, he said.
"Church members should not let their natural trust blind them to the dangers of those who would exploit it," Otterson said.
He said that members should cultivate a healthy skepticism of all investment opportunities and consult with those qualified to fully understand the risks involved.
"Should someone — inside or outside of the church — come to you with a financial proposition, ensure that you practice financial discretion and consult qualified, professional advisers with well-established public reputations," Otterson said. "There is a difference between trust and naiveté, and church members must be informed and cautious."
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