Church Money Used for “Ponzi” Fraud Scheme–Kansas Investigator
Update by Chuck Fager
Wichita, Kansas – Maurice Roberts, the former Superintendent of Mid-America Yearly Meeting, testified for several hours Thursday as a key witness in a major church fraud trial here. Priscilla Deters, 63, of Walnut, California is being tried on 13 charges of wire and mail fraud in U.S. District Court. The charges are in connection with a “Ponzi” scheme which prosecutors say collected over $6 million from churches and church members in twenty-one states.
Among the victims of the fraud were Quaker churches in Kansas, Oklahoma and Texas. Roberts, now a resident of Camano Island, Washington, was General Superintendent of these churches, through their Mid-America Yearly Meeting. Mid-America Yearly Meeting is an association of evangelical Quaker (or Friends) churches headquartered in Wichita. He served in that position from 1982 to 1994, when he was forced to resign after the frauds became known.
After leaving Mid-America, Roberts said he was hired by Phil Harmon, a prominent Quaker in Northwest yearly Meeting circles, in May of 1995. Harmon has had his own legal troubles.
Prosecutors assert that in the fraud scheme, Deters promised churches she would double their investment in a year, while keeping their funds safe in certificates of deposit. Deters told the groups that the money for these “matching gifts” came from a fund containing several million dollars. She also claimed to be providing such gifts from the profits of several highly lucrative businesses.
However, prosecutors contend there never was any such multi-million dollar fund, and no business profits.
Instead, according to bank records introduced as evidence, Deters spent investors’ money freely on personal expenses and gifts to her several children. Deters also, prosecutors contend, paid off early investors with money from later investors, in what is known as a “Ponzi” scheme.
Deters’ defense attorney, Federal Defender Steve Gradert, argued that Deters did not guarantee to double her investors’ money, and that she never intended to defraud anyone.
Instead, Gradert has suggested that Deters is the victim of a conspiracy involving Roberts and other as yet unnamed persons, to shift blame from their own misdeeds to her. Gradert also sought to tie the Deters scheme to the frauds associated with Phil Harmon, through Roberts’ connection with both.
Roberts testified that he first learned of Deters and her program in 1988, in connection with a Quaker ministers’ conference. The conference planners invested $7500 with her, Roberts said, and received back $50,000 a year later.
This experience, Roberts acknowledged, made him very enthusiastic about Deters.
Thereafter, between 1989 and 1993, according to church records introduced in evidence, Roberts persuaded his association of Friends churches to invest a total of $439,000 in church money with Deters, hoping to gain at least $878,000 in returns. Instead, the group received back only $354,000, $85,000 less than they put in, and $524,000 less than they were expecting.
Deters stopped making payments to Roberts’ group in late 1993.
Prosecutor Allen Metzger showed Roberts a sheaf of faxes Roberts had sent to Deters thereafter. The faxes pleaded for funds to be sent from the various deposits that were supposed to be in his group’s accounts, and explained the financial hardship the shortfall was creating for the group. Roberts testified that the only responses he got to these appeals were excuses and promises.
Metzger then brought forward a sheaf of Deters’ bank records. Speaking dramatically, he declared that at the same time Deters was failing to send funds to Roberts’ group, she was using money from the same bank accounts to close on a $775,000 house for her son, buy several vehicles, and pay her own mortgage.
“If you had known this,” Metzger asked after each set of bank records was shown, “would you have kept believing in her?”
“No,” was Roberts’ repeated reply.
In 1994, the Kansas Securities Commission investigated Deters, and interviewed Roberts. Roberts was later granted immunity from state prosecution in return for cooperation with the probe.
Defender Gradert pointed out that this immunity was contingent on the belief that Roberts had not profited personally from the fraud. He also asked Roberts if he had kept any of the funds from Deters’ payments. Roberts denied doing so, and stated that the books of Mid-America Yearly Meeting were audited regularly.
Gradert also questioned Roberts about his relation to Phil Harmon. Roberts had known Harmon for years through the National Friends Insurance Trust, which insured pastors in Mid-America Yerarly Meeting. Roberts and Harmon were also on the boards of two small Quaker schools in Kansas and Oklahoma.
Harmon hired Roberts in 1995 to be head of Skagit Valley Associates, which he said was the paymster and office management support arm for all of Harmon’s companies. His office was next door to Harmon’s, Roberts affirmed, but he insisted he had no role in promoting or marketing any of the failed company’s services or investment products.
In 1996-97, Harmon’s business empire collapsed amid charges of fraud. About 230 investors lost an estimated $14 million, with at least as much more being stolen from a health insurance plan Harmon operated for several hundred Quaker pastors and staff workers. Harmon pleaded guilty in October, 1997 to federal charges of tax fraud and conspiracy. He is expected to serve eight years, and he will be formally sentenced in May.
Harmon also described Roberts as as his “extremely close personal friend” and a member of his personal “support group,” in a Seattle federal petition in May of 1997, in which Harmon requested permission to meet with Roberts. The court denied this request.
Seattle prosecutors have stated to this reporter that they expect to indict several more persons in conncection with the Harmon case, including Phil Harmon’s son P. Steven “Steve” Harmon. Asked if he had any fear of being indicted in the wake of Harmon’s frauds, Roberts replied firmly, “No, sir.”
He added that he had not been given any offer of immunity in the Seattle case, but that he had worked for federal authorities for six months, organizing and preparing Harmon’s business records and assets for federal supervision.
Defender Gradert also sought to shore up the Harmon connection by disclosing that another early advocate of Kansas Quakers’ investment in Deters’ programs was one Steve Harmon.
However, Roberts replied that this Harmon was a Quaker pastor in Oklahoma, and no relation to P. Stephen “Steve” Harmon, son of Phil Harmon.