October 6, 2009
Michigan authorities say they have uncovered a Ponzi scheme that was aimed at defrauding African-American churches around the state.
Two men - Michael J. Morris and William T. Perkins - have been charged with attempting to defraud twenty-one churches in Detroit, Flint, Saginaw, Inkster, Ferndale, Highland Park, Port Huron and Ypsilanti of approximately $660,000.
"In this difficult economy, families depend more and more on good works provided by local churches," said Michigan Attorney General Mike Cox. "By essentially pilfering the bank accounts of these ministries the defendants didn't just violate the sanctity of the church, they stole from the entire community."
Morris and Perkins, representatives of Television Broadcasting Online and Urban Interfaith Network, allegedly schemed to obtain money from leasing companies, leaving the churches responsible for repayment of the funds. The defendants approached Michigan churches and offered to provide electronic kiosks free of charge for use in religious education, community events and fundraising.
The pastors were told that a "national sponsor" would cover all costs in exchange for advertising that would run on the machines. They were then convinced to sign leases, described as a formality, on each kiosk. In reality, the churches unknowingly became responsible for the full purchase price of the kiosk, Cox said.
The complaint alleges the defendants took the agreements, along with greatly inflated invoices for the cost of the kiosks, to leasing companies to obtain funding. The leasing companies then paid Morris and Perkins approximately $27,000 for each of the kiosks, generating substantial profits for the defendants.
However, since there was no "national sponsor" to make the payments, Morris and Perkins used some of the funds from the leasing company to make the initial payments and pocketed the rest, Cox says. When the defendants later stopped making payments, the leasing companies, following the terms of the leasing contracts, demanded payment directly from the churches. In some cases, the contracts allowed leasing companies to take funds directly from church bank accounts, leaving churches in economic distress.
In addition to the alleged fraud against Michigan churches, Cox says Morris and Perkins are accused of targeting over 160 churches in 13 other states and the District of Columbia.