How Religious Con Artists Stole $35 Million Dollars from Quakers, Nazarenes and Other Churches And How They’ll Steal From You If You Let Them
An Investigative Report by
This report is about crime and churches. It is also about Mary Washburn.
Mary Washburn was a widow when she moved from Tyler, Texas back home to Cherokee, Oklahoma. She had been gone for thirty-three years, and she returned to the old home place mainly to be safe. “There were a lot of illegal aliens and colored down in Tyler,” she said candidly, “and seemed like there was a murder every weekend.”
Cherokee should have been safe enough; Oklahoma City was nearly a hundred miles away, and Tulsa, another fifty.
But it wasn’t. A criminal followed Mary Washburn to Cherokee, stalked her to her house, and stole all the money she had, $68,000. “There’s no way in the world I can get it back,” she told me.
Dick Johnston is not surprised by stories like Mary Washburn’s. He’s heard hundreds. It’s part of his job, as Director of the National Center on White Collar Crime. He used to be with the Bureau of Alcohol, Tobacco and Firearms (“That was before Waco and the Branch Davidians,” he wants me to be sure and add).
Johnston also spent several years running drug enforcement programs in Kentucky and Virginia. So he knows about crime. “And,” he says, “I personally am far more fearful of the consequences of this kind of crime than I am of street crime. You can protect your body; but what do you do about somebody who charms you out of your life savings?”
What do you do? For her part, Mary Washburn is trying to raise hell. But it isn’t easy; she doesn’t know who to call, and the places she has called–the Postal inspectors, the FBI, the county attorney–have given her little by way of response, so far.
This report grew out of Mary Washburn’s case, and several hundred more like it. Mary Washburn lost her money by investing it in a fraudulent scheme which was marketed to and through a Quaker congregation, the Cherokee Friends Church.
Such frauds are all too common today. They cost their victims billions–Attorney General Janet Reno recently admitted that the Justice Department can’t put a reliable number on it, but she cited $40 billion per year as a conservative estimate. But she’s making white collar crime a priority, she insists, because, “I’ve seen the absolute and total devastation to a victim who at first thought, This is legitimate. I’ll take my chances,’ and just got completely wiped out, all their life savings vanished.”
In these pages, we will see this devastation too, more than once.
I became interested in Mary Washburn’s plight through the church connection, because I have reported on Quaker news and issues for almost twenty years,
For almost eleven years, I published A Friendly Letter as a monthly newsletter of independent reporting and analysis of Quaker news and issues. It was the only ongoing Quaker journal written by a professional journalist.
Writing and publishing A Friendly Letter was a demanding job. The Religious Society of Friends is a small faith group, but we Quakers are fully human, and there was never a shortage of material.
When A Friendly Letter stopped, many readers urged me to keep it going. Some even offered financial help. And no similar publication has appeared to take its place.
The encouragement was welcome, but the newsletter was not an end in itself. I said then I would wait for a compelling need to be presented before taking up my reporter’s pen. And then, if it was in what Quakers call right order, way would open. With the discovery of these frauds–which incidentally affected members of several other groups besides Quakers–it seemed to me such a need had presented itself.
The four months of intensive research and writing that have gone into this report were made possible by the freewill gifts of just over a hundred donors, mainly former subscribers to A Friendly Letter. This support came to $8697, and by the time this reaches print, it will all be spent. I am very grateful to all of those who supported the work, and my hopes that this report can be of service to Friends and others, like Mary Washburn.
To find out whether we achieved this common goal, please read on.
Note: This report was prepared in February, 1998. The cases described here have continued to unfold since then. Several updates are also included on this website, along with numerous photographs.
All We Like Sheep
Annette Gurney has her work cut out for her.
Gurney is Assistant U.S. Attorney for the District of Kansas. On February 24, 1998 she will attempt to persuade a jury that Priscilla Deters is a crook who stole several million dollars and deserves to go to jail.
I predict it will be a tough sell. And I’m not the only one.
Listen to Dick Johnston, Director of the National Center on White Collar Crime:
“Most of the time in this type of crime, people get away with light sentences, or fines and no jail time at all. It’s a challenge to get a jury to understand it, and after conviction to get the judge to understand why the perpetrator should go to jail, rather than just pay a fine and maybe some restitution.”
There are several major reasons for such outcomes. Two are relevant here:
First, our society, and the law enforcement system, are obsessed with “street crime,” and the fear of personal violence.
Second, and more important here, when American juries look out at accused con artists, more often than not they look into a mirror.
Street criminals have been successfully defined as alien, ominous outsiders, typically young, male and of color. By contrast, the technical term for many con games is “affinity group crime.” That’s because the masterminds of such schemes look like their victims; they are simpatico, and often charismatic. These features are tools of their trade, fully as important as plastic bags or an Uzi to any drug pusher. The best con artists talk like their victims, share their backgrounds, culture, religion.
So it will be here. How could a Wichita jury not include several serious churchgoers, probably of middle age or older, most of them white, and several female? And when such a group looks at the defense table, that’s what they’ll see:
A 63 year-old white church lady, immaculately but not ostentatiously dressed, looking hurt but with a dignified bearing. One of them.
People don’t like to send their own to jail. Jail is for The Threatening Other.
I asked Annette Gurney if she thought it was a tactical advantage in this case to have Deters facing another woman as prosecutor. “That’s something I don’t even want to get into,” she replied primly.
“But what does your experience suggest?” I pressed.
She sighed. “I’ve never had a case like Priscilla Deters before,” she admitted.
Nevertheless, Gurney will give it her best, and she is no newcomer to going after con artists. Before joining the feds, she spent several years on the local D.A.’s staff, fighting consumer crimes of various sorts.
And she’s got evidence, plenty of it. Unfortunately, though, for aficionados of courtroom fireworks, not much of it portends the dramatic. Gurney’s focus will be on a series of letters, faxes and telephone calls:
Did or did not Deters mail, fax, and/or say certain things on certain dates to certain people in Kansas? That’s about it. There’s nary a shootout, drug deal or car chase to be found here. Arnold Schwarzenegger and Bruce Willis will not be vying for the movie rights to this trial.
About the only moment of anything like high tension in the case came early on the morning of December 13, 1994, when two investigators showed up at Deters’ house in Walnut, California, carrying a search warrant.
They found what they came for: piles of paper, on desks which also bore several telephones with answering machines. While they boxed up bank records and other documents, I’ve been told the phones were ringing off the hook. The answering machines’ amplifiers broadcast a series of angry demands for money as background for the search.
When the bank records were finally sorted out, months later, there turned out to be something like ninety-eight bank accounts connected to Priscilla Deters’ business, which was called Productions Plus. Of the $6 million-plus she took in, how much money was still in them is a matter of dispute. Estimates range from over $700,000 to exactly zero.
One other very valuable document retrieved in the search was a three-page list of 58 churches and schools in 21 states. All had invested money with Productions Plus, and the list included names, addresses and phone numbers. The total amount on the three pages came to over $4 million dollars. Investigators were confident that the list was not complete, because numerous individuals had also invested in Productions Plus, and they were not included.
On the list were four institutions located in Kansas: two were Nazarene, a church in Hays and an evangelist in Olathe; and two were Quaker, Barclay College in Haviland and Mid-America Yearly Meeting in Wichita.
Remember these names. Annette Gurney’s indictment is a federal case, but she plans to concentrate on what happened in Kansas; the other 20 states will have to fend for themselves.
And what happened in Kansas, according to her indictment, is that these four groups sent Priscilla Deters $875,500, which Deters promised to double in a year’s time by special “matching gifts.”
In fact, the Kansans got back only $642,026, for a loss on their investment of $233, 474, and $1,107,974 less than they were confidently expecting.
The loss, in federal legalese, was due to “a scheme and artifice to defraud and for obtaining money by means of false and fraudulent pretenses, representations and promises….”
There are fourteen counts of such fraud detailed in the indictment. If convicted on all counts, Deters could be sentenced to 56 years in prison and a $250,000 fine.
That’s the prosecution case in a nutshell. What about the defense?
There is more speculation here. There has to be, because Deters isn’t talking to reporters, nor are members of her family. Her defense attorney, Federal Defender Steve Gradert, has been hard to reach and close to monosyllabic in his responses.
But he did make one admission that has proved to be very revealing: “She has maintained her innocence, not just pled not guilty,” he said. “I can’t really comment beyond that.”
That’s not much of a disclosure; but in a way, it’s enough. For her part, Gurney wearily confirmed it. Up to ninety per cent of federal criminal cases end in plea bargains. “But,” Gurney sighed, “Priscilla’s not going to plead.”
Gradert’s statement is revealing because, if Deters isn’t talking, some of her supporters are; and she still has them, certified true believers. The case they present is remarkably consistent, and in summary, comes down to something like this:
Priscilla Deters is the target and victim of a conspiracy, backed by a shadowy coalition of forces ranging from, in various reports, the Vatican, to the Mafia, to a cabal of dishonest male evangelical church leaders. She does not owe anyone money; to the contrary, many of the so-called “victims” are actually in debt to her.
This is what her friends say. And while Deters may not be giving interviews, she has said some of these things to people who wrote them down. Let’s listen in on one such occasion:
It’s Friday in Lincoln, Nebraska. June 26, 1996. An evening service at the First Church of the Nazarene, is just finishing up. A dozen people remain behind, at first clustered in the sanctuary, then moving to a classroom. There they settle into chairs around a well-dressed middle aged woman, who talks to them earnestly for two hours.
The speaker is Priscilla Deters, and at some points she sounds as if her world is collapsing. “If those terrible wicked people had not hurt [me],” she says, “everything would be fine….If you only knew what I have been through,” she sobs, “these people will not get off my back.” She insists she is being “persecuted for doing good deeds.”
But then she dries the tears, and turns abruptly upbeat. “I am free and clear in California,” she insists, and “my businesses are thriving…they are growing all the time.”
Among her listeners are half a dozen couples, Nazarene ministers and their wives. They are uneasy and confused about what they are hearing. Four of the couples have invested money, a total of more than $72,000, with Deters’ Productions Plus. (Their names, incidentally, were not on the list found in the search of Deters’ house.)
Most of them have been told they were buying shares in large electronic signs, which were to carry paid advertising and be placed in shopping malls. They had been assured that profits from these signs were large and steady, and from this money they would get both interest payments and matching gifts, in rapid and reliable succession.
But they are worried about their money tonight. Some have received a few interest payments, which then stopped; others have received nothing. What, they want to know, is going on? Where is their money?
Deters repeatedly assures them that “I have the money, I definitely have the money”; and “yes, the money is in a safe place where they cannot find it.”
“They”, this mysterious army of persecutors, seem to be coming at her from all directions, but especially Kansas.
Tonight, she wants to talk specifically about one set of persecutors: the general Authorities of the Nazarene Church, operating from International Headquarters in Kansas City. They have placed an injunction against her, Deters insists, and she pleads with the group to lobby these leaders to lift the injunction. Then she can get back to her mission and will pay back all that she owes these people, and more.
The ministers are surprised to hear that their church leadership is carrying on such a vendetta; more than one asks for evidence. Deters says she has it, and goes out to her car to get it. She returns with a stapled legal document.
A minister scrutinizes it, and finds it is an affidavit, drafted by the General Counsel for the Nazarene Church, and submitted to the California Department of Corporations. The affidavit was sent in connection with an injunction issued by the Los Angeles Superior Court in August of 1995, almost a year before. Attached to the affidavit is a letter from Priscilla’s twin sister, Phyllis Beaver, to the Church authorities, pleading with them to lift this injunction.
The injunction has ordered Priscilla Deters to stop offering what the court finds are “unlicensed securities.” The court also froze her bank accounts, and appointed a receiver to take over all her assets, and redistribute them for the benefit of persons and groups with claims against them.
Flipping through the affidavit, the minister sees no direct connection between the statement and what may have happened to their money.
An injunction is certainly unfortunate, he says, and others echo him. But what about our money? When will we receive the promised interest payments, and matching gifts? Several of the ministers have assigned their matching money to their churches; but no such funds have yet been sent, long after the date they were supposed to appear.
Deters’ answers to these queries are rambling and evasive; she circles back repeatedly to the need to lobby the Nazarene church to lift “its” injunction. The meeting finally breaks up.
Afterward, the ministers’ wives are particularly uneasy. One woman, who thinks of herself as a good judge of character, found Deters “completely unreadable.” Another decided she was “either dishonest or delusional.”
All the same, just to be safe, one of the ministers writes a letter to the Nazarene authorities on behalf of those present. It suggests that if indeed the church was the body sustaining the injunction, that the action be dropped, so she would have a chance to repay what she owed them. If she didn’t, the letter added hopefully, legal action could be reinstituted.
“I have no assurance that the action I proposed would have been successful,” the writer admits later, “nor do I know if it would have been feasible.”
It is not successful, because Nazarene headquarters is not, in fact, “behind” the injunction. By late that summer, with no money forthcoming, four of the couples are writing affidavits of their own, backing up a motion by the receiver in California to hold Deters in contempt of the injunction.
A more coherent account of Deters’ line of defense came from another of her attorneys, James Parker. Parker was retained in 1997 to overturn the receivership established by the 1995 California injunction. Because he is not part of the criminal defense effort, Parker talked more freely about it. And here is the substance of what he told me:
The documents pointed to as evidence in this case are phony. They have been doctored and fabricated, to paint Priscilla Deters as a criminal, and thus to hide the identities of the real perpetrators, and the massive embezzlement of funds that was the real crime that has been committed.
Put more bluntly, Deters is being framed. Wait until the trial, they say; all this will come out, and people will be very surprised.
In that case, maybe I better take back what was said earlier about a lack of fireworks at the trial. If such assertions are actually documented in court, I will be among those most surprised. To make this case, Priscilla Deters would have to take the stand. Under federal rules, Annette Gurney can’t call her as a witness. But once she’s on the stand, she’s fair game for cross-examination. Taking the stand would be a very risky step. Adding to the risk would be the need to furnish evidence.
What kind of evidence? Attorney Parker, for instance, insists he has seen the “original documents” to support his assertions that Deters was a victim of a setup. But neither he nor the other supporters have showed anything to me, and nothing like it has turned up in the reams of court documents I have examined thus far. Further, they have declared numerous things to me as facts which I know for certain are not so.
So we’ll see. And on second thought, maybe it shouldn’t be such a surprise if Deters insists on mounting an aggressive, assertive case. After all, one thing my investigation has shown is that she is not merely confident of her innocence. It goes farther than that: Priscilla Deters is, and for fifteen years has been, a woman on a mission, and a divinely-mandated mission at that.
She is out, in her words, “to raise up the King of Kings.”
The burning light and certainty of this mission make ashes and nonsense of a handful of calls, faxes and letters to Kansas. As the apostle Peter said it in Acts 5:29, “We must obey God rather than men.”
Annette Gurney will not be talking much, if at all, about divinely-directed missions. The stern concreteness of Title 18, section 1343 of the US Code requires her to establish only whether Deters “knowingly transmitted by wire communications in interstate and foreign commerce certain signs, signals and sounds for the purpose of executing the scheme and artifice to defraud….”
In this limited context, “Productions Plus” ought to be relatively simple to portray as a fraud:
For most of a decade, Priscilla Deters told church leaders, including the Kansans, that she could do the equivalent of spinning straw into gold: she could double their funds in a year’s time, reliably and without risk.
As we shall see, a few early investors in her plan did double their money, and more; and word of this spread quickly. Church leaders being no more immune to greed than anyone else, scores of them, including many prominent Quakers, flocked to invest in her plans and recruited others to do the same.
In strict financial and legal terms, Deters was actually running a Ponzi-type scheme. There was in fact no magic process for doubling funds; instead, early investors were paid off with the funds from later investors, and when these funds finally dried up, the operation collapsed in a tangle of losses, litigation and the current criminal charges.
Seen from this narrow perspective, there is nothing new, and little that is striking about “Productions Plus.” Ponzi schemes have been around a long time, in both secular and sacred garb, and despite warnings from authorities, show little signs of slowing down. If Annette Gurney gets this message across to the jury, she should win her case.
But a conviction on those terms will not produce any real understanding of what Priscilla Deters and Productions Plus have been about for fifteen years. The full story is much more complex, bizarre and grotesquely fascinating than anything Annette Gurney will be presenting.
To begin to approach such understanding, we need to look far beyond that Wichita courtroom.
The Possibility Thinker’s Creed:
“When faced with a mountain,
I will not quit!
I will keep on striving
until I climb over
find a pass through,
or simply stay and turn
the mountain into a gold mine–
with God’s help!”
–Robert Schuller, pastor of the Crystal Cathedral
Allow a journalist a momentary flight into fantasy.
Hard by Disneyland, the Crystal Cathedral rises out of the asphalt, its thousands of glass panes reflecting the California sunlight. From this prototypical, world-famous megachurch, Robert Schuller has preached what he calls “possibility thinking” for years, to an audience of thousands in the sanctuary, plus millions more who watch his “Hour of Power” broadcasts, read his books, attend Possibility thinkers’ conferences, play the Possibility Thinker board game, or nowadays tune into his website.
I’m imagining a Sunday morning in, say, 1982. The large Cathedral choir is singing their hearts out, perhaps in one of the large concert performances the Cathedral mounts periodically. The music might even be original, composed by the church’s talented staff.
In the choir is Priscilla Deters. She has been a gospel singer all her life. And she has needed the comfort and inspiration of the music. It has helped her through a recent divorce and other family traumas. It has also been a source of prestige, and money.
On this imagined morning, Priscilla Deters does more than sing, however. Amidst the music, she has a vision. It is a vision of a ministry all her own, one which would take her talents and make of them a way to, in one of her favorite phrases, “raise up the King of Kings.” As God blesses me, she realizes, I will be able to return a portion to others in the work of the church. God will use me and this work as a channel for his blessings to his people.
What kind of blessings?
Money. Everywhere she looks, there are ministries–churches, schools, missions–and they all need money. The arts can be a way of assembling money for these ministries: especially multimedia concerts, which bring together lights and images with music, and when done right can draw large, paying crowds.
How is this to happen? After all, Priscilla Deters is a schoolteacher, running classrooms rather than ministries. She has several children in school, with college coming on. Her elderly mother is in frail health. How is all this to happen?
She is not worried. If she was a Quaker, she would say, “Way will open.” But at the Crystal cathedral this is phrased another way:
“When faced with a mountain,
I will not quit!”
– – – – – – – – – – – – –
Let me be clear: I have no hard evidence that the event just described really took place.
But I venture this scenario because something like it must have happened. Or at least, that is what Priscilla Deters appears to believe, and what those who still stand behind her believe also. She is a woman on whom God has placed his hand. And the setting is accurate: Deters did sing in the choir of the Crystal Cathedral, for years.
In fact, Priscilla Deters has been singing in church most of her life. Tom Claus, an old acquaintance, recalled seeing her and her identical twin sister Phyllis featured at Wesleyan-Nazarene church conferences in Indiana in 1947. They were twelve, and Claus just a few years older, a “preacher boy” headed for what would become a career as a missionary to Native Americans. Priscilla and Phyllis Kuhn, as they were known then, held center stage as the “Gospel Sunshine Twins.”
“They sang so sweetly, with wonderful harmony,” Claus reminisced, “and they looked so cute, dressed just alike.”
Their polished performances were clearly the fruit of much practice. One friend was told the Kuhn girls had been singing together since they were three years old; college classmates were informed that they had sung on the radio as children in their home town near Akron, Ohio. They were still singing when they enrolled in Marion College–now Indiana Wesleyan University–in the early fifties.
Marion College, which is not far from Indianapolis, was a sober place then–bobby sox were prohibited, and daily chapel services were required. The more modestly a student dressed, the better. Women played sports in culottes, and the men’s basketball team took the court in long pants. Dancing, of course, was verboten.
But if there was no dancing at Marion College, there was plenty of music. Indeed, joining a musical “gospel team” was a way to gain status on the campus. The teams were coed groups of four or five, which combined singing with preaching (by the male members). Teams got to travel on weekends to various church events.
Naturally, the Kuhn twins were prominent team members. And they were high-profile students, with flaming red hair, who managed to look atypically stylish in their dress while keeping within the letter of the rules. Priscilla graduated in 1957, and Phyllis, who reportedly had health problems, earned her degree two years later. Both majored in music.
Diplomas were not all they got at Marion, however. Priscilla met and married Leonard Deters there, and Phyllis fell for the campus minister’s son, David Beaver.
From there the trail gets cold for awhile. Phyllis settled in Akron. She has told people of being the organist for Rex Humbard, who was one of the early generation of television evangelists. Humbard built a large church, the Cathedral of Tomorrow, in nearby Cuyahoga Falls. By 1968, Priscilla was a schoolteacher in California, with four children. She also joined the Crystal Cathedral, and sang in the choir. In 1980 she and Leonard Deters were divorced.
Priscilla is fiercely proud of her 25 years as a teacher, and mentions it often. She says she taught English, French, and, of course, music. She spent her career in Hacienda La Puente, a district east of Los Angeles. She retired in 1983, and did substitute teaching for three years thereafter.
The story goes that during these years Priscilla’s boundless energy could not be contained within the limits of classroom and family. “While I was a teacher I became involved in a variety of fund raising activities,” she told a California court.
One such effort, from the early 1980s, was called “Savings Plus”, and it was the direct ancestor of Productions Plus. School groups agreed to sell Savings Plus discount cards, and they kept part of the purchase price as a commission. Buyers used the card to get discounts at various local merchants. Such discount cards, in various guises, are widely-used marketing devices.
The logo for “Savings Plus” was almost identical to that of Productions Plus, and clearly the germ of the operation can be found here. “Every dollar, rightly divided, will multiply,” one of its early brochures announces.
Another asks groups, “Do You Want To receive NEW Cash Resources WITHOUT Added Time…Money & Work…? JOIN…THE SAVINGS PLUS PERPETUAL FUNDING PROGRAM.” (All emphasis is in the originals.)
The “funding program” appeared to boil down to continued efforts to sell the cards.
Over ten years, and in millions of words, the nub of Deters’ message did not get much more elaborate than this.
Savings Plus was not overtly religious, but for the spiritually minded, the subtext could be read in a caption at the bottom of one of its flyers, which summed up the program as: “COMMUNITIES HANDLING RESOURCES INVOLVING SERVICE TOGETHER”, whose first letters spell CHRIST.
As proudly as she looks back on these modest origins, it is evident that Savings Plus never amounted to much. Its real significance was as a stepping stone to a bigger stage. Deters’ first big break came when she got out of town.
“In 1983,” she wrote later, “I was asked to assist in the Spirit of America Walk for Hunger’ by Bob Wieland, a paraplegic Vietnam War Veteran who was walking on his hands across America.” She left teaching to become project manager for the Walk. Deters helped organize the logistics and publicity for this pilgrimage.
Along the walk’s route, she said, “I developed relationships with charitable organizations in each community visited, and a fund raising program for purchase of food which was distributed along the Walk.” She also organized concerts, video displays, banquets and other events. Wieland, who had recovered from his war wounds to become a champion power lifter, gave displays of his prowess at most major stops on the tour.
Clearly Deters enjoyed this work. There’s also reason to think she saw great profit potential in such charitable promotions, especially on a national scale. And the combination of religion, performance and money was one she had seen, often at close range, since the childhood career of the Sunshine Gospel Twins.
Productions Plus, Priscilla Deters proprietor, was first registered as a business in Los Angeles County on January 9, 1984. Clearly the idea was to combine the fundraising idea behind Savings Plus with the kind of “productions” Deters had put together for the Walk.
Priscilla Deters, it seemed, was on her way. And she was thinking big; after all, she had a vision.
Productions Plus didn’t exactly take off like a rocket, though. To get to the larger stage she knew was out there, Deters needed more than a business name. She also needed, among other things, a partner, friends who could open doors, some capital, and above all a hot property, something she could promote.
Some of these showed up soon enough. Her sister Phyllis came west from Ohio, and they have worked together, with that particular solidarity of twins, ever since.
The problem of capital fell into place beginning in 1987. The money came from another friend, but in a rather striking manner.
The friend was Wayne Ashworth, who was the Director of Development at the Whittier Christian School. The school is a large one, with 1300 students in eight grades, associated with Calvary Baptist church. As Ashworth later told it, he began loaning Priscilla money in 1987. Over the next two years, he made ten loans to her, totaling $234,000.
The terms of the loans were generous: they were not due for eight years, with no payments in the meantime, and they were unsecured; interest was at eight per cent.
The most striking fact about these loans was that they weren’t Ashworth’s money. They all came from the funds of the Whittier Christian school. Further, Ashworth later testified that no one at the school knew about or approved the loans except himself.
Why was he loaning the school’s money to her?
“We felt,” Ashworth said–without explaining who else the “we” included–“that Priscilla Deters with her company of Productions Plus had great potential in the business world and a great deal of confidence in her personally and her expertise in marketing.”
But there was institutional self-interest in it as well: “She was also looked at as a very viable potential big donor to the school. And I cultivated that gift possibility because that’s my work.” He also acknowledged that he loaned Deters an additional $11,000 of his own personal funds.
Here I’m obliged to pause and reflect:
Maybe it’s only a reporter’s ingrained cynicism, but this explanation sounds incomplete. Was Ashworth really authorized to put almost a quarter of a million dollars of his school’s money in play on his own hook, without security, and without reporting it? All this in order to cultivate a potential future donor?
The idea strains credulity, as they say. But if he wasn’t, then why did he do it? What else, I wonder, could have been going on between him and Deters?
But perhaps I just have a suspicious mind. Over the years, lots of church people, men and women, opened their checkbooks wide for Priscilla Deters; they believed in her. “She was very persuasive,” is a remark others have made to me again and again. Among so many, why not Ashworth?
In any event, the first of these loans came due on December 14, 1994. That was exactly one day after Deters’ home was searched and her records taken. Ashworth said she asked for an extension of one year on the loan, and he agreed.
But 18 months later, in July 1996, Ashworth testified that none of the $234,000 had yet been repaid; though he had received about half the $11,000 of personal loans back.
When all these transactions finally came to light, Ashworth lost his job. Shortly after giving a lengthy statement to the California receiver in July of 1996, he dropped out of sight. Attached to his statement were copies of the ten loan notes, all signed by Deters and her sister.
But was Ashworth fired because he had been freelancing, or simply because the money was not paid back? Whittier Christian Schools officials pointedly declined to be interviewed, so we don’t know what they were thinking.
We do, however, have some idea of what Deters’ reaction to Ashworth’s statement was: Her lawyer, and her supporters, now say it is a pack of lies. Perjury.
What really happened, according to her local attorney James Parker, is that Ashworth embezzled the money, then falsified loan notes to make it appear as if Deters had received the money, when in fact she hadn’t. Further, Deters told Parker, her signature on the notes was coerced by Ashworth with threats that if she didn’t sign them he would kill himself.
My credulity is showing more strains here. And not just mine: Richard Clements, the receiver, had never heard this line of explanation til I recounted it to him, and he also had questions. “If that was true,” he said, “why didn’t her attorney raise it right then, to discredit him? Or one of her earlier attorneys?” (Deters has changed lawyers frequently.)
Good question. Deters’ attorney at the time was Michael Bertz. He was on hand for Ashworth’s sworn statement, and gave little advice beyond reminding him to tell the truth and stick to the facts. He made no challenge whatever to Ashworth’s assertions. When I contacted Bertz, he declined to comment on his role in the deposition, or on Ashworth’s credibility.
Clements made another telling point, which will also get us back to our narrative:
At the beginning of 1989, Deters deposited in her Productions Plus account a little more than $234,000, about what Ashworth had loaned her .
“Where else did she get that much money?” Clements wondered. “I’ve seen no indication that she had that kind of capital.”
But wherever that block of capital came from, Deters was ready to put it to work, in two ways: as bait to attract new investors–and as a down payment on the hot property she had been seeking, the one she was sure would be the bottomless gold mine needed to fulfill her vision.
When Priscilla Deters fattened her bank account with that $234,000, a new minister joined the staff of the Crystal Cathedral.
His name was T. Eugene Coffin. He had been associated with the Cathedral for years, with such titles as “Chaplain of the Tower” and “executive pastor.” What this actually seemed to mean is that he was something of a liturgical utility outfielder, performing weddings, funerals, and (unusually for a Quaker) baptisms, plus doing some family counseling. He knew Priscilla Deters, and he was to become one of the staunchest and most vocal supporters that Productions Plus would ever have.
Coffin was already a distinguished evangelical Friend. Born in India of missionary parents, he had been a star at Oregon Yearly Meeting’s Pacific College (now George Fox University) in the mid-1930s: handsome, athletic, charismatic, with a beautiful singing voice. He was on the George Fox Board for many years, serving as chairman for several terms.
Coffin had earlier served as pastor of the East Whittier Friends Church in California, from 1969 to 1976. These years happened to overlap the tumultuous rise and fall of the church’s most illustrious member, Richard Nixon. The president had called Coffin to the White House several times to preside and preach at his White House worship services there.
As the Vietnam war dragged on and Watergate unfolded, East Whittier received formal appeals from more than 200 Friends meetings asking for Nixon’s disownment from the Quaker fold for his perceived departures from Quaker testimonies on peace and truthtelling. It was Coffin who announced their reply, which was that they were not about to do any such thing.
This response may have shocked the liberal Friends who sent those minutes, but in his home constituency, Coffin’s loyalty to a famous and powerful native son was expected and honored.
The association with a president, followed by his elevation from little East Whittier to the glittering magnificence of the Crystal Cathedral, further burnished Coffin’s reputation and put him virtually beyond criticism among evangelical Quakers. Deters rightly judged that Coffin’s name and recommendation could open many Quaker doors.
Indeed, if anyone deserves the melancholy credit for turning Priscilla Deters loose on Friends, it is unmistakably T. Eugene Coffin. As my research made plain, all roads among Friends lead back to him. And these paths converge at the Friends Ministers Conference which he chaired in Denver, in April of 1989. In confidence games, a key role is that of the “roper,” a person who, whether wise to the scheme or not, works to “rope in” new victims, or “marks.” All available evidence indicates that Coffin was Deters’ key roper among Friends.
The 1989 Conference was the fourth in a series that were held every five years. It had originally been called a Friends Pastors Conference, but this was changed for the 1984 gathering in a bow to traditional Quaker nomenclature, and to accommodate the sensibilities of the handful of attenders who came from the non-pastoral Quaker groups.
Deters’ introduction to the planning committee was best described by an Investigator for the Kansas State Security Commission, Gary Fulton. Writing almost six years later, in support of the application for the search warrant, he said:
“Dr. Eugene Coffin…told [the]…Committee about this exceptional’ investment program being offered by Deters d/b/a Productions Plus to non-profit charitable organizations. Dr. Coffin told [Maurice] Roberts and other Committee members that Deters would match dollar for dollar all investment funds placed into her charitable gift giving program in a fifty two (52) week time period.
“Dr. Coffin assured the Committee that deters was a highly respected and religious business woman who could be trusted with their investment funds.
“Based upon the representation of Dr. Coffin, the Committee decided to invest by mailing a $5700 check to Deters…in early 1988.”
Thus was opened Pandora’s Box.
Maurice Roberts was the Treasurer of the Friends Ministers Conference. He was also Superintendent of Mid-America Yearly Meeting, which had its headquarters in Wichita, Kansas.
Unlike most superintendents, Roberts was not a former pastor, though he had taken a minor in Bible at Friends University, the Quaker college in Wichita. Instead, he had run a real estate business in Topeka, and served as Clerk of Mid-America Yearly Meeting, before becoming Superintendent.
A year after sending their deposit, with the conference date drawing near, the committee wrote to Deters asking for a “disbursement” of their matching gift. On April 20, 1989, Productions Plus sent them a check.
But the check was not for double their original deposit.
It was for $50,000, almost ten times what they had put in.
Investigator Gary Fulton later wrote, in official deadpan, that after this check arrived, committee “…members became very excited and pleased with Deters’ generosity from her investment program.”
Roberts had still not met Deters. But having been in business, he knew a tenfold return was remarkable to say the least, and he wanted to know how she had done it. Roberts says he asked Gene Coffin.
Coffin’s answer, as Roberts recalled it, was: Simple. Deters was in the advertising business, he explained; she marketed coupon booklets, which were mailed out to people in many communities; advertisers paid to be included in these booklets. She allocated the profits from these booklet mailings in designated zip code areas to her “beneficiaries,” and the Friends Ministers Conference had been the beneficiary in various areas. Evidently their allotted zip codes had been quite productive.
That neither Roberts nor anyone else raised a red flag at this point seems incredible in hindsight. What kind of legal business produces close to a 1000 per cent profit in one year?
Or perhaps it is not so incredible. Professor Arthur Allen Leff, a scholar of consumer law at Yale Law School, published a study of con games in 1976 called Swindling and Selling. In it he considered the impact of such seemingly amazing results:
“Given the exhilarating immediacy of these actual pay-outs, with real money coming into the hands of real people, it is possible in running a successful Ponzi never even to attempt to answer the fundamental question, where is all the money coming from? Or rather, it is possible for the Ponzi operator to make himself the answer: Trust me; I’ve done it up to now and will continue to do it.’”
Almost immediately, however, Leff qualifies this judgment with an observation that fits Coffin’s explanation perfectly:
“Eventually [the Ponzi operator] will have to…indicate a source of wealth other than the later investors themselves. That mechanism need not be very plausible upon reflection…but it must be possible, publicizable, and complicated.”
Whether Eugene Coffin was in fact as trustful of Deters as he seemed we do not know, and he is in no condition to tell us. We may note in passing that a person who stuck with Richard Nixon to the bitter end probably had a well developed capacity for credulity.
But in addition, this confidence was likely bolstered by the fact that between 1989 and 1994, Deters paid him an average of nearly $5000 per year for otherwise unidentified services. These payments are recorded in her financial records, as straight up fees: there is no evidence that Coffin ever loaned her money, or invested in her program. (As of February, 1998, Coffin was under full-time care as an Alzheimers patient; in a brief telephone interview, he was unable to respond coherently to questions about these or other matters.)
What was Deters buying from Coffin with these payments? Arthur Leff had one answer:
“If the Ponzi operator can manage to procure–corruptly, falsely, or through luck–the names of successful plungers or, at least, apparently sophisticated operators to associate themselves with the game, so much the better.”
However sincerely Coffin was convinced of the integrity and promise of Productions Plus–and he stuck by her until his health broke down, in 1995–some other evangelical Quakers had doubts.
Chuck Hise was one of the doubters. He was also among Priscilla Deters’ first targets.
Hise is Director of Quaker Gardens, the retirement community operated by Friends Church-Southwest Yearly Meeting in Stanton, California. Quaker Gardens is where Eugene Coffin is now being cared for.
Hise remembers meeting Deters as long ago as 1984, when Productions Plus was newly-minted. She made a pitch at a dinner meeting in a restaurant in Whittier, before a dozen or more people from the yearly meeting. Eugene Coffin came with her to the session.
“She talked about her desire to support the Friends ministries,” Hise told me. “She had a sign business, and the signs were to be sold through community involvement by churches and schools. There was profit to be made in commissions from the sales, and then ongoing profits from advertising rentals on the signs. (We will be hearing more about these signs.) From this stream of profits would come the matching gifts to double the investors’ money in a year.
It was an interesting scheme, but Hise didn’t feel he understood it completely (another common reaction).
The sticking point very likely had to do with the safety of the investors’ money. Deters assured people their money would be kept safe and untouched while it waited to be doubled.
But if so, why did they need to make a “deposit” with her at all?
Maybe, Hise thought he also heard, the money was actually going to be used to capitalize her business. But in that case, it wouldn’t be untouched, and it would not necessarily be safe, because small businesses fail at a very high rate.
So how could it be both safe and untouched, while at the same time providing the capital for growing Productions Plus, given the risky character of new businesses?
Deters couldn’t really have it both ways. But over the years, this was the circle that she left many people thinking was really a square.
Hise was not alone in feeling confused after this meeting; nobody nibbled then.
So Deters came back at them, every few months. Hise recalls meeting with her, at her request, as many as eight times in the next several years. He also sent her to Quaker Gardens’ Finance Committee, hoping they could understand better what she was about.
Some of his Board members were not confused at all, but downright skeptical. One doubter was Joe Coffin, a relation of Gene. Joe Coffin told me he had once worked selling advertising to small businesses, and found it a tough, competitive field where profits were not easy to come by and risks were substantial.
Nevertheless, Deters kept coming back. Hise recalled once taking two friends to meet with her; one was a business professor, the other an accountant.
They listened closely, and after the meeting, talking in the parking lot, Hise asked them, “What do you think?”
The CPA said, “Chuck, I don’t have a clue what she’s up to. I’m not saying she’s a thief or a con artist or anything. But if I was you, I’d put my money in my pocket and run.”
Hise and Quaker Gardens kept their money in their pocket until after the news of the 1989 friends ministers Conference hit. Then the Finance Committee said, in effect: “Okay. Maybe this thing is worth a try–IF we can make sure our money really is safe.”
So Quaker Gardens deposited $100,000 with Productions Plus. Priscilla Deters promised them that at the end of a year they would get a 100% match for their money, and that their money would be safe, kept in a certificate of deposit at a federally insured bank.
But Hise and his committee wanted to be sure their money was safe. Damn sure, actually, though they might not admit to using profanity about it. Hise called the FDIC to make sure the bank was insured. He also called an attorney, to double check. Finally, he went to the bank along with the chairman of his Finance Committee, and insisted that the bank give him a letter guaranteeing that no one (read: Deters) could get at that CD without his signature. In advance. Period. The bank wrote the letter.
What happened? The CD sat in the bank, safe and unmolested, for twelve months. And on the anniversary date, Hise made damn sure that the money was returned. He thinks he may even have driven to the bank himself to pick it up.
Along with the original $100,000, Quaker Gardens collected a year’s worth of bank interest.
“What about the match?” I asked. “Weren’t you supposed to double your money?”
“Nope,” Hise said. There was no sign of any match, then or later. But Hise says he didn’t care. The Board hadn’t counted on the doubling, and were simply relieved to have their money back, safe and sound.
After that, neither Chuck Hise nor any other group that was part of Friends Church-Southwest Yearly Meeting deposited any more money with Productions Plus. “I later heard indirectly that Priscilla said we hadn’t followed her plan, and that’s why we didn’t get a match.”
Although secondhand, this comment has the ring of truth. All of the many “service agreements” I have seen between Productions Plus and various churches include the following language about the accounts where the investor’s deposits are to be held:
“Signatories on said account will be designated Trustees of the Beneficiary Savings Fund.”
This language in fact gave control of the deposit to Productions Plus. It was Deters who did the “designating” of signatories, and the designee was always herself.
If there were skeptics on the Quaker Gardens Board, the Friends Ministers Conference Committee was a different story. There may have been a few questions, but there evidently weren’t real doubts. After all, $50,000 was in the bank, and Priscilla Deters continued to have the enthusiastic endorsement of Eugene Coffin.
Coffin’s explanation about coupon book mailings as the source of the $50,000 grant sounds like a variation on the Savings Plus plan. But Phillip Deters, Priscilla’s son, testified that savings Plus had not continued after about 1987, and in her own account of the business, Priscilla mentioned no such campaigns. So while one can’t prove a negative, I’m doubtful there ever were any coupon booklets, or any zip codes reserved for the Friends Ministers Conference.
Besides which, the committee sent its $5700 to Deters in 1988. That was also the year Wayne Ashworth began making his quiet loans to Deters. When it came time to send the Conference a match, maybe she didn’t need Savings Plus anymore.
In any event, the Fourth Friends Ministers Conference in Denver was a success. I was there, and can testify to it. Hundreds of pastors soaked up the atmosphere and perks of the luxurious hotel; we went to many workshops, like one which touted telemarketing campaigns as a surefire way of “planting” new churches, and another about “ministering” to homosexuals who wanted to overcome their “sin.” There were banquets and impassioned sermons. I recall feeling that the conference was a bargain, that we got a lot for our money.
When we had all gone home, the conference committee basked in its success. Not only was a good time had by all; after the bills were paid, there was still $22,000 left over. The Committee looked ahead enthusiastically toward the fifth conference, planned for Orlando, Florida in 1994. It also had a new chairman: Maurice Roberts. In its euphoria, it was happy to send the $22,000 surplus back to Productions Plus, as a new deposit for future matching gifts.
Maurice Roberts had high hopes for the next conference, especially financially. Deters told him that if the committee left their $22,000 with her for four of the intervening five years, she would match the accumulated total each year, for a total of $176,000 by 1994, an 800 per cent return on their investment.
Could they really count on this bountiful amount as they drew up their next conference budget? Roberts insists that Deters assured him that they could. (Deters later said she made no such pledge; but we will get to that in due time.)
The committee figured, with that kind of cash on hand, they could be generous to the ministers who came to the 1994 conference, knowing that many were not well-paid. They made plans to reimburse the planefare of as many of the pastors who needed it, in full.
In the meantime, contemplating these figures, Maurice Roberts began to wonder if there wasn’t more money where their $50,000 had come from, for other projects beyond the Ministers Conference. After all, he had a yearly meeting to run, and it needed money too.
When Andrew Jackson Bailey was three months old, in 1927, no one expected him to produce a gold mine. He wasn’t expected to live to be four months old, because he had double pneumonia.
He survived the pneumonia, but a year later was diagnosed with polio. Polio was then was feared as a plague that paralyzed both the mighty (like Franklin Roosevelt) and the humble, without hope of a cure for either. Many of its victims died. Doctors told Jackson Bailey’s family that their boy might live, but would never walk.
Bailey did walk again, but not til he was eight. In the meantime, a friend gave him a paint set, to help him fill the long hours of his confinement. Bailey not only learned to walk, but also became a self-taught artist.
He was able to marry and attend the University of Georgia, where he was fascinated by history. The subjects of his early art work are mainly religious, patriotic or both: In “Freedom,” the Statue of Liberty is shown cradling the Bible and brandishing the Cross aloft. In “Creation,” the sun and moon hover on opposite sides of a dark background, where they were just hung by God’s hands. These hands are shown poised as if to catch the new earth, which seems to have just dropped like a ripe apple from an as yet uncreated tree.
Another scene, “in God We Trust,” was widely circulated by a Pensacola, Florida promoter in a campaign to gather a million signatures on a petition to Washington. The petition aimed to keep the title phrase on U.S. money, and fend off a lawsuit by atheist Madalyn Murray to have it removed. The painting must have worked; the phrase is still there.
Despite this success as an artist, disaster hung over Bailey like a cloud: In 1960, aged thirty-three, he was felled by a heart attack, then paralyzed by a stroke.
Once again he recovered, and attributed his renewed health to divine intervention. “I made a vow then,” Bailey told me, “that if God let me live, I would show my thanks by painting the complete Life of Christ.”
He got his chance, in spades. An Atlanta attorney, John Chambers, assembled a group of investors to support Bailey in this project. They formed a company called the Life of Christ Foundation; but the backers did not want just another painting; they wanted a monument, a landmark–an attraction which could draw crowds, paying crowds.
Bailey was glad to oblige. He wanted his painting to be authentic; so he spent six years researching everything he could find about what the Holy Land looked like in the time of Christ: the fabric and weave of clothing; the architecture and materials used in ancient buildings; the colors and shapes of the trees and flowers. He went to Israel to do field work, right after the Six Day War in 1967. “There I was,” he told me, “walking past Egyptian tanks still burning, trying to see what things looked like two thousand years earlier.”
After that trip, he was ready to begin painting. The investors made sure he had top-quality materials, importing the finest linen from Belgium, and supplying Rembrandt oils. The preparations and materials cost $250,000. Even with help from several assistants, the painting took three years, and Bailey was drained by it. “I went from 152 pounds to 113 while I was doing it,” he recalls.
When his Life of Christ was completed, in 1970, it was indeed monumental: made up of fifty five panels, the work is eleven feet high and over a thousand feet long. “Three and a third football fields,” Bailey boasts. Everyone I’ve talked to who has seen it, including persons with no strong religious background, reports that the work is indeed imposing and impressive.
It was finished just in time, though, because disaster was waiting to strike again: In 1971, Bailey was accidentally shot in the chest by an antique gun he had collected. After that came a brain tumor, which was successfully removed. Bailey says he is retired now, living in a small town not far from Atlanta, where he still paints some.
Injury and illness weren’t the only calamities Bailey had to cope with. While he claimed to have retained publishing rights to the paintings, the work itself was owned by the investors. They had plans to exhibit it, and produce posters, books, and other objects. From these sales the royalties should have come rolling in for Bailey and his family.
But the backers went broke. The painting was sold two or three times, and each time the new owner lost money, and it was never exhibited, only moved from one warehouse to another. In 1980 a book of reproductions of the painting, called The Painted Word, was printed; then its backers promptly went bust as well. Angry investors quarreled among themselves, and the books sat in unopened cartons, exiled with the paintings to invisibility in a warehouse. There they languished, as Bailey labored to regain his health, and the years passed.
About the only good news for the paintings came late in the decade, when it was measured and selected for the Guinness Book of World Records in 1987, as the largest oil painting in the world. This was at least a plug that would get wide circulation. Maybe someone would read about them and rescue them from oblivion, give them their rightful place in the public eye.
One person who read about the paintings there was Priscilla Deters, or so she told Bailey later. And she decided that she was the one to bring this masterpiece into the world’s spotlight where it belonged.
In fact, in Jackson Bailey’s work she saw the opportunity she had been waiting for, the chance to visibly “raise up the King of Kings.”
“I chose to believe in her,” Maurice Roberts told me. “My premise is to take a person by faith when they say they’re a follower of Christ out to help the kingdom. I choose to do that with people, unless and until there’s evidence otherwise.”
Sure. But Roberts’ record suggests that it helps if the person to be believed has money, or seems to.
After the $50,000 gift to the 1989 Friends Ministers Conference, Roberts thought that what worked there ought to work for Mid-America Yearly Meeting too.
But he didn’t want to rush into anything. He made calls to people who had worked with her; the feedback seemed positive.
That was not enough, though. Roberts is a Christian, and he trusts in Christian witness and spiritual discernment. Once he was introduced to Priscilla Deters, she seemed like a faithful Christian. “It was unusual,” he told me, “if a month went by that Priscilla didn’t call me to tell of a blessing, or ask for prayer. Even prayer on very personal needs and concerns.”
This impressed Roberts. But he wanted another perspective, from someone he trusted. So at one point he took his wife Peggy to meet her. The two women spent a long time together, and then Peggy prayed over what she had heard. Afterward she told her husband she had been shown that Deters was a very spiritual person, one with a special call to serve, and to do so without drawing attention to herself as an individual.
Roberts also did his own work of discernment, and found a verse from the Book of Exodus decisive. In Chapter 4, when God is preparing Moses to return to Egypt and free the Hebrews from slavery, Moses asks, “What if they don’t believe me?” God tells him to use what is in his hand, namely his long wooden staff, which later performed various wonders to startle his countrymen and gain him a hearing.
Roberts concluded that he should use what was in his hand, namely the surplus funds of Mid-America Yearly Meeting, in pursuit of God’s purposes, as localized in the yearly meeting agenda of church planting, youth work, and building a new headquarters building.
He talked this idea over with the yearly meeting Trustees, who were ultimately responsible for Mid-America’s investments. There were some questions, but the glow of the $50,000 match was still bright, and he was given the green light. On December 27, 1989, Roberts sent $5,000 of Mid-America’s funds to Productions Plus. It was the first of several such checks.
Roberts did not bother to tell the Trustees about all the subsequent checks. In operational terms, he didn’t need to; he was a signatory to the Yearly Meeting’s checking accounts. And by 1991, there were new Trustees, including one named Leatha Hein, who kept asking persistent, annoying questions.
He also became an evangelist, or perhaps more accurately an agent of Productions Plus. Roberts told me that he did not try to persuade anyone to invest with her, just answered questions honestly about his experience. This statement is contradicted by letters and statements in court documents, in which he is seeking out and urging other Evangelical Quaker leaders to take part. Two examples will suffice; there are more in my files:
In February, 1991 he wrote to Richard Felix, the former President of Friends University in Wichita, who was now President of Azusa Pacific University in California:
“You may remember that many months ago, I proposed to the Finance Committee of Friends University that we look at a plan whereby a dollar-for-dollar match would be made. This is a plan through Productions Plus….It can become a significant tool for endowing a chair or some other special use. The program works!” (Azusa didn’t bite.)
Or a letter of July, 1991 to Deters on behalf of Evangelical Friends Mission(EFM), which sent–and lost–lost $10,000 it had planned to use to provide scholarships for students in its third world missions:
“I have encouraged the [EFM Finance] committee to consider this opportunity for several months.”
Roberts later vehemently insisted that he never, ever received a penny from Deters as commission for these sales efforts. People in Kansas say they believe him. There are no specific payments to him in her financial records, as there are each year for Eugene Coffin. But these records are not complete, as we shall see; and in this case, after all that has happened, I think the question is better thought of as unresolved.
By 1989, whatever else Productions Plus was becoming, it was definitely a family affair. Available records show that Priscilla Deters paid three of her sons, Loren, Phillip and Randy, substantial amounts of money each year between 1989 and 1994, from the accounts containing investors’ funds. Her sister, Phyllis Beaver, also received frequent payments.
Even Priscilla’s aged mother, Bessie Kuhn, shows up regularly as a payee on checks.
What were these payments for? In July 1996, Loren Deters was asked at a deposition:
Q….And to your knowledge, did [Bessie Kuhn] ever work for Productions Plus?
Q. Okay. So from your recollection, she wouldn’t have worked for Productions Plus even in the mid-`80s, then?
Q. Do you have any knowledge as to whether or not she would have invested money in Productions Plus?
A. No, she didn’t.
Nevertheless, the aged Bessie Kuhn was paid $120,695 over five years.
Deters’ generosity to her sons was likewise notable. For instance, Loren Deters was a full-time law student during the years 1991 to 1994. In those years, according to her records, Priscilla Deters paid him a total of $37,986.
What for? This is what Loren testified in 1996:
Loren Deters: …(W)hile I was in law school, my mom would ask me to look up specific issues for her….
Question: So when you would look up legal issues in law school, would you be paid for that?
Loren Deters: It was kind of a nebulous thing. I’m not sure what–there wasn’t, you know, an agreement. If you do this, then I’ll give you this.’ It wasn’t like a regular employment contract.
But I might say, Mom, you know, my financial aid ran out. Can you send me some money.’ And she’ll say, Well, I’ve got to know about this particular issue.’
So I’m not sure what the primary motivation was, if she was giving me money like a mom would give her son money, or if it was for like work that I would do.
Loren Deters: But I did have access to a great law library, and I needed the practice, for goodness sake.
His brothers were not neglected, however: Randy, Phillip and Bryan received a total of $371,426 between 1992 and 1994.
There were numerous other items; a Lexis bought at the end of 1992; $20,000 spent on dental work, and so forth.
After the search of her house, Investigator Gary Fulton of the Kansas state Securities Commission, testified that, “My review of the documents obtained from productions Plus and Mrs. Deters discloses that she spent at least $1,820,450 of funds obtained from investors in the matching gift program for expenses of Productions Plus and/or herself. That amount includes $512,250 paid to members of her immediate family….” He also noted that these totals did not include up to one third of the bank records for the years involved, because these records were missing when the house was searched.
This pattern is in rather sharp contradiction to Deters’ pledge to investors that “management costs are borne by Productions Plus. There are no other costs involved.”
However, it is a mistake to infer from these figures that Productions Plus was simply intended to enrich Deters and her family. As the financial records also show, in these same years she spent hundreds of thousands of dollars, not on herself, but on her plans to “lift up the King of Kings.” especially through the work of Jackson Bailey. This effort, I believe, became the real driving force behind her activities.
It is speculation, but plausibly such, that she may have rationalized that she needed to use investor’s money as she did in order to get where she needed to be to pay them off the way she had promised. She wouldn’t have been the first to make such rationalizations. Or for that matter, the first to succeed.
And for that matter, she might well have succeeded, if it hadn’t been for an unlikely adversary, one undoubtedly selected by Providence, who didn’t want the job of bringing her down, and did not in fact realize that’s what he was doing.
How many Catholic priests can there be who are nicknamed “Bubba”?
Robert Graves is one. He earned the nickname, by virtue of his roots, and particularly by his career before taking the cloth.
His family were among the original white settlers of the central Florida area where he was raised, “right south of Orlando, in Osceola County, where the railroad tracks crossed.” His father’s background is Old Virginia (his son is named Robert Lee Graves), and he owned a construction company which prospered and brought affluence and respect to the family.
Robert Graves thus grew up a rich kid, “around the pool” he puts it, and by his own account, was something of a hellion as a teenager in the late 1960s: He had his own airplane at 16. He drove fast cars, says he was a lady’s man. Bubba, indeed.
But he also tells of another, buried side of his personality, which burst through the surface one night at a drive-in. He was there with his high school girlfriend, and one of the features was, Brother Sun, Sister Moon, about the young St. Francis. Francis was also the scion of a wealthy family, who left it all behind to follow his image of “Lady Poverty.”
Watching it, Graves found himself suddenly weeping. “Everybody figured that the girl and I were going to get married and have a family there,” he told me. “But that wasn’t really me.”
Out of high school, though, he seemed headed in a respectable and promising direction: to the U.S. Military Academy at West Point in 1973. And if he didn’t ultimately stay in the military as a career, there would be the family construction company.
Where could he go from there? Well, look what happened to Jimmy Carter, just to the north in Georgia, who went to the Naval academy and then came home to run the family peanut farm. The sky was the limit.
Graves’s course was perhaps just as unique, but in a very different direction. The big event of his plebe year at the academy was, of all things, a religious conversion: he left his family’s Episcopalianism to become a Catholic, and a fervent one. When his mother fell terminally ill late that year, he left west Point and the promise of a military career without regret and returned home, buried his mother, and finished college at Georgia Tech in 1977.
Over the next five years, Graves pursued both his “Bubba” lifestyle of fast cars, ladies, and work at the family firm, and a parallel spiritual quest to find out what God wanted him to do with the intense faith he had developed. He made long retreats with various orders, starting with Franciscans, and proceeding on to the stricter, more ascetic Trappists and Carthusians.
Finally, in 1982, he left America for Italy, the homeland of his new church. There he found what he had been looking for: a small religious community called the Sons of the Divine Will, based in the old roman town of Civitavecchia.
The Sons of the Divine Will was a young group, founded only in 1974. The members were mostly lay people, men and women, who pursued a kind of neo-primitive Franciscan discipline, depending on freewill donations to live, and never charging fees for their religious services–masses, baptisms, marriages.
This no-fee policy got them in trouble with local church hierarchs, who lost business to the upstarts and cried foul; but Graves is proud of it. “The church is in the hearts of the people, not in the institutions,” he affirms. Francis would understand.
Graves says he wasn’t interested in becoming a priest, but was told by those he respected that he had a vocation and should pursue holy orders. He was ordained on June 21, 1987 in Rome, by none other than Pope John Paul II.
At home, however, there were changes: his father died. What would happen to the business? There was also the matter of the estate. Graves had two sisters, and the three of them were to share a large inheritance. In his culture, however, it is up to the son to settle these things, and Graves took on the task. He wanted out of the business, and declined to take any of the money for himself; he was through with all that. But what was to happen to it?
In the end, Graves turned his share of the family estate over to the order, to help build a center for the Sons of the Divine Will in Kissimmee, his old home area. The order’s founder, Father Gustavo, lives there now. Graves says there are about a thousand members of the order in the US, Canada and Mexico, and he spends much time traveling and conducting retreats among them. He is happy with his lot.
At least, he was until October 1, 1991, when he was contacted by a stranger named Priscilla Deters. Mrs. Deters said she wanted to talk to him about some paintings.
Mark Griffin, where were you in 1991?
Griffin is president of the North American Securities Administrators Association. Its members are the financial watchdogs of the fifty state governments. On November 12, 1997 he held a press conference, to warn the public about the growing threat of “affinity group fraud.” Here is a bit of what he said:
“Religious affinity group fraud continues to be a widespread, pernicious problem…. you can trust me because I’m like you,’ continues to be the siren song of all of these con artists. But don’t be fooled. Affinity group swindlers play the loyalty angle for all it’s worth.
“To help investors guard against affinity fraud, NASAA is releasing an Investor Alert with the following tips:
— Beware of testimonials from other group members. Affinity fraud scam artists frequently pay out high returns to early investors using money from later arrivals.”
—Obtain a prospectus or other form of written information that details the risks in the investment and procedures to get your money out.
—Ask for professional advice from a neutral outside expert not in your group–an accountant, attorney or financial planner–to evaluate a potential investment. And–
—Before investing any money, call your local securities agency to learn more about the salesperson and firm. The simplest inquiry is to ask if they are registered to do business in your state. And is the investment allowed to be sold. Don’t take the word of a salesperson! Check out the investment yourself.”
In 1991, almost all of Priscilla Deters’ new clients failed to follow any of this advice. Except for at least one, whose identity we can only guess at.
This nameless person received a letter dated February 26 of that year, from one Ed Steele, an evangelical adman and direct mail consultant. The letter announced the newest wrinkle in the Productions Plus program, something called the Worldwide Community Service Charitable trust.
Later testimony suggests there was little more to this trust than one of the ninety-eight bank accounts–that, along with a letterhead, listing a Board of trustees, made up of Phyllis Beaver, Wayne Ashworth, Eugene Coffin, and another of Deters local investors, George Brown; plus Priscilla as Director. But the name makes it sound like a foundation, and Ed Steele’s letter promoted the idea in glowing terms. It is worth quoting at length, both because of the way it almost perfectly illustrates what Mark Griffin and NASAA were talking about, and because it is a fateful link in the chain of events we are following. (Note: Italics added; capitals and bold in the original.):
“After thirty years in development efforts for ministries and institutions and seven years of personal observation, I’m convinced that Productions Plus’ World-Wide Community Service Custodial Trust Fund is an…
AUTHENTIC SOURCE OF GIFT INCOME FOR NON-PROFIT MINISTRIES WHICH IS TRULY UNIQUE
“Let me quickly explain that the WCSC Trust Fund is not an investment program, a fundraising scheme or a plan whereby something is sold to your donors….
“It is a risk-free, savings-based plan through which new money is generated and GIVEN TO YOUR MINISTRY.
“Simply put, when funds are placed in a CD with World-Wide Community Service Custodial trust in an accredited, federally-insured banking institution, interest is paid to the depositor….
“Then, for every $500 unit of the principal placed in the WCS Custodial Trust, a 100% matching grant is given to the registered beneficiary at the end of one year.
“There are no administrative costs, no fees, no commissions to middlemen and no finders’ fees. I personally receive no compensation from the WCS Custodial Trust. Furthermore, at the end of each 52-week period, several attractive roll-over options are available, some of which offer exponential increases to qualified non-profits.
“I’ve been given the unique privilege of selecting a number of non-profit organizations and ministries to whom these funds can be given. Several million dollars are available for immediate release to appropriate ministries. For this reason, we need to hear from you within thirty days. Conditions may not hold after that time….”
Among the untruths in Steele’s letter were the following: there were not “several million dollars” available for immediate release; Steele played no role in selecting participants; the program was very much an “investment,” and one that was certainly not “risk-free”.
Nevertheless, the letter had its impact. Copies of it have turned up in several court statements filed by clients in different parts of the country.
It was also important in another way: Someone who read it had sense enough to do what the NASAA Investor Alert recommended: He or she turned it over to the appropriate regulatory agency, in this case the California Department of Corporations, to find out if it was legal.
Deters did not rely on the Steele letter alone. In January of 1991 she hired Charles F. “Chuck Crosby,” a former pastor in the Church of the Nazarene from Colorado as a “consultant,” to follow up leads and make presentations, especially to Nazarene churches.
Why Nazarenes? Deters’ background was very close to, if not part of the Nazarene tradition. The Nazarene Church is an offshoot of Methodism, generally more conservative in character, favoring revivalism and devoted to the pursuit of “sanctification” or “holiness.” As a current Nazarene statement on the Internet puts it:
“The doctrine that distinguishes the Church of the Nazarene and other Wesleyan denominations from most other Christian denominations is that of entire sanctification.
“Nazarenes believe that God calls Christians to a life of holy living that is marked by an act of God, cleansing the heart from original sin and filling the individual with love for God and humankind. This experience is marked by entire consecration of the believer to do God’s will and is followed by a life of seeking to serve God through service to others.”
Most of evangelical Quakerism shows a heavy influence of this Wesleyan Holiness tradition; this familiarity undoubtedly has something to do with Deters’ inroads among Friends. Almost all her Quaker clients–or victims–were drawn from those groups most influenced by this Wesleyan Holiness tradition.
Chuck Crosby’s pay was set at $6,000 per month, not including bonuses. By the end of 1992, Deters had paid him $99,500.
He earned it. Over the next two years more than a score of Nazarene churches in at least ten states poured money into Productions Plus; two million dollars is a reasonable estimate. In North and South Dakota, Nazarene churches bundled their investments together, and what Deters called “the Dakota Project” brought in over half a million dollars. A list of the churches was seized in the search of Deters house; but there were also numerous individuals who invested with her, and no complete list of their names has turned up.
Among Friends, Deters had energetic recruiting help from three principle allies: Eugene Coffin in California, and in Kansas, two key figures in Mid-America Yearly Meeting: Maurice Roberts, and Roberts’ Assistant Superintendent for “church planting,” Randy Littlefield. Even Roberts’ Youth Superintendent, Royce Frazier, got in on the act a bit later. As the Kansas investigator wrote, “Roberts told [me] that he wanted to share this newly found wealth with other member churches and ministers in Kansas, Oklahoma and Colorado.”
If Nazarenes, with their much greater numbers, put in more money than Friends to Productions Plus, the Quakers got in earlier, and across an even wider geographical span, from California to North Carolina; and among them can be found some of her most loyal supporters still.
Not that these four recruiters always worked in harmony. In Kansas particularly, Roberts and Littlefield clashed early on. Roberts wanted to “share the wealth,” but he also wanted to be the man with the keys to the vault. He insisted that all the “deposits” for Productions Plus should be channeled through him, and kept information about the ones he handled very close to the vest.
Littlefield didn’t like this centralized control. Why, he wanted to know, shouldn’t individual churches be able to make their own arrangements with Deters? Practically all of them had needs, and why should headquarters keep such a tight grip on everything? Was this some kind of ego thing with Roberts?
Littlefield soon left the yearly meeting staff for Friends pastorates in League City, Texas and Cherokee, Oklahoma. In both places he successfully urged the congregations to send money to Deters. In fact, Cherokee sent almost half a million dollars, rivaling the Nazarenes’ “Dakota Project,” from one small church in a declining little town.
The Cherokee plan was to build a community center as well as a larger church, and it was supposed to breathe life into the small, depressed community. Since the Friends church was small, investments were solicited from other townspeople, like Mary Washburn, and the response was enthusiastic. After all, who wouldn’t want to help their community, and make excellent profits at the same time?
Royce Frazier’s contribution was more a matter of doing a good deed: his job as Youth Superintendent meant among other things that he was sent to the planning committee for YouthQuake, a national triennial conference of young Friends.
In 1991, YouthQuake was held in Burlington, Vermont between Christmas and New Year’s Day. YouthQuake was a creation of evangelical Friends, as a kind of revival conference for teens; but its reach had expanded, and in Burlington an unexpectedly large contingent of kids came from the liberal unprogrammed branches of Friends showed up as well.
This mix occasionally proved volatile, as youths from widely divergent religious cultures tried to understand each other. But after some early tumults, all ended well, and part of the upside was that the big turnout meant the planning committee, like that of the Friends Ministers Conference, ended up with a $20,000 cash surplus.
When the YouthQuake committee met in March, 1992, to take stock and begin work on the 1994 gathering, Royce Frazier knew just what they should do with that extra $20,000: put it to work doubling with Productions Plus. They could end up with $40,000 or more by then; and with that kind of cushion, the next YouthQuake could be made affordable for families of even modest means.
Who could argue with that?
Evidently some could, for there were loud complaints when the Committee heard about it later. In fact, the Committee then adopted a policy prohibiting any such ex parte transactions afterward; but by then the deal was done.
Accounts conflict as to exactly how, when and by whom the $20,000 deposit was approved; the most plausible account appears to be that Frazier, with the cooperation of the Treasurer, Sheila Bach of Baltimore Yearly Meeting, simply sent the money in and reported on it later. What is beyond question, is that the money was sent, through Maurice Roberts, on April 17, 1992. The YouthQuake Committee did not meet again until September, 1992.
The Productions Plus bandwagon hit a few bumps in 1991, but was not thrown off track.
At the end of May, Deters was surprised to see a process server show up with an official looking document. Ed Steele and Wayne Ashworth also got copies. It was a “Desist and Refrain” order from the California Department of Corporations. Although signed by the Commissioner, the state attorney who did the work was named George Crawford.
The body of the letter was a single, legalese-weighted sentence that ran on for fifteen lines. Its message was plain enough: “…you are hereby ordered to desist and refrain from the further offer or sale in the State of California of securities, including, but not limited to, evidences of indebtedness and/or investment contracts in the form of Resource Development Fund Agreements’….”
Deters took immediate action, of a sort: she dissolved the Worldwide Community Service Charitable Trust. She rewrote Chuck Crosby’s contract, including language about how he was supposed to use only approved printed materials when making his sales presentations, and to avoid talking about the program as an “investment.”
And on June 22 she fired off a letter to the Department of Corporations, challenging the order and insisting, among other things:
“1. I am NOT a corporation.
2. I DO NOT SELL SECURITIES….”
She also alleged that “…there have been aggressive efforts to re-direct and exploit the program for the benefit of individuals profitable gain rather than the true purpose of our work.”
(Just who these nefarious individuals might have been was not specified. Deters would later finger Maurice Roberts as the arch-fiend. But at the time of this letter, and for more than two years thereafter, she continued doing business with Roberts without complaint.)
The letter closed with the affirmation that, “As a servant of the State of California since 1968, I deny all the allegations and deem them to be false.” She asked for time to prepare a formal appeal. She also called George Crawford, to seek an extension of time to respond to the order, explaining that her 93 year-old mother was quite ill. (Bessie Kuhn often seemed to fall ill at such moments.)
Crawford followed up the call with a letter on June 27, in which he shrugged off her first two claims. “It is not significant that neither you nor Productions Plus is a corporation,” he replied. Further “…both state law and the Department of Corporations, stress the substance of a transaction–and not its form–in independently determining whether that transaction is a “security.”
He added, however, that she was welcome to file a formal appeal of the order, and when she did he would “immediately” schedule a hearing date.
No formal appeal was ever filed by Productions Plus. That has not prevented Deters’ supporters from confidently asserting, as both Randy Littlefield and Ed Steele did to me, that “The California order was proven false and lifted,” (Littlefield) and “the case has been thrown out….”(Steele). We also heard Deters herself telling the ministers in Lincoln, Nebraska that, “I am free and clear in California.”
In truth, once the dust settled, very little had changed. Dick Johnston, of the National Center on White Collar Crime, understands what happened: “The problem there is more the system,” he told me. “By and large, enforcement types think they’ve done good job when they identify somebody and issue a cease and desist order, or revoke a license; then they think they’ve succeeded. Usually they haven’t.”
Just so. In this case, the “Desist and Refrain” order was a civil action, which meant Deters would not be arrested for violating it. It also meant that if the state ever suspected she was violating the order, it would have to go to court to seek an injunction to stop her.
That would be a long, slow process, if it ever happened at all. Regulators have limited resources, and lots of crooks to chase, especially in large, populous states. “California,” notes Johnston, “has been a hotbed of this kind of scam.” So the enforcers triage their cases, and set dollar amount thresholds for frauds, below which they can’t usually be bothered.
This practice was news to me but not, evidently, to the crooks. “The reality,” Dick Johnston says, “is that the career criminals in white collar crime know better how to work the system, and what will or won’t happen than most cops, often state-by-state.” Many are well aware of the unofficial thresholds, and work to stay beneath them, at least in their home areas. It is a notable fact that many of Deters’ clients in California got their money back, or most of it.
Nevertheless, her basic operation was not changed an iota by the order. If anything, the California experience made her bolder. In the fall of 1991, Chuck Crosby’s work among the Nazarenes on the “Dakota Project” was briefly jeopardized when someone called that state’s Securities Commissioner. On November 1, the Commissioner issued a cease and desist order directed at Deters and Crosby. More alarming, somebody called the Grand Forks Herald, which snapped up the story like raw meat.
“Church investment’ plan likely scam,” was the headline in the Religion section of the November 10, 1991 edition.
The article had the annoying triumphalist tone of the investigative reporter with a scoop: “So far,” the piece declared, “it appears no money from North Dakota churches was sent to California. But it was close.” It characterized a telephone interview with Deters as “vague and short on details.” She referred them to Maurice Roberts, who blandly told them that Mid-America Yearly Meeting had benefited from it.
On the inside page, where the piece was continued, a different story emerged. The local promoter, a Nazarene superintendent named Roger Wegner, laid it on the line:
“I happen to believe people that are in the church,” he said, echoing Maurice Roberts’ sentiments almost exactly. “I happen to believe Priscilla Deters. I happen to believe Chuck Crosby, and in others that have had the results. I will believe those people.”
Wegner also knew who not to believe: “It’s not illegal. I don’t care what [the] Securities [Commissioner] says….”
And he didn’t. A few weeks later, the money was sent, well over $200,000 worth. And it kept coming. The article was forgotten, the order was ignored, and nothing happened.
(In 1995, after the “Dakota Project” was long since a done deal, the South Dakota Securities Commissioner issued a similar cease and desist order. But this order didn’t get any local press, and when I called the Commission office to ask for a copy, they vaguely remembered it, but couldn’t find a copy. Such is law and order in the world of white collar crime.)
In the early eighties, John Chambers had assembled another group of Atlanta investors to have a go at displaying Jackson Bailey’s Life of Christ paintings. They raised some money, and bought a piece of property in what must surely be the prime tourist location in North America: Orlando, Florida, right near Disney World. Their plan, like the previous ones, was to build an exhibition hall for the art, and charge admission. They figured, with good reason, that there should be plenty of tourist traffic to tap. They called their company Theme Park Ventures.
Theme Park Ventures got as far as designing the building, selecting a contractor, obtaining permits, and starting the preparatory work at the site. The building was supposed to cost more than $3 million. In October, 1984 they shipped the paintings to the contractor in Florida, who parked them in a large shed, confidently expecting speedy completion of the project. The parties were so confident they didn’t even have a written agreement with the contractor. That was fine, in the beginning; business was still done that way in some corners of Florida then.
But then they went broke also. Details are hazy and arcane, but there was an unpaid mortgage on the land, investors demanding their money back, threats of foreclosure, and the likelihood of more litigation. Once again, the paintings languished in a storage shed for several years.
This particular warehouse belonged to the Graves Company, which had been hired to construct the exhibit hall.
When all this happened, Robert Graves was in Italy, learning the way of the Sons of the Divine Will and studying for the priesthood. He wasn’t interested in what the family company was doing back in Florida, though he heard about this project and even saw the paintings as early as 1984, as the Theme Park Ventures project was taking shape.
But after his parents died, he felt obliged to sort out the estate, both for the benefit of his two sisters and their families, and later his religious community. When it comes to the matter of Theme Park Ventures, an element of family pride also seeps into his voice. His background is Old South, after all, a culture in which honor is everything. And he feels the Graves Company had been ripped off, essentially robbed of a $3 million job, and made to look foolish by Theme Park Ventures’ collapse. That’s cutting pretty close to a southerner’s sense of honor.
So when Priscilla Deters came calling in October, 1991 to talk about the paintings, and her desire to have them put on display, Robert Graves also had some things to say: Mainly, that he wanted the Graves Company compensated by Theme Park Ventures for the work the company had done on the site, and several years of storage, before the paintings went anywhere. A deal is a deal, he insisted.
But is an unwritten deal also a deal? Theme Park Ventures didn’t think so; John Chambers contended the contractor had agreed to store the paintings for free. But he did send Graves a “courtesy check” for $30,000, as a compromise gesture.
Graves was insulted by this token payment. He retorted by sending Theme Park ventures a bill for more than $2,700,000, and warned if it wasn’t paid, he would auction off the paintings to satisfy it.
The figure seems grossly inflated on its face. Graves now insists that it was more of an initial bargaining position; his opponents called it a brazen attempt to steal the paintings.
Deters, at least initially, seemed unfazed by his attitude. She assured him that would be no problem; something would be worked out.
How could she be so sure? Graves wanted to know.
Easy, Deters said: because she owned the paintings now.
“They buy and sell you like they do ballplayers,” Jackson Bailey said, remembering what had happened.
Not that he was complaining. Major league ballplayers may be chattels, but they command high prices. And so did he.
He watched Theme Park Ventures collapse with a certain bemusement, but also with frustration. “I just wanted the paintings to be shown, so people could see them,” he said.
His motives were not entirely selfless, however. After all, he still claimed publishing rights to the paintings; but who was going to buy posters, tee shirts or collectible plates bearing images of a painting that no one had ever seen? Besides, his health was still marginal, and if anything was to come from his masterwork, he would need help.
Help seemed to arrive in 1988, in the person of an attorney from Gainesville, Georgia named Sylvester Singleton. Singleton told Bailey he could handle all the promotional and publishing work associated with the paintings for him. He was sure they would make a lot of money. In fact, he was so sure, he had formed a corporation, Life of Christ Ministries, as the vehicle for this enterprise; and he offered to pay Bailey five million dollars, at the rate of $100,000 per year, in management fees, plus royalties on all the products sold.
On May 16, 1988, Bailey signed a management agreement with Singleton. He was to receive monthly payments of $8333 per month for the next fifty years, if he lived that long.
Evidently, Singleton soon fell victim to the jinx that seemed to follow anyone who tried to profit from the paintings, and couldn’t keep up the payments. This is hardly surprising: the exhibit hall project in Florida had flopped, and the paintings were still out of sight. There was no revenue to manage. But in addition, Singleton evidently ran into unrelated legal problems of his own. By early 1989, Singleton was needing help himself.
“Singleton called me one day,” Bailey recalled, “and said, this lady wants to meet you.” He drove to meet Priscilla Deters in a restaurant, and she said, “I’m buying your contract.” On November 30, 1989, Singleton assigned his management agreement to Deters, effective January, 1990.
One provision of the agreement Deters purchased from Singleton read as follows:
“Said [management] license shall be interpreted to include an ownership interest in said works of Artist to the extent necessary to effectuate this Agreement.” (Emphasis added.)
This is probably as close as Priscilla ever came to owning the paintings. But when she called on Robert Graves, she seemed to think it was close enough.
A lot might have been different if Leatha Hein’s house near Wichita hadn’t been damaged by a severe windstorm in June of 1990. But that’s one of the hazards of living in Kansas.
It was a mobile home, where Hein and her husband Norman were staying until they could build their own house nearby without having to borrow money from banks.
“It wasn’t a tornado,” she recalled, “but straight wind, 120 miles an hour.” What weather forecasters call a “severe thunderstorm.” They heard it was coming on the radio, but before they could react a tree smashed through their kitchen window.
“About that time we figured it would be safer in our garage,” she said, “so we grabbed the dog and headed for the door. It took both of us pushing to get it open. Once we got to the garage I crawled under the car, and we just stayed there, listening to the wind sucking and banging at the big garage doors.”
A half an hour later, it was over. When they emerged from their garage, five big old elm trees had been knocked over on the mobile home.
As if that wasn’t enough, later that same year Leatha’s father and father-in-law both became seriously ill.
All the time involved in rebuilding and caring for ailing parents meant Hein was pretty preoccupied for the next year or so, and not able to pay much attention to the demands of being a Trustee for Mid-America Yearly Meeting. She had been appointed as Clerk of the Trustees at the sessions the same summer of the windstorm, but she didn’t get to meetings much for a year or so.
By the time she did, MAYM was well into a cycle of sending money to Productions Plus, at Maurice Roberts’ urging. The first yearly meeting deposit came in December of 1989, for $5000; by the end of 1991, the yearly meeting had sent six more checks, for a total investment of $242,000.
In August of 1991, Deters sent MAYM a check for $13,474, the first “disbursement” on their investment. After that, in addition to MAYM’s own deposits, Roberts began freelancing, recruiting other investors, individuals and churches, combining their checks in the yearly meeting accounts. YouthQuake was one of them, in April, 1992 along with $2000 from Renovare, the spiritual growth group established by popular devotional author Richard Foster, a longtime MAYM member.
“Since [I] was acquainted with Deters,” Roberts later explained, “[I] felt it would be easier for MAYM to collect the investor funds and forward them to Productions Plus.” Through January, 1993, he sent in four such “bundled” checks, from eleven churches and groups, totaling $197,000.
It was also easier not to bother telling the Trustees about these transactions. As his name was on his name was on the Yearly Meeting accounts, Roberts could cut and sign checks without the Trustees’ knowledge.
If direct oversight was lacking, though, there was no dearth of questions. The Trustees were not stupid. “How does this program work?” Hein asked, as did others. “What do you mean, she doubles your money in a year? How could she do that?”
None of the Trustees had as yet met Deters, so these questions went to Roberts. His explanations were varied, but unsatisfying. At one point, paraphrasing language in Ed Steele’s letter about an endowment of several million dollars, Roberts told them Deters was independently wealthy and had a trust, set up to help a selected few nonprofit groups, like theirs. Other times there were references to the electronic sign business.
The sign business deserves a brief description here. The signs are more properly called “LED moving message color signboards.” That’s what Phillip Deters called them, and he should know. He had been working on this part of the business since 1985, in various guises, joined by his brothers Randy and Bryan.
The signs carry moving, blinking messages and images, and can be programmed to receive satellite news broadcasts as well as advertising. It was the ads that were supposed to make them a gold mine: the signs were to be placed in stores and other high-traffic areas, drawing the attention of passersby with the news, and then delivering ad messages in between.
Deters ballyhooed these signs as the wave of the marketing future, said she was in on the ground floor, and could hardly keep up with their explosive growth and profits. In 1992 she set up a division of Productions Plus, called Channel Q Communications, to deal with it. (She told Leatha Hein the Q stood for Quaker.)
However, her own records and statements show that after several years of such promotional hype, as late as the summer of 1995 this purportedly burgeoning enterprise existed in a single 40 by 40 office suite in a Rancho Cucamonga mall. Further, ChannelQ then owned exactly 12 of these signs, and her son Phillip acknowledged that “at this time no display signboards are in operation as sales activities have not been undertaken….” Her financial records include no indication of income from this “business” (or any other).
Sales may have poor, but the wages were good: Between 1992 and 1994, Philip and his two brothers shared an average of $125,000 in annual pay for thus “working” at Channel Q. (Channel Q was still at the same location as of mid-1998, and even had its own webpage:
Even without these data, Leatha Hein was not the only one of the Mid-America Trustees who had doubts about the sign business as a reliable source of 100% annual profits. Another was a young banker, Rodney Pitts. But when Roberts stonewalled the committee, Pitts made some inquiries on his own, using a banker’s tools. (Pitts declined to be interviewed, but this account of his actions is based on sources with firsthand familiarity with them.)
Pitts came back to the Trustees genuinely alarmed, and with reason: he had asked Dun and Bradstreet to check on Productions Plus, and their report raised several red flags: Deters had declined to be interviewed about the business and refused to furnish even basic financial information about it. However, a check of bank records had shown that it was deeply in debt, with several outstanding bank loans secured, not by inventory or business receivables, but by savings. And it further disclosed that the certificates of deposit which were supposedly keeping the yearly meeting’s money safe were not in the yearly meeting’s name, but Priscilla’s.
Besides the Dun and Bradstreet report, Pitts had alarming news from an attorney, with whom he had consulted about something called the Kansas Uniform Management of Institutional Funds Act. This law set standards for financial trustees of nonprofit organizations. Pitts reported to the MAYM Trustees that with what they already knew–and didn’t know–about Deters, they were a long way out of compliance with these standards. This meant that if things went sour and there were lawsuits, the trustees could be liable.
Pitts demanded that the Trustees confront Roberts with all this; he said he would take the lead, and make his case. In a special meeting on March 1 of 1993, he finally got his wish, laying out his concerns in a three-page memo.
Roberts was ready with a 4-page defense, stressing that Deters had thus far delivered, sending money when requested. He also spoke at length about various tests of spiritual discernment he had applied to this situation, including the visit by his wife to Priscilla, and her prayerful sense of Deters’ rectitude. Roberts reaffirmed his confidence in Productions Plus, and when the meeting ended, the Trustees were not yet agreed to challenge him.
Shortly thereafter, Rodney Pitts resigned from the Trustees. Leatha Hein pleaded with him to stay on, but he was adamant: further association with the group, he declared, could result in a threat to his banking career. It wasn’t worth the risk.
Of all those who were eager to cash in on Productions Plus’s largesse, none was more eager than the Houston Graduate School of Theology (HGST).
This small evangelical seminary, founded in 1983, was related to Mid-America Yearly Meeting, and Maurice Roberts sat on its board. In may of 1991 it was still operating out of rented quarters, and its founder and President, Delbert Vaughn, knew exactly what Productions Plus could do for the school: finance the building of a campus of its own.
The familiar faces of Gene Coffin and Maurice Roberts were there to recommend Productions Plus. Vaughn, who calls Deters an old family friend, leaped aboard her program, sending $100,000 in May of 1991.
This initial deposit was followed up with several more over the next two years. Exact figures are not available, but Deters’ records indicate that at least $430,000 was put in by the school, and this is likely a low figure, because individuals probably added funds which are not clearly identified in her books.
This is a particularly hefty amount for a school whose total budget in 1995 was $524,000. Yet in that same year, Vaughn was confidently reporting to MAYM that he fully expected their “endowment” to provide for the building of a new campus “within the next two or three years.”
In pursuit of this ambition, and with the help of Deters’ early “disbursements,” the school bought 53 acres of land. And in the rush to fatten the “endowment” for building on it, Vaughn looked for help from other friends of the school. One of his most willing helpers came from the other end of the South, in North Carolina.
In 1975, when Billy Britt made his debut address to a North Carolina Yearly Meeting (NCYM) session as Superintendent, the minutes record that he declared that “to experience growth, North Carolina Yearly Meeting must have an evangelism explosion.”
During his twenty years in the office, however, there were no signs of any such explosion. By 1995, NCYM membership had fallen by more than twenty per cent. The causes for such a decrease are complex, but it is evident from the record that continuing factional conflict was a significant factor. NCYM has both an evangelical and a quite moderate wing, and jockeying between them was chronic and occasionally quite bitter.
One focus of this conflict has been the shape and location of Quaker theological education for pastors. Many of the most moderate, even liberal pastors came to North Carolina from the Earlham School of Religion(ESR) in Richmond, Indiana. But the evangelicals saw ESR as far too soft on such matters as the Bible, Christ as the only way to salvation, training in mass evangelism, and hot button issues like homosexuality and “feminist” or “New Age” spirituality. Some of these critics gravitated toward the Houston Graduate school of Theology. In the fall term of 1994, Houston established an outpost in NCYM, located at John Wesley College, a small holiness school in High Point. The extension was headed by Frank Scurry, a NCYM pastor.
Billy Britt generally sided with the evangelicals, and he served on the Houston Board. (He has more recently joined the ESR board.) When Houston’s Delbert Vaughn asked for his help in finding money to put into the Productions Plus “endowment” plans, Billy was happy to do what he could.
As it turned out, he was able to do a good bit.
If NCYM’s membership had lagged, its own endowment had been steadily growing, such that there were nearly four million dollars in its accounts by 1993. Britt thought it ought to be possible to tap some of these funds for the Houston work
It was possible, yes, but not easy. NCYM officers with direct financial responsibility reacted with proper caution: When Britt approached both the Clerk of the Trustees, Scott Parker, he reportedly got the response that, “if it sounds too good to be true, it probably is,” and a firm negative. So he turned to Carter Pike, chair of the NCYM Executive Committee. What about making use of some of the yearly meeting’s excess cash? Carter was equally opposed.
What then? There was also an Investment Committee, on which Carter Pike served with two others, who were more loyal to Britt. So Britt scheduled a meeting of the Investment Committee with Priscilla Deters, in the autumn of 1993. Carter Pike was not notified of the meeting, however, and was not present.
One of the members who was there, Kay Coltrane, recalls that Deters was “very persuasive,” with charts and graphs and printed material to pass out. The proposal was for a three-cornered transaction: If NCYM deposited $100,000 with Productions Plus, she would put the money in a CD for safekeeping, pay NCYM fifteen percent interest on it, and direct the additional matching funds to Houston for its campus. Coltrane also recalls being called by a Houston faculty member (David Robinson, now its new president), who urged support of the plan.
The truncated committee approved the investment.
Britt had the check drawn up on New Years Eve, 1993. NCYM was supposed to get the CD for its files, and receive its first quarterly interest payment, $3750, in March of 1994.
Deters was not finished in North Carolina, however. In the early 1950s, Billy Britt attended Peoples Bible College in High Point, North Carolina. In 1993, Peoples had become John Wesley College, and Britt’s wife Viola was a member of its board.
Frank Scurry, the NCYM pastor who also headed the Houston extension program there, told John Wesley’s President, Brian Donley, about Deters and Productions Plus. Donley was interested. His school was in tenuous financial condition: in debt, unaccredited, and paying very low salaries to its faculty. Donley and his board could think of many uses for matching grants: retiring the debt, some new building, scholarships, you name it.
In short order the drill was repeated: Deters visited the campus, promised a threefold match in three years, and the board, after only cursory inquiries and the invocation of Eugene Coffin’s name, voted to send her $100,000.
How cursory was their check of Deters’ bona fides? She had given them a list of “referrals,” which included Houston’s Delbert Vaughn. Donley called Vaughn on December 13, 1993, and took notes of their conversation. Here is some of what Vaughn told him, which shows what con artists call the “roping” process in full swing:
“He [Vaughn] is very pleased with his association with Mrs. Deters. She is extremely enthused about what she is doing. She is very interested in helping independent or smaller struggling organization accomplish their objectives IF they are serious about reaching people for Christ. She is very evangelical.
“Everything she has promised has been fulfilled….Again, what she promises, she delivers….
“Dr. Eugene Coffin (sp) is on her Board and has served on the Board of George Fox College. He is especially gifted in finance, of highest integrity, and shares her commitment.
“She loves to share the successes of her various programs and gets blessed talking about them.
“She works with four companies, all of which have excellent financial track records….
“She has been thoroughly investigated by several major banks and tax attorneys. everything she is doing is legal.”
I also spoke to Delbert Vaughn in November, 1997. With the con exposed, his responses then were somewhat different. He spoke rapidly but disjointedly. Here is a sample:
Q. Did you or your Board know about the 1991 Cease and Desist orders when they got the deposit from North Carolina Yearly Meeting?
A. I wouldn’t dare tell you yes or no. We knew what we were doing….I hope you don’t put out any indication that we didn’t know what we were doing. Our Board of Directors knew what they were doing. There was total information by the Board….I don’t want our school publicized with something that’s wrong or irregular or where we didn’t know what we were doing….I’d just as soon you left our school out of this (repeated several times)…We all respect our school, it’s been a good school, a clean school, we don’t want to be hurt by any news, worthy or unworthy.”
According to Deters’ records, by the time Vaughn spoke to Donley, HGST had deposited $149,000, and received back $178,000. Thus they were ahead at that point, and his enthusiasm then is perhaps understandable, unencumbered as it was by any real information except bank balances. HGST already had 53 acres of land for its new campus complex, and Vaughn was confident the project would soon be underway, financed by future Productions Plus grants.
To that end, HGST sent Deters at least another $285,000, for a total of $434,453 by mid-1994. However, Deters records indicate they received back only another $5700, leaving a deficit of a quarter of a million dollars.
HGST’s current President, David Robinson, declined to confirm these figures. But he acknowledged what I already knew, that the school has put the 53-acre property up for sale. In addition, Houston has been consistently late in sending the interest payments due to North Carolina Yearly Meeting, whose $100,000 loss it agreed to cover, and has twice asked for the interest rate to be reduced.
When I asked Vaughn if HGST had filed a claim with the receiver to seek recovery of its losses, his response was instant: “There’s been no claim filed by the school in California. We never filed a claim against anyone such as that.”
When I referred in passing to the losses suffered by other investors, Vaughn could not resist repeating the mantra of the Deters believer/victim: “Many people say that Priscilla Deters doesn’t have any money, but I don’t think they know.” Asked pointblank if HGST had lost any money with Deters, he answered, “Not yet.”
Vaughn’s successor as President, David Robinson, was more straightforward, if not much more informative. He agreed that Vaughn has “a strong personal commitment to this, and urgently desires for this to work out. We all do. But,” he added, “some of the rest of us are more understanding of the realities.”
Whatever he knew or didn’t know in 1993, Vaughn’s recommendation weighed heavily with Brian Donley. John Wesley College sent $100,000 to Productions Plus in January of 1994. It was one of the last institutional deposits to be made.
We have seen how much of the investors’ money Priscilla Deters spent on her family. But their support was not her main goal. Throughout these years she came back again and again to Jackson Bailey’s paintings, locked up in that Florida construction company’s warehouse, and she became increasingly determined to have them. She was determined, and willing to spend money.
She paid Sylvester Singleton at least $77,000 to take over his management agreement.
She paid Jackson Bailey and his family members well over $600,000, in keeping with the terms of the agreement.
In April, 1992 she paid Theme Park Ventures $50,000 for an exclusive option to buy the paintings from them, for a total price of $500,000.
And by the end of 1992, she was spending freely on legal fees to gain control of the paintings.
The legal fees were necessary because in June of 1992, she filed suit against Robert Graves.
She had negotiated with Graves, in her fashion, for months since first meeting with him the previous October. According to Graves, she first tried to convince him that she owned the paintings, evidently by virtue of the clause in the management agreement about an “ownership interest.”
But Graves was not impressed by this agreement. The last he knew, the paintings were owned by Theme Park Ventures, and they hadn’t sold them to anybody. He said he insisted that Deters show him evidence of a clear title to the paintings before he would release them to her. This, of course, she did not have. But she resolved to get it.
In the meantime, she changed tacks, and tried to charm the paintings out of his grasp, by proposing to raise money for Graves’ religious community, a million dollars worth, from her copious business profits, once he handed over the paintings. Graves told Deters his community would freely accept any contributions she wanted to make. But he wasn’t interested in bartering the paintings for a promise.
Quakers and Nazarenes by the score had fallen for this line. But Graves did not. One wonders whether his affluent background combined with his priest’s vow of poverty to help him see through the ploy. On the one hand, he says he knew that holding on to the paintings was the only chance he had of gaining any kind of settlement of what he felt his family was owed, and he wasn’t about to let go of them otherwise.
And on the other hand, where evangelicals like Maurice Roberts’ wife were deeply moved by what they saw as her devout spirituality, Graves says she looked shallow and crooked to him from the beginning. Perhaps this was a difference in perception enabled by the distance between Wesleyan and Franciscan religious cultures. Or perhaps it was something that a recovering rascal nicknamed “Bubba” would recognize, through a glass darkly.
In the end, Graves believes that it was this seeing through her that sent Deters scurrying to file suit. “What really got her mad,” he told me, “was at the end I laughed at her, and said, You know Priscilla, I’ve told you one thing, to get your attorneys to show me proof that you really own this art work. And you know what I think? I think all of that’s a bunch of garbage.’
“That was it,” Graves said. “I laughed at her, and she thought she was getting her sweet revenge. She got all flustered on the phone, and ended by saying, You will be hearing from my attorneys.’”
And he did. Deters formed an alliance with John Chambers and Theme Park Ventures, to hire a widely respected and aggressive law firm in Orlando, Subin, Shams and Rosenbluth, to take on the priest and wrest the paintings away from him. Over the next two years she was to pay Subin and Shams almost $200,000 in fees, and promise them a good deal more. She also retained a California attorney for the case, and paid him $35,000. She wanted those paintings.
Graves recalls this extended legal combat as a “nightmare,” and it’s no wonder. He lost every battle before the bar: the court ordered him to give up the paintings in June, 1992. Despite his appeals, they were finally moved out of his storage shed that fall. The judge in the case got so angry that he threatened the priest with fines and even jail.
By late 1992, Deters must have felt her dream was finally within her grasp: She commissioned Johnnie Carl, a musician at the Crystal Cathedral, to compose a musical score to go with the exhibition of the paintings, paying him $26,000. She threw $11,000 more at Ed Steele, for writing a narration script for the show.
But these plans proved premature. In the end, Graves outlasted Deters. He denounced her whole performance as “a con.” Even after it was clear he wouldn’t get anything for his family’s estate, he was resolved to deny Deters control of the artwork. He kept up the struggle like an everglades guerilla.
When his case, built on his inflated bill for $2.7 million in storage fees, was thrown out, he hunted up old creditors who had loaned money to Theme Park Ventures, and persuaded them to sue Deters for payment of their liens. This challenge threw Deters on the defensive, and dragged out the process for months.
By late 1993 Deters and Theme Park Ventures had achieved technical legal control of the paintings, but all this really gained her was the opportunity to pay storage bills that topped a thousand dollars a month, while lawyers wrangled and her legal bills mounted. More than a year later, the painting still sat locked up in a storage warehouse in Orange County. Meanwhile Robert Graves was setting out to find someone else who could buy the paintings, and get them away from Deters for good.
“It was her just due,” he said to me. “What hurt the worst about it was that she was doing all this in the name of religion, just like those preachers scamming people on TV.”
Then he waxed briefly theological. “There are sins that are not heard about much, and they’re the sins that cry out for God’s justice.”
Which ones? I asked. “The abuse of the innocent,” he said, “like the defrauding of all those people by Priscilla Deters.”
He also admitted that at the beginning, he had had a more worldly goal: “I wanted my family to get what was coming to them for a defaulted project and eight years of storage of the paintings. Instead, they tried to sue it all away from us for nothing.”
Personally, I believed him on both counts.
Robin Johnston remains proud of his tenure as President of Barclay College, which was still Friends Bible College when he started. Ironically, in light of how it ended, one of the main goals of his administration was to put the college on a sound financial footing. Johnston is an engaging man, who spoke frankly about his experience with Productions Plus and what it has cost him.
Barclay is a small school, with barely a hundred students in 1993, in rural Haviland, Kansas. It began as an academy for evangelical Quaker youth, and became a college in 1916. “The College has always been in a tight financial spot,” Johnston told me. “Sometimes we were behind on paychecks, but this was not unusual.”
Penury was more than an unfortunate condition; it was also a kind of witness to simplicity, a sign that the school was staying on its course of training holiness missionaries, “soul-winners,” and evangelistic pastors, and not going the way of the larger, secularizing Quaker colleges, going for growth and prosperity, and chasing anybody and everything to get it.
Still, austerity is one thing; chronic flirting with bankruptcy is another. The school, like John Wesley College in North Carolina, was deeply in debt when Johnston came, and he says he worked ceaselessly to pay off the loans, and get rid of the high interest payments that went with it. “We built a new education building, Jackson Hall,” he said, “without going into debt.” They were making progress. “And we were doing it while keeping the tuition low, so our graduates would not have to go so deeply into debt. But then,” he admitted, “we had a hard time getting contributions out of them.”
New donors, and steady ones, that’s what Johnston was constantly looking for, and as much as anything else, that’s what led him to Priscilla Deters, just as it had Brian Donley and Delbert Vaughn.
Oh, that and the usual: fulsome praise for her from Eugene Coffin, with whom he talked several times. And from Maurice Roberts, who sat on his board.
He even visited the Productions Plus “headquarters” in the mall at Rancho Cucamonga, and was taken through the room that was Channel Q, with the brightly blinking signs.
“She really snowed me,” he said. “She said these moving billboards, they were going to be everywhere, there was just no end to the resources they were going to bring in. And that was how she could turn money over so fast.” Oddly, though, no one was working in the office at the time except Priscilla’s sister, Phyllis Beaver.
Johnston had his young daughter with him on that visit. When they left, she turned to him and asked, “Daddy, what did that lady say for the last hour?”
Johnston said, “Sarah, I don’t know.”
Still, Barclay College sent Productions Plus $90,000 in October of 1991. Given the school’s circumstances, that much money wasn’t easy to find. “We pulled some money from this, that and the other thing,” Johnston said. They were promised a return of $180,000 the following October.
Deters did send Barclay a check for $90,000 in November of 1992, with a letter telling them that was their match, and the original $90,000 was still on deposit. The board decided to leave it there, and planned on using that money especially for scholarships. Johnston admitted that “we didn’t have the cash flow to have anything less than double our money back.”
But Johnston and Barclay never saw another penny from Deters. By 1995, Johnston was reporting to Rocky Mountain Yearly Meeting that, “It is true that we are facing economic difficulties and we have been mandated by our accrediting agency to improve out economic status by November of this year.” There were rumors that the school might be forced to close, and the impression one gets is that it was a near thing.
Johnston took the fall for the debacle, offering his resignation in the spring of 1995. He was kept on for a year as Alumni Director, then simply cut loose, in “downsizing.” After a year’s “sabbatical,” he found a slot as pastor of the Berkeley Friends Church, in California. Talking with him, it sounded as if the year off, and the new job, had done him a lot of good. He was upbeat, optimistic, and admirably philosophical about what had happened. He expected to be called as a witness for Annette Gurney in Priscilla’s trial.
Is it merely a coincidence that June, 1992, was the twenty-fifth anniversary of Priscilla Kuhn Deters’ graduation from Marion College, and in that same month she collected a $50,000 deposit from her alma mater? The contact person for the deposit in her records was the president, James Barnes.
In any event, the old school tie didn’t get it any special treatment. The school, renamed Indiana Wesleyan University, is still waiting for its money.
A multimedia religious art extravaganza. That’s what Priscilla hoped to build around the Life of Christ paintings: there would be lights, music, video; a production worthy of the name. And she couldn’t afford to wait until the hassles over ownership were worked out and she had physical control of the works.
She began assembling the pieces for a prototype. Priscilla talked of having Johnnie Carl’s musical score recorded by a philharmonic in London, and even booked some recording studio time in England. A video of the paintings was made, and she obtained a set of what she called “vignettes,” small versions of some of the big panels painted by Bailey.
It wasn’t the real thing. But it was a start. And by March of 1992, she was ready for a trial run.
She chose a conference called “Sonrise,” in Glorieta, New Mexico, organized by her childhood acquaintance, Tom Claus, for his Native American ministry. Several hundred people were on hand when she presented a concert, along with a slide show of the paintings (the video wasn’t ready yet). The “vignettes” were displayed in an adjoining room.
Deters called the presentation a “Tribute to the Master by the Masters art and music spectacular.” Jackson Bailey, billed as a “world renown artist,” made a personal appearance at the event.
For the official record, Tom Claus called it “a great success…” But when I asked him about it, he recalled it somewhat differently.
He said a lot of his people were not impressed by the “vignettes.” “Lots of them looked inferior, you know, not up to a high art standard.” Besides, “Some of the figures in them were really dark.”
Dark? You mean hard to see?
No, he answered; dark-skinned. “People didn’t think the apostles looked that dark,” he said. (Jackson Bailey was adamant on this point. “Jesus and the apostles were Arabs,” he told me, “and by today’s standards they’d be considered dark-skinned. I researched this, and I wanted my paintings to be true to history.”)
As for the concert, the big spectacular amounted to not much more than Phyllis playing the organ, the sisters singing and showing slides, and then distributing copies of Bailey’s “In God We Trust” poster to everyone.
Claus liked the slides of the big paintings. But overall, the concert was less than a stellar launch for the multimedia program.
Deters tried again later that year, this time in print, with The Life of Christ Coloring Book. The drawings were by Bailey’s wife Brenda, and Productions Plus was the publisher. But again, performance was less than spectacular. Three years later, Deters acknowledged that “Productions Plus presently has an inventory of…24 cases of The Life of Christ Coloring Book from which sales are being made on a sporadic basis.” (Wayne Ashworth said the Whittier Christian School bought some.)
Bailey’s art, specifically “The Creation,” appeared in print again the next year, on the cover of Productions Plus’s other venture in publishing, a book called Founded on the Floods: A Scientist Looks at Creation, by Hugh Paine.
Paine was a religious physicist, and the book made a case for a modified form of creationism, namely that there were two great floods recorded in the Bible associated with the earth’s early history. Noah and the Ark floated on the second flood, Paine contended. The first flood took place before the opening verses of Genesis.
Whatever the scientific or biblical merits of this thesis, the book must have been costly to produce, with its large full-color cover, including a snapshot of Jackson Bailey on the back. And its sales were also, as Deters’ euphemistically put it, “sporadic.” Deters said there were still 73 cases of Founded on the Floods in inventory in August, 1995.
Deters put on one more concert extravaganza, called “One Night of Greatness,” in November of 1993, in Houston. Randy Littlefield, now pastoring nearby, helped with it, as did the Houston Graduate School of Theology. It was billed as a fundraiser for an inner-city ministry, and the first half brought together several local choirs and musical groups. After intermission, however, it was all Productions Plus: the video of the big paintings; musical arrangements by the Crystal Cathedral’s Johnnie Carl; a tribute to Hugh Paine and Founded on the Floods; and again, Jackson Bailey was on hand, this time to hand out “vignettes” as awards to local church leaders.
Priscilla produced the concert, in a large auditorium. Evidently the event went off reasonably well; but the turnout was disappointing. Randy Littlefield admitted that “the main hall…was not as full as we had hoped.”
(Priscilla’s son Loren, in an unguarded moment a few years later, was more blunt: “my mom’s understanding,” he said, “was that they would provide the people in the seats, and she would do all the up-front work, as usual. And when it came time to put people in the seats, there was no one there.”)
Depending on your point of view, it is possible to see in these events a progression toward a polished performance which, once the paintings were incorporated, could have credibly contended for “spectacular” status.
As it turned out, though, the Houston concert was just about the last hurrah for a dream that was coming under increasing, and increasingly irresistible pressure, from several directions.
Was July 11, 1993 the turning point for Productions Plus, its Gettysburg? That’s how it looks to me. Priscilla Deters visited her bankers that day. She told them she wanted to borrow money–a lot of money, $357,000.
The bankers were willing, as bankers are, provided she could offer appropriate security for the loan.
She had security, in the form of seven certificates of deposit at the bank, in amounts large enough to cover the loan. She signed them over, got the money, and left.
What was this loan for? Well, there were the huge legal bills in Florida, of course, where Robert Graves still had the Life of Christ art mired in legal swamps. Then there was $129,000 paid to Jackson Bailey and members of his family that year; and $200,000 paid to her four sons. This is not to mention the calls from various of her “beneficiaries” for payments of their promised “matched funds.”
Money was still coming in, of course, and by the end of that year, or a little after, she would have some of her biggest scores: the $100,000 from North Carolina Yearly Meeting, followed by an equal sum from John Wesley College. But these were among the last of her new suckers. Meanwhile, the cash was flowing out an at alarming, and unsustainable rate.
In June, Deters had reported to Maurice Roberts that the $22,000 deposited in 1989 by the Friends Ministers Conference Committee had ballooned to $280,000, which he could count on for financing the conference the following spring. She followed up this report in September, with a check for $35,000 to Roberts for Mid-America Yearly Meeting, as the “match” for one of its many outstanding deposits. It was, however, the last payment the yearly meeting ever received from her.
In November she put on the under-attended, money-draining Thanksgiving concert in Houston.
And on December 3 of that year, Gary Fulton, of the Kansas Securities Commission, opened a formal investigation of Productions Plus.
The first interest payment of $3750 on North Carolina Yearly Meeting’s $100,000 deposit, which was intended to benefit the Houston Graduate School of Theology, was due in March of 1994. It did not arrive.
That same month, Billy Britt announced to the Representative Body meeting that he planned to retire as Superintendent not later than June 30, 1995. At the same meeting, partisans of the Houston Graduate School of Theology proposed to eliminate the Earlham School of Religion from eligibility for yearly meeting student loans; but this effort was defeated.
Who called Gary Fulton?
It was almost certainly someone from Mid-America Yearly Meeting, but Leatha Hein, who was clerk of their Trustees, insists it wasn’t she. “By the time I talked to Gary,” she says, “he was already working on it.”
Hein was working on it too. The Trustees had been pressing for a meeting with Deters, to get some firsthand information about this woman who had taken in so much of the money under their care. And on January 28, 1994, they finally had their chance. Maurice Roberts brought Deters to the MAYM office in Wichita, and the Trustees spent several hours listening to her talk vaguely and in circles about her plans, her vision, and her immensely profitable enterprises.
This session was a disaster for Deters. Afterward, the Trustees, even those who had been most loyal to Roberts, agreed that MAYM should have nothing further to do with Deters and Productions Plus, and that they needed to act to get their money back as soon as they could.
There was another important meeting earlier that month, January 12, when Gary Fulton called on Roberts, to gather information about Deters. At the end of March, Fulton wrote to Deters in California, requesting documents about the business. Deters called him a few days later, to say her attorney would have the information for him soon.
Now events began to speed up. The 1994 Friends Ministers Conference was scheduled for Memorial Day weekend. Maurice Roberts, in his other capacity as Clerk of the Conference Planning Committee, requested a disbursement of some of the $280,000 Deters had told him were waiting for the group, to pay the advance expenses. He did not get an immediate response. When he did hear from Priscilla, she talked about her many problems and the attacks of enemies, and said she would have $140,000 for them soon, in time for the gathering in Orlando.
The Friends Ministers Conference was not the only gathering seeking money from Deters then. YouthQuake 1994 was scheduled for December in New Mexico, and its planning committee needed funds to print a publicity poster and deal with other advance costs.
Royce Frazier, who was Clerk of the Committee and Maurice Roberts’ Assistant Superintendent, told the group he would get some of the matching grant they were due from Productions Plus. No one was worried; they had a total of $20,000 coming. And Frazier soon came through, with checks drawn on MAYM accounts for a total of $10,000. The Committee figured this was the matching part of their investment, and plans for the gathering proceeded.
Barely two weeks after Priscilla had heard from Fulton and knew she was under investigation, Deters confronted Leatha Hein again, on April 15, 1994 at an airport lounge near her office in Walnut, California.
Priscilla planned a full-court press for the session: she brought Eugene Coffin and George Brown, two of her “Board.” Roberts accompanied Hein. When Deters arrived, her son Randy followed in his mother’s wake, pushing a cart on which was a portable VCR, ready to show a new video–probably the video of the paintings.
But Hein was having none of it. She had not come to California for a dog and pony show, she declared. She was there to ask questions, on behalf of the MAYM Trustees, and she wanted answers.
Deters immediately launched into a rambling, rapid-fire response. But when she mentioned that she had a new plan to achieve her overall goals, involving Maurice Roberts’ helping her to canvass every church in MAYM and getting all the pastors’ retirement money invested with her, Hein cut her off.
“Excuse me,” she barked, “you need to understand this. You’re not dealing with Maurice Roberts anymore, because he does not have fiduciary responsibility. You’re done dealing with him, and you’re done dealing with Mid-America Yearly Meeting.” There would be, Hein made plain, no canvassing of pastors. Nor would Maurice Roberts be promoting Productions Plus again.
That stopped Priscilla in mid-flight, Hein recalls. “She sort of looked at me like, What did you just say?’ I think she knew she’d been told.”
That same month, the trustees talked to Gary Fulton. Then they hired their own lawyer.
Friends were not the only ones anxiously expecting payments from Priscilla. Her Florida attorney, Ralph Losey, wrote to John Chambers on December 8, 1993, that “it is her intention to conclude the purchase of the painting [from Theme Park Ventures] prior to the end of this year.”
It didn’t happen. But in mid-January, 1994, Attorney John Chambers, representing Theme Park Ventures, prepared a Bill of Sale as if the deal was again imminent. It didn’t happen then either.
On may 26, 1994, the Fifth Friends Ministers Conference opened in Orlando, Florida on schedule. Priscilla Deters was on hand, as were others who had things to sell to Quaker pastors. Prominent among the numerous exhibitors were Phil and Steve Harmon, insurance agents from Northwest Yearly Meeting, who manned a booth and touted their National Friends Insurance Trust, a health insurance plan which many yearly meetings were part of.
Deters may have been briefly taken aback by Leatha Hein’s pronouncement that she wold not be permitted to canvass pastors in MAYM about investing their retirement funds. But she rebounded quickly and adroitly. Priscilla simply told Maurice Roberts she wanted to do her canvassing in Orlando, where there would be more ministers on hand anyway. To make sure she was allowed to do her prospecting, she said there would be no advance “disbursement” of matching funds; instead, she would bring a check for $80,000 to the conference with her, and send $60,000 more shortly afterward.
She did bring the $80,000 check, which she kept in her pocket until Sunday, the last day of the conference. Then she told Roberts not to deposit it until the following Wednesday. The Conference Treasurer, David Brock, the Superintendent of Indiana Yearly Meeting, was not concerned about the delay, at first. “She looked real professional in Florida,” he said. “She convinced us that she knew what she was doing.” Then on Tuesday, she called Roberts and told him to hang on to the check for a few more days.
In the meantime, however, the hotel staff had presented its bill, and told David Brock he could not leave until the bill was paid.
Now Brock was concerned; he needed $80,000 cash, and he needed it now. He got on the phone to the clerk of his Trustees, and arranged an emergency loan of $80,000 from Indiana’s reserves, to pay the bill so he could get home.
This experience was unsettling enough. But the wait for clearance to deposit the $80,000 check continued, until several weeks later when Brock was appalled to discover that Deters had stopped payment on the $80,000 check the day after she gave it to the Conference officials. He realized then that she had never intended for it to be paid.
It was after the Orlando debacle that the scales began to fall from the eyes of the leading pastoral Friends. After five years of confidence in Productions Plus, they suddenly realized that something was seriously wrong somewhere. $80,000 was a lot of money, and Indiana’s Trustees wanted it back.
What to do? Key superintendents met by phone in October, and it was agreed that the two umbrella associations which had sponsored the conference, Friends United Meeting and Evangelical Friends International, would sign a note promising to pay the money back to Indiana.
But neither of these groups had the money to make good on the note, so a letter went out to all the participating yearly meetings, asking that they “voluntarily” contribute funds to pay off the note, according to the number of persons they had sent to the conference.
This was done. But it is a curious fact that nowhere, in any of the yearly meeting minutes of the period that I have reviewed, which includes most of them, is there any mention of this special, unexpected “fraud surcharge” or its basis.
Indiana’s share, for instance, was $13,000. That’s not a small amount, but there was no mention of the transaction in the yearly meeting minutes. I asked David Brock why not, and he couldn’t say
Thus quietly, almost surreptitiously, the EFI-FUM note was speedily retired and the incident receded into the mists of silence.
As Conference Treasurer, Brock spent many hours on the phone with Priscilla that summer and fall, attempting to cajole the promised $140,000 out of her. He got nowhere; she took up much of the time complaining about sickness in her family, and attacks by a growing number of enemies.
By the end of that summer, though, Brock recalls that Deters suddenly changed her tune.
“She said she really didn’t owe us money at all,” he told me. “She said we had mishandled her plan, and that she was now going to set up a matching plan in every community where we had a pastor, and she wanted me to give her their names, addresses and phone numbers.
“This,” he concluded, “was crazy.”
Brock also got calls during this period from our old reliable, Eugene Coffin. Coffin assured him that Deters would come through, and urged him not to cooperate with any investigations that were being hatched as part of the persecution of his friend and patron.
With the collapse of the Productions Plus bubble, Deters was not the only one who was in trouble. Among those in the know, many eyes were turning toward Wichita, to focus on her principle promoter in the heartland: Maurice Roberts.
When Mid-America Yearly Meeting gathered in August, 1994, Leatha Hein thought she knew just how much money the group had put into Productions Plus, how much it had gotten out, and what the outstanding balance was: $55,696. This amount represented only the difference between what had been put into Productions Plus through MAYM, and what had been returned; it did not include the “matching amounts,” which would have been several hundred thousand dollars more.
Based on the expectation of receiving these matching funds, the yearly meeting had gone ahead with construction of a new headquarters building, and several other projects. Now, after Orlando, it was time for a reckoning.
Before Leatha Hein’s regular report, Maurice Roberts spoke about Productions Plus. He reminded Friends that the yearly meeting had been involved with the program since 1989, but “Beginning in mid 1993,” he acknowledged, “this matching gift program began to show signs of concern.”
What kind of concern? First, of course, there was the obvious fact that payments had stopped. “Most recently,” he said, ” verbal reports [from Deters] have hinted that the money which has been received by Mid-America may be only the return of our original deposits, and not matching money at all.”
I don’t think Roberts yet realized it, but as far as Priscilla was concerned, he had joined the enemy, become part of the satanic forces that were attacking her from all directions.
When he finished, Hein continued, stating frankly that “The Trustees have filed a formal complaint with the Kansas Securities Commission…and we are presently working with the Commission in an investigation. You need to be aware that there could be a lawsuit in the future that names Maurice Roberts, Superintendent, and the Yearly Meeting Trustees.”
This was not happy news. But when it was over, Hein figured she had done her job. Both the yearly meeting and the Trustees knew what the numbers were, and where they stood. The worst was over.
But it wasn’t. Shortly after the sessions concluded, Hein got an envelope in the mail. Inside were copies of documents which showed that there were in fact several more transactions involving Productions Plus and MAYM which she and the Trustees had not known about, and for which the yearly meeting was liable. The total amount of these unadmitted and unpaid obligations came to $150,000.
That is to say, Roberts had been deceiving the Trustees about just how many deposits he had solicited, from whom, and on what terms.
Hein was shocked, and angry. If the yearly meeting were sued, the buck would stop with the Trustees; that was the law. They were being put at personal risk without their knowledge or consent.
This was an intolerable situation. Between the Trustees and the Superintendent, something would have to give. And soon.
Gary Fulton of the Kansas Securities Commission was still waiting for documents from Productions Plus in September, 1994, six months after his letter requesting them. But he did hear from Priscilla. She called on the 20th of that month to tell him again that her attorney was assembling the papers, which would be sent by the end of the month.
But she also said, among other things, that contrary to what had been told her depositors for years, “the money collected by Productions Plus was not an investment but earnest money as a gesture of good faith for her commitment to do fundraising for them.”
This is similar to what David Brock was hearing about the same time in Indiana. It has the ring of a legal ploy. Deters’ son Loren, who was paid so well by Productions plus while in law school, articulated the line quite well.
All of his mother’s projects, he said, were in reality “joint ventures with nonprofit organizations,” which were “a way to help nonprofit organizations raise money for the efforts that they were pursuing.”
In such “joint ventures,” he explained, “because Productions Plus would have to do the groundwork first, it’s my understanding that they would need some kind of security from the group with which they were engaged in this joint venture so that if they [the group] backed out at the end, Productions Plus didn’t suffer all of the losses.”
If Fulton expected Priscilla to keep her pledge, he was disappointed. On September 30 a letter came. “In the letter,” he reported, “Deters said her ninety seven year old mother had a heart attack and she was unable to send the requested information.”
Three weeks later, Deters called Fulton again. This time she told him “a criminal element of people were trying to discredit her program through false information.”
But that was not all. She told him that “the earnest money[s] she collected from participants in her program were never placed into Certificates of Deposit and she did not know where that type of information originated.” Still, Fulton noted, she “again reassured [me] that her attorneys were working around the clock compiling the requested information and should have it sent shortly.”
By December, in a dry, third-person statement, Fulton was reporting that he had “failed to receive any written documentation from Deters as promised.”
I doubt he was surprised by such evasion and stonewalling. In any event, it did not deter him. There were other ways to get what he wanted.
Fulton had worked on several interstate fraud investigations, among them probes involving the California Department of Corporations. Fulton contacted an investigator he knew there, John Noonan, and in early December, Noonan applied for a warrant to search Deters’ house in Walnut, with Fulton’s help.
Citing the 1991 Desist and Refrain order, Fulton blandly told the judge that “it is apparent that Deters and Productions Plus have continued to operate their investment program in the State of California after the issuance of said California order.” Fulton added that he “believes the records pertaining to this investment program are to be found” there. The judge agreed to let them find out.
Shortly after Thanksgiving, Bessie Kuhn died, aged ninety seven. The Deters house in Walnut was searched early in the morning of December 13, 1994.
“I have dreaded this day and this meeting,” Maurice Roberts said. “At the same time, I’ve looked forward to it.”
The day was October 22, 1994. The meeting was a special session of Mid-America Yearly Meeting’s Representatives and Executive Council.
“You have by now learned from the trustee report why you have been called together,” he continued. “The two issues presented by them were: (1) My concealment of certain agreements and other pertinent information, and (2) my deception in answers related to the above.
“The Trustee report is correct in telling you that I had avoided showing some documents to them, and this has impacted their responsibilities. In this way I have abused my authority when it came to some Trustee matters.”
The seven-page statement he was reading is a remarkable document. It took no little courage to stand up and make it, and overall it is quite candid. However, behind its calm language lay some harsh confrontations.
The crucial one came on a day not long before, when Leatha Hein was approached at work by the Clerk of MAYM, Duane Hansen, who asked her to come to an unscheduled meeting with Roberts at the yearly meeting office. Hansen didn’t say what it was about.
Once there, Roberts informed her that he had confessed to Hansen his deception about the extent of the yearly meeting’s obligations to investors in Productions Plus. “I asked Duane to be with me while I confessed to Leatha Hein,” Roberts told the Representatives, “and I asked her forgiveness.”
Hein said of that meeting, “As far as Maurice was concerned, he didn’t think it had to go any farther than the Trustees. He felt like he’d been honest with us, so he could go ahead serving as Superintendent. We could sell some assets and pay off the debts and go on.”
Hein felt otherwise: after their years of struggle to get at the truth, after what they had learned about Deters and her operation, this was not just a committee matter.
She had, for instance, recently learned about the cease and desist orders from California and North Dakota. She confronted Roberts with a clipping of the 1991 news article from the Grand Forks Herald in which Roberts had been interviewed. “I asked him, Don’t you think the trustees shoulda known this?’
“I told him that the truth had to be out on the table. The Trustees will have a recommendation, and what the representatives want to do with it is up to them. But I will not cover this up.”
Despite this pushing and pulling, there is much to be gained from Roberts’ statement. Much of it has an irreducible dignity, a touch of class that is all too rare, especially among Quaker and other church leaders ensnared in this miasma of corruption and folly.
“Today I am confessing to you,” Roberts told the Representatives, “knowing I have jeopardized your trust in me. I’m not aware that anything I have ever done in my role as Superintendent was done for personal gain at the expense of the YM or its people….
“I’ve probably cared too much, taken too much ownership, as though it was my ship to bring safely into the harbor….The financial dilemma that we face is the result of my concern to help others. My motives have been to serve.
“In a retreat setting a few days ago, someone said that the more one leads, the more one is tempted to lead. In this case, my control mechanism backfired because I wasn’t accountable in matters related to Trustee affairs.
“The Trustees have recommended that I be terminated and the Executive Committee has recommended my resignation. I had told the Clerk before the Executive Committee meeting, and then I told that Committee, it would be easier for me to resign and run and hide. But I think to have done so would lack integrity on my part. To be unwilling to make a confession to you would have been a further failure.
“Someone said that in the business world, heads roll quickly. How well I know. I have lived in the business world. I’ve seen it happen more than once.
“The church lives under a different operating manual. I wanted to come here today, not to save my job, but to offer myself to a partnership for recovery, painful as that would be for both of us.
“One counsel to me was to offer my resignation to the Executive Council for them to act upon. The other side of the counsel was that to have done so would create a polarizing of positions. It is not my intent to do so. Therefore, rather than offer my resignation, I have resigned and have placed that letter in the hands of the Executive Council….
“I have felt the Lord’s forgiveness and restoration, and have heard him reaffirm his love for me. He will take care of me.
“One of my prayer warriors told me how she asked God to walk with me through this. She said God’s reply was, It would be my pleasure.’”
“I’ve told you how I overstepped my authority. I deeply regret my failure in this way. I wish I could undo it by the wave of a hand….
“I do not want to cause any more hurt to you. And I remind you that Satan would like to profit from this. It would be at my expense and at your expense if he were allowed to win any points at all.
“…If all of this trauma can be used to bring the people called Friends into a closer relationship with the Lord Jesus, I am grateful that my violations are useful to that end.”
Admiration for Roberts’ composed self-disclosure should not blind us to the import of what he was admitting:
He had been–no lesser phrase is honest–a colossal fool.
Worse, he had been a roper in a scam, actively recruiting new marks for the plucking, many of whom would otherwise have avoided being swindled.
In the process, he had consciously made fools out of his employers, and put the Trustees, their representatives, at serious legal risk.
The fact that he did not put any of the victims’ money in his own pocket–if it is indeed true–didn’t recoup anybody’s losses. Roberts fully deserved to be fired; indeed, he might well have been indicted.
Nevertheless, in the pastoral guild, the tendency to defend and exculpate one’s brethren is endemic. When Quaker Life reported on the resignation, in its December, 1994 issue, Editor Johan Maurer rushed to his colleague’s defense: “Maurice Roberts was certainly not the only prominent Friend who advocated working with Productions Plus. I hope Friends will look for solutions rather than blame, and will honor Maurice for his years of distinguished leadership among us.”
Reading this, one might have thought Roberts was the injured party. But Roberts was not simply one feckless advocate for Priscilla among others; he was second only to Eugene Coffin in spreading her baneful influence among Friends, and in some ways even more energetic about it.
And if there were to be “solutions” for such institutional corruption, speaking plainly about it and holding those responsible clearly accountable would surely be among the most important. The rarity of such plain speaking is evident here; the dearth of accountability would become evident soon enough.
However unedifying the rationalizations of the Quaker Life article may have been, it had its effect, especially at John Wesley College in North Carolina, where the light was otherwise slow to dawn.
The first quarterly interest payment on their 1994 deposit of $100,000 arrived late, but it did get there. Afterward, Deters called President Brian Donley to suggest that she hold the rest of the year’s payments until the end of the year, which would allow more interest to accrue.
Donley agreed, but cautioned her that they definitely needed the funds by early January, 1995. He explained that he planned to use the interest for after-Christmas bonuses for his underpaid faculty. “Our faculty members earn so little,” he told her, “that after the holidays this bonus is a real blessing.”
But just before the holidays, Donley got a call from a local board member, advising him of the imminent appearance of the Quaker Life article. Donley wrote to Deters about this, affirming that, “We were confident, however, that Productions Plus would continue to honor the agreements made with John Wesley College, especially given the track record other organizations have had with you.”
Ah, innocence. By January 31, the interest money had still not arrived, and panic was spreading among the college officials. The executive Committee gathered in Donley’s office that evening to figure out what to do.
The first thing they thought of was the entirely familiar: their Board member Viola Britt, wife of alumnus Billy Britt, offered to call Eugene Coffin for advice. Coffin too did the expected: “He assured us,” Donley wrote to Priscilla, “that you would fulfill your agreements and that we should not be alarmed.” Coffin added that the rumored trouble in Kansas was the work of evil forces.
Despite Coffin’s assurances, the board was alarmed. It resolved to pray for all concerned, and to send Donley and two others to California to meet Deters and Coffin. Donley had strict instructions to bring back either their matching gift or their original deposit.
Donley went where he was sent, and his delegations spent five days in February negotiating with Priscilla and sister Phyllis in California.
But all they came back with was empty pockets and a “non-disclosure agreement” that the twins insisted they sign, which pledged them not to discuss “proprietary information” with any third party, presumably including investigators.
Well, that was not quite all. They were also given a one-page “report,” dated January 3, 1995, listing an inventory of items which, it stated, “represents the fund-raising efforts of Productions Plus on behalf of” the college.
The list is cruelly revealing. It included:
- 1000 copies of the book, The Painted Word, which included reproductions of the Life of Christ paintings, priced at $35 per copy, with a 65% volume discount.
- 55 sets of a “Vignettes Collection” of reproductions of Jackson Bailey’s work, priced at $1000 per set, again with a volume discount of 65%. And
- 1000 copies of the book, Founded on the Floods, priced at $10 each, with a volume discount of 50%.
Let us do a bit of math here. The total list price of all these items comes to $100,000, the amount of John Wesley’s investment. But if they were sold at the listed discounts, the profit, from which the college’s matching grant was to come, would total only $63,500, considerably less than double.
But that is not the worst of it. Founded on the Floods was the only item that was solidly accounted for in Deters’ inventory, and it was selling, at best, “sporadically.” As for the stock of The Painted Word, she did not own it at all. These books, published in 1980, belonged to and were stored with the Life of Christ paintings. Both were still locked up in Florida, now out of her reach, awaiting a Sheriff’s Sale which would take them away from her forever.
And finally, there is no evidence that the sets of Bailey’s “vignettes” even existed.
That was what John Wesley’s money had bought them.
It was not reported what the college did about their faculty bonuses in 1995. But they never saw their $100,000 again.
Not far away in Greensboro, Billy Britt must have been well aware of what was going on; Viola would have kept him informed. By then, too, it was apparent that the interest on the $100,000 he had sent to Priscilla from North Carolina Yearly Meeting’s funds to benefit the Houston Graduate School was in jeopardy as well. None of the first year’s quarterly interest payments, a total of $15,000, had appeared. For that matter, there was no sign of the CD Deters had promised to send as security for it.
North Carolina’s Representative Body met on march 4, 1995. At that session, Carter Pike reported for the Executive Committee. The final item of his report was the announcement that Billy Britt would leave the Superintendent’s position three and a half months early, on March 15, rather than June 30, though his salary would be continued til the later date.
During his last week in the yearly meeting office, Britt made heavy and continuous use of a paper shredder, destroying documents from his files.
Britt failed to return several phone calls seeking his comment on these developments. But I did speak with Viola Britt, who bridled when asked about the paper shredder. “It was strictly routine,” she insisted. “Everybody does that when they leave a job. Don’t you?”
(For the record, I don’t. I toss stuff, and file a lot.)
The Executive Committee appointed a task force to investigate the involvement with Productions Plus. When it was due to report to the June Representative meeting, its clerk asked Billy Britt to do the explaining.
Many among the representatives listened closely, anxiously expecting at last to hear a detailed account of the affair.
Instead, Britt was terse and brief. He explained that Deters had been recommended to him by Eugene Coffin, he had acted in good faith, a CD had been promised, and that the Houston Graduate School had pledged to repay the $100,000 if Productions Plus did not. He may have made an honest error in judgement, but he had done nothing wrong.
There were many probing and angry questions from the floor, but the answers were few and evasive and the matter was soon closed.
Maurice Roberts’ statement looks even better viewed from this angle.
Something else happened in March of 1995, which should have sent Priscilla Deters into despair:
On the morning of the 15th, a Sheriff’s Sale took place in Orlando, Florida. One item was offered, “to the highest bidder at hand for cash on demand,” to wit:
“APPROXIMATELY 50 SEPARATE PAINTINGS, MEASURING 11′ X 20′ AND MISC. BOOKLETS DESCRIBING PAINTINGS.”
Thus Deters lost the war, all of whose individual battles she appeared to have won.
The Florida courts had rejected Robert Graves’ challenges, and finally awarded the Life of Christ paintings to the bankrupt Theme Park Ventures, which in turn was forced to sell them to pay off old debts. This was the legal outcome Priscilla had been striving for. Had she had the cash, she could now have bought the paintings, free and clear. But she didn’t have the cash.
The painting was bought by an auction company, reportedly for $20,000. The auction company in turn put it up for sale on May 6. This time, a real buyer stepped forward: Herbert Brown, a wealthy businessman who had been chairman of a regional hamburger chain. He offered about $90,000, and took it away to a climate-controlled warehouse in Clearwater, where it remains at this writing.
Brown’s son Jared, who handled the purchase, told me his family had no immediate plans for the painting. “We’re not in the exhibition business,” he said, adding that “if somebody who is wants to display them and do a good job, we’ll cooperate.”
The painting, he added, was really acquired as a gift for his mother, who was a devout Christian. “We’re all active Christians,” he said.
How did the Browns hear about the painting? “From Father Robert Graves,” Jared blandly explained. “He contacted us several months before they went on sale, and we became interested. We rescued the paintings, really. They might have fallen into somebody’s hands who might not do well with them.”
When I asked, he said, no, he had never talked to or heard from Priscilla Deters.
This, then, was Robert Graves’s moral victory: His family company got nothing; but neither did Deters, and the paintings were safely out of her clutches. He speaks well of the Browns and their new acquisition.
Deters knew about the sale. On March 1, her Florida attorney wrote to Theme Park’s John Chambers that, “I received a telephone call from Priscilla Deters this morning. She asked me to advise you that she now has her financing in order and intends to close on the purchase of the painting prior to the Sheriff’s Sale date.”
But she didn’t, and by then no one was surprised.
The fate of the paintings is deeply ironic. Deters had spent over a million dollars trying to clear the title and wrest them away from Robert Graves. Yet in the end, they were sold for a tenth that amount to a stranger, a buyer whom Graves recruited.
There was one more significant item in Brian Donley’s account of his discovery of how badly he and John Wesley College had been hoodwinked. Besides hearing about the Quaker Life article–which internal evidence suggests he did not actually read–he also got a call in January from a friend at an evangelical group in Ohio, who told him of receiving a letter from the California Department of Corporations. The letter wanted information about his group’s dealings with Deters.
The letter was from George Crawford, the attorney who had handled the original 1991 Desist and Refrain order. He was writing to many of the groups whose names were on the list confiscated in the search of Deters house. And over the next several months, Crawford got numerous responses from people who had sent money in, but not got it back. From the responses, he assembled a stack of affidavits describing losses and outrage at what the victims were learning about their supposed benefactor.
His plan was to seek an injunction against Deters and Productions Plus, for violating the 1991 order. When he went to court, he also asked that the court appoint a receiver to take control of Deters’ assets, so they could be distributed among her victims as compensation.
Priscilla hired an aggressive local attorney to fight the injunction. But it was issued anyway, in August of 1995. Another attorney, Richard Clements, was appointed as receiver. Thereafter she was supposed to turn over control of all her personal property and business assets to Clements.
Deters’ story since then has been a study in maneuver and evasion. Legal documents show that through 1995 and well into 1996, she was still maneuvering to repurchase the paintings, and gain control of the Florida land where the exhibit hall was to be built.
How did she propose to pay for any of this, when all her assets were supposed to be under the control of a receiver?
That’s where evasion comes in. Deters’ own statements suggest that assets were hidden from the receiver’s scrutiny.
Recall our account of her meeting with in June, 1996 with members of the Nazarene Church, in Lincoln, Nebraska. Susan Skinner, one of those present, later declared under oath that:
“During this meeting, Mrs. Deters was specifically asked if either she or Productions Plus still had the money from our investments. Her response was, Yes, the money is in a safe place where they (presumably the receiver) cannot find it,’ and that it (presumably the money) has been moved.’ She stated that the money is all there,’ and that she cannot get to the money because they (presumably the receiver) would find out’…From her repeated use of the word we,’ I developed the impression that at least one of Mrs. Deters’ sons knows where the money is, and that the sons were in some way helping her.” [Note: all parentheses were in the original.]
Others present at the meeting repeated similar statements. These declarations could, of course, be no more than the bluster which Deters spread liberally among her victims. But the statements are corroborated by other data, specifically my discovery of three private corporations which Deters either controlled or had access to, after the receiver was appointed.
Two of them, Tidings, Inc., and R.A.S., Inc., were Nevada companies; the third, Wonders International Productions, Inc., was located in Denver, Colorado.
Phyllis Beaver was listed as President of Tidings, which was only established on June 30, 1995, shortly before the receivership was set up. Beaver was also listed as the contact for Wonders International, which likewise first appeared in 1995.
R.A.S., Inc. was described as “partially owned and controlled by Priscilla Deters” by an attorney connected with Theme Park Ventures. Its president was one Jerry Morgan; Deters’ financial records show she had been making substantial payments to Morgan, for unspecified services, for several years.
In early 1996, R.A.S. made an offer to buy all the stock of Theme Park, as a step toward regaining control of the painting and the Florida property.
Besides corporations, evasion also marked the matter of Channel Q. Communications.
Deters told receiver Clements that Channel Q was a completely independent enterprise, in which she had no ownership interest. Clements took her at her word and did not seize any of its equipment or bank accounts. (ChannelQ was still operating as of mid-February, 1998, and Phyllis Beaver often answered its phone. It has a web page, at: http://www.citivu.com/channelq/)
Yet her declaration to Clements is contradicted by several other facts:
Deters had registered the business as a sole proprietorship herself in San Bernardino County on July 20, 1992. In a 1995 statement she described Channel Q as “a primary developing project of Productions Plus…” Her son Phillip likewise testified that it was “a business activity owned by Priscilla Deters….”
When these items were pointed out to him, Clements agreed that it seemed highly likely that ChannelQ was in fact a Deters asset, which suggests he had been misled.
Another and major form of likely evasion has to do with Deters’ financial records. Deters was required by the court injunction of 1995 to submit financial statements covering the period 1989 to 1995. The initial set of records submitted showed that at the end of 1994, she had cash on hand totaling $719,000.
However, the initial records were all stamped “Draft”; and when she finally submitted a “final” version, more than a year later in November, 1996, somehow this $719,000 in cash had completely disappeared, and Productions Plus was reported to have had no cash whatever as of the end of 1994.
What happened to the $719,000?
Good question; Richard Clements would like to know. On the final set of records–a stack of documents nearly six inches high–Deters’ accountant makes it plain that the figures therein are something other than exhaustive or entirely reliable:
“We have not audited or reviewed the accompanying financial statements, and accordingly do not express an opinion or any other form of assurance on them….
“Additionally, management [i.e., Deters] has elected to omit substantially all of the disclosures and the statement of cash flows as required by generally accepted accounting principles. If the omitted disclosures and the statements were included in the financial statements, they might influence the user’s conclusions about the Company’s financial position, results of operations and cash flows.”
What kind of omissions are being referred to?
Besides whatever is simply not there, the records contain long lists of entries marked simply,”check written”; there are several other series marked simply “unknown,” and still more recorded only as “cash disbursements.” Perhaps significantly, on December 31, 1994, $300,000 worth of items are noted, “reclassify projects in process”, without further explanation.
Given this kind of financial legerdemain, it is hardly to be wondered at that after more than two years in the post, receiver Clements has collected exactly zero dollars to redistribute to Deters’ hapless “beneficiaries.”
Why does Clements put up with such high-handed treatment?
There are two responses:
First–and very significantly for readers who are ever victimized–there is not much he can do. He is not a prosecutor, or even a public employee. His resources and authority are strictly limited; in this field, the deck is stacked in favor of the crooks. No wonder that, in her career, Deters has shaken off cease and desist orders like so much dandruff; even the 1995 injunction barely slowed her down. Bottom line: the ability of state efforts to control such activities is severely limited.
But the second answer is, Clements in fact did what he could: He went back to court in August of 1996 and asked the judge to cite Deters for contempt of court for violating the injunction.
Furthermore, he won his case. In January, 1997 Deters was convicted on two counts of civil contempt.
The court fined her $2,000. She paid the fine and kept on moving.
As this record should indicate, there was really only one kind of legal action that might actually stop Deters and the Productions Plus machinery.
To hear Priscilla tell it after 1994, Maurice Roberts was the devil incarnate, the source of all her troubles.
That’s dead-wrong. Sure, Roberts told the truth in his resignation speech, when he had no alternative. But Deters’ real bete noire in Kansas was Leatha Hein. She freely admits that once the Kansas Securities Commission got into the case, and Gary Fulton had searched Deters’ house, she became an assertive advocate–a nag, a pest–lobbying for him to turn to the feds.
One reason she did was because it soon became clear, even to her layperson’s eye, that there were limits to what Fulton could do. His jurisdiction was too narrow. He didn’t have the authority to search certain kinds of bank records in another state; but the feds did.
“Kansas isn’t the whole picture.” Hein kept telling him. “The whole United States is the picture. Deters operated in 21 states.”
The other reason to turn to the feds was that they could make the investigation a criminal case. Making jail time part of the equation would change the whole nature of the game.
Hein also began worrying about the statute of limitations, which was five years. Mid-America first sent money to Priscilla in 1989; by 1995, the clock was running out on any possible prosecution for their transactions.
“Finally, I got so frustrated I told them I was gonna call Sam Brownback [Kansas’ newly-elected U.S. Senator who succeeded Nancy Kassebaum].” Hein felt she had a contact with Brownback, because one of the Trustees’ sons had been in law school with him. “But, heck,” she declared, “I was ready to go all the way to Janet Reno if I had to.”
Maybe this pestering got some response. At any rate, an Assistant U.S. Attorney in Wichita, Bryan Johnson, was assigned to the investigation, and it looked like it might be getting somewhere.
But then in late 1995, Johnson abruptly resigned, to go into private practice. The probe stalled until another prosecutor, Annette Gurney, got up to speed.
While the feds floundered, the twins were not idle.
Will Haworth is pastor of the Nazarene Church in Hays, Kansas. After talking to Chuck Crosby, Deters’ “consultant”/salesman, his church had put $37,500 of borrowed money with Productions Plus in 1991. Three years later there was no sign of it, or any matching funds.
When Gary Fulton called, in early 1995, Haworth was ready to talk to him.
But about that same time, Priscilla called.
Now that her mother had died, making her unavailable for further service as a reason for delay, Priscilla announced that her ex-husband, Leonard Deters, had suffered a heart attack and was in critical condition, and she had been required to spend much time with him. But worse yet, Satan was after her, under the guise of people who were saying she had been selling unregistered investments. Had they, she inquired, approached him?
Who might she be thinking of, he wondered.
The California Department of Corporations. George Crawford, that lawyer.
Well, yes, Haworth acknowledged that he had heard from them.
Did you respond? she wanted to know.
Well, yes again.
Oh, you should have contacted me first, she chided. She added that most of the churches contacted did not respond to them.
On another occasion, Phyllis Beaver called Haworth with an anguished plea: Christians don’t prosecute other Christians, she whimpered, weeping into the phone. This was all being done to them by someone who was sick, or someone intent on persecuting believers. Beaver asked him to pray with her that Satan would be bound.
That’s generally a good idea, Haworth felt, so he joined her in the prayer.
Deters and Beaver also worked the phones to get at Haworth indirectly. Soon he was hearing from other Nazarenes, one a pastor who had invested his retirement money with her. The pastor was shocked by Haworth’s cooperation with the authorities:
We’ve had her in our home, the pastor told him, and she’s the finest spiritual lady, never does anything without prayer. How could you?
“This made for a sleepless night for me,” Haworth admitted. But then, his church’s missing $37,500 didn’t help him sleep any better either.
He got more calls, from other investors. One prominent Nazarene told him that if the truth got out about how many of their churches had been swindled, and for how much, that the resulting scandal would take down some “big names” in the Nazarene fold.
Still others took a more pragmatic tack: Look, they said, if you prosecute Deters, none of us will get our money back, and then it will be YOUR fault, not hers.
“This was awful hard to hear,” he admitted.
When Annette Gurney called from the U.S. Attorney’s office, however, she asked a different kind of question: If you had known that your church’s money would be used for Deters and her family, would you have gotten into it?
“Absolutely not,” Haworth answered. That much was clear, and it helped firm his resolve.
Unlike Leatha Hein, Haworth was not on a crusade. But he was still resolved to tell the truth about what had happened. He was not going to prosecute Deters, just cooperate with investigators; what they did was their business.
In June he prepared an affidavit for George Crawford. It was brief, less than a thousand words, just the facts about his congregation’s hopes of building a larger church with the matching money they never got, and the initial investment they never saw again either.
Haworth called Deters afterward, to tell her what he had done. She begged him to withdraw the affidavit. He didn’t.
Some other potential witnesses were close enough that Deters made her pitch in person.
Chuck Hise remembers exactly when he decided that Priscilla Deters was a liar.
It was late in the afternoon of Tuesday, April 16, 1996, and she was sitting in his office.
Hise, remember, is Director of Quaker Gardens, the retirement community for Southwest Yearly Meeting, in Garden Grove, California. They were the ones who got an ironclad bank guarantee on the CD that Priscilla put their $100,000 in, got it back after a year, and walked away.
Hise had not been eager to meet with Deters, but agreed when she pressed him, insisting she wanted to share something she was very excited about.
Priscilla was that sort of person, Hise recalls. Very enthusiastic, bubbly, always talking-a-mile-a-minute. Also persistent. Hise figured she had some new project to promote.
She didn’t. Deters arrived with Phyllis Beaver and another couple, Randy and Charlene Littlefield.
From almost the minute they arrived, and for nearly two hours, they talked nonstop to him. At him. And Priscilla, he remembers, kept laughing. Chortling at the hilarious thought, which she repeated over and over, that somehow some people had got the utterly silly idea into their heads that she, of all people, had been promising to double their investment money in a year.
How she chuckled at this. All four of the visitors did. How could people have ever possibly imagined such a ridiculous thing?
It was then Chuck Hise knew Priscilla had lied.
Because that’s exactly what she had promised him. Hise didn’t join in their laughter.
This crazy idea wasn’t all Deters talked about. It turned out, she went on, that there were some people in Kansas, Quakers there, who somehow had adopted this giddy notion about money doubling, who had talked about it to state and federal investigators. Now, can you imagine, she was in danger of being indicted for fraud.
Deters never lost her composure, but she pleaded with Hise to speak with his yearly meeting leadership, to urge them to intervene with the Quaker leadership in Kansas, and get them to head off this big mistake they were making.
“I think they left believing I agreed with them,” Hise told me.
“They never asked whether I thought they had promised to double people’s money. If they had asked me that, my answer would have been that yes, I had that idea too. And I got it straight from them.”
At the 1995 sessions of Mid-America Yearly Meeting, the Trustees reported on a year “of intensive activity….” Included was a revised accounting of the commitments outstanding from the Productions Plus debacle, which came to $150,000. Of this total, $84,482 had already been repaid, from funds generated by special appeals, plus the sale of some MAYM properties. The “Trustees have worked diligently throughout the year to settle these accounts as rapidly as possible.”
One item, however, remained very much unsettled.
The Trustees report continued:
“Our report one year ago…included a figure of $20,000 for YouthQuake. This included $10,000 of trustees monies released by the former Superintendent for YouthQuake use. Our understanding from Royce Frazier, then Chairman of the YouthQuake Committee, was that MAYM Trustees had no obligation for the $20,000 sent to Productions Plus, and the $10,000 advance would be repaid by YouthQuake. Very recently a letter has been received from [the] current Chairman of the YouthQuake Committee informing us that they indeed hold MAYM liable for the $20,000 they invested with Productions Plus through MAYM. Their correspondence indicated, however, that they are willing to forgive $10,000 of the loss of their funds, but do not intend to repay the $10,000 advance….this has the effect of raising our indebtedness to [MAYM] endowments by an additional $10,000.”
Behind the density of this language lies one of the least edifying pieces of fallout from the whole Productions Plus mess, and one that remains shamefully unresolved even now.
As we saw earlier, the YouthQuake Committee had likely been snookered into sending money to Deters in the first place. Then, what they thought–or allowed themselves to think–was a partial return of their investment was not really that at all, but actually came out of MAYM’s funds, and was carried in the yearly meeting’s books as a balance due.
That was how it stood when Leatha Hein and the Trustees sorted out the accounts. Thus they asked for repayment, only to be given the Quaker equivalent of a Bronx cheer from the YouthQuake Committee.
What was going on here? Can a Quaker body simply welsh on a $20,000 debts, especially to another Quaker body? And how much exactly did YouthQuake put into Productions Plus–$10,000, as previously reported, or $20,000?
Key to the situation is the role of Royce Frazier, who as Maurice Roberts’ assistant in 1992 was the initiator of the investment, and then the go-between from the Committee to MAYM. When interviewed, Frazier, now a psychologist in rural Kansas, flatly contradicted the Trustees’ account. The $10,000 was not MAYM money, he insisted. “The Trustees had it all wrong.”
But how? A friend of Frazier’s suggested that Frazier had paid the $10,000 from his own pocket, as a way of repenting for his involvement in the fraud. Frazier made no such admission, and Leatha Hein scoffed.
“Oh, yeah” she retorted when told of this. “Well, then why didn’t he correct the report at the time? He was the Acting Superintendent then. He was there. Besides, I’ve seen the check stubs. It was yearly meeting money.”
But how did the YouthQuake Committee get the idea that the $10,000 from MAYM was “theirs”? Who told them that?
Hein added that she had repeatedly asked Frazier at the time to provide her with written minutes and records regarding the YouthQuake transactions, to clarify their exact terms and understandings, but these were never furnished. She says Frazier also assured her that the sponsoring yearly meetings would share any losses, as did those who participated in the Friends Ministers Conference.
This last would have been a straightforward way to handle it. But who was ready to tell these yearly meetings that they faced a second unscheduled “fraud surcharge” in barely more than a year’s time? Evidently no one.
Furthermore, there is an equally plausible alternative explanation of what happened: Roberts or Frazier, still figuring that Deters would come through and pay off, simply “borrowed” the money from MAYM and described it to the YouthQuake Committee as if it were an “advance” on the match. By 1994, as the Trustees were soon to learn, such informal and unreported money transfers back and forth were not at all unusual.
(One way to sort out the facts would be to examine the relevant YouthQuake minutes, to see how much they sent, with what approval, and how the returned funds were actually reported to them. But as of press time, the Committee had declined to release them to me for review. And their Treasurer, Sheila Bach of Baltimore Yearly Meeting, who cut the original checks, angrily refused to be interviewed about her role in the matter.)
The amount involved here is minor in the multimillion total of these frauds. But the corrosive institutional effects of the practices it induced are painfully obvious. I regret to say that in this case, my clear impression is that the responses to my inquiry–and to Hein’s–go beyond stonewalling to the seeming perpetuation of untruths, and camouflage of possible defalcation. While most of the other messes left in the wake of this scandal have been cleaned up; this one remains to fester.
This item, like the rest of the Trustees’ long and unhappy list, was received without comment by the body. The report’s final paragraph, however, was striking:
“We have done our best to serve God and MAYM through some very difficult days. The job is obviously not finished. We will assist where we can to provide a smooth a transition as possible to newly appointed Trustees.”
A transition? Unstated, but implicitly acknowledged by the last sentence was a striking reality: Once this report was finished, all four members of the Trustees thereupon resigned.
Not to put too fine a point on it, They quit. They had had enough.
The minutes record that Leatha Hein was given a standing ovation in recognition of her “untiring efforts.” But she says, “once we walked out of that building, we became nonpersons.” She has not been back.
Herbert Pitts, another of the Trustees, told me that he had received a “very unkind letter,” in which a member of MAYM accused him of persecuting Maurice Roberts, and said he ought to get down on his knees to ask God’s forgiveness, and then apologize to Roberts.
This despite the fact that Pitts had been among the holdouts on the Trustees. He found it “very difficult” to come to the conclusion that Roberts had misled the group, and did so only “with a great deal of hesitancy and disappointment,” because of his high regard for Roberts’ wisdom and abilities. Pitts now worships at a Nazarene church, but hastens to say this is due only to living at too great a distance from a Friends church.
Paul Boles, a third Trustee, said simply that they all had become “very unpopular” in the wake of Roberts’ termination. “I called a friend in Houston about it,” he recalled, “and this person just came unglued. He said it was a lie and there was nothing wrong with Roberts and nothing wrong with Productions Plus.”
This reaction against the Trustees, whose labors may very well have saved MAYM from bankruptcy and litigation, is unfortunately a very common one. Shooting the messenger who brings bad news, and ostracizing whistle blowers are familiar enough phenomena that the former is found in the Scriptures, and the other is the stuff of sardonic proverb: No good deed goes unpunished.
Nevertheless, Hein performed one other valedictory service on behalf of the yearly meeting, which was not in the report, but may have been as important as any other: She retrieved all the correspondence between Maurice Roberts and Priscilla Deters, from the beginning.
To get it, she had to insist. Roberts had given these papers to his attorney, who had also represented MAYM in the past. But the Trustees had hired their own counsel, and with his encouragement, Hein demanded that all the correspondence be returned to her, as it was yearly meeting property and she represented the Committee with responsibility for MAYM’s property.
Once they were in hand, she spent many hours putting documents in chronological order, then tracing carefully the pattern of the transactions and the statements made back and forth, using highlighter on key sections. When the letters were all arranged and marked, she assembled them in a thick looseleaf notebook.
“If the Trustees had been able to see this stuff, even the first papers,” she said, “we could have seen that this operation was not good. Maurice kept telling us he had all the paperwork in order, but he never let us see it.”
The notebook’s main value, however, was not to the past, but the future. Dick Johnston of the National Center on White Collar crime told me that “White collar crime takes 5000 percent more time to investigate than a street crime.” Did the Wichita U.S. Attorney’s office and the Kansas Securities Commission have that much time and energy? Probably not.
But they got a break, a big one, when Hein handed her annotated notebook on to Gary Fulton for his investigation. Fulton, in turn, gave it to the feds.
The federal grand jury handed up the indictment on December 18, 1996. Outlining its charge of fourteen counts of wire and mail fraud, the 34-page documents cited a long list of written and faxed communications between Deters and Will Haworth, another Nazarene evangelist named Chuck Millhuff, Barclay College, and Mid-America Yearly Meeting.
How useful was Leatha Hein’s notebook to their work? The respective totals of the communications between the victims and Deters cited in the indictment are enlightening:
Haworth, Hays Nazarene Church——-5
Mid-America Yearly Meeting———–118
Is it too much to say that without Leatha Hein’s painstakingly assembled notebook to work from, the grand jury would not have had enough evidence to make its case? I don’t think so.
Imagine where they’d be if Maurice Roberts had borrowed Billy Britt’s paper shredder.
But what if despite all the evidence, Priscilla beats the rap? That would be a victory indeed, but her legal troubles would not likely be over.
One brief entry at the end of the introduction to the indictment, which was not made into a felony count, makes this clear:
“That neither defendant PRISCILLA J. DETERS or Production Plus had filed federal income tax returns for the years 1990 through 1994.”
To be sure, she was very busy in these years. But at the same time, according to her own financial statements, she was able to pay herself $273,990, not including travel expenses. So this failure to file will at the least require some explanation.
She will have that opportunity. A week before the indictment was made public, the IRS filed a tax lien against Priscilla in the amount of $16,304. This claim is likely to be followed by others.
And behind the IRS in line there is the receiver, Richard Clements. And next to him is George Crawford of the California Department of Corporations. Both have been flouted and mocked by her for years; can their patience be inexhaustible? In all the Golden State, will there be found not even one prosecutor inclined to turn their pleas, and Gary Fulton’s evidence, into a criminal case? Or perhaps some law enforcement official in North Dakota will be shamed enough by the looting of Nazarene churches there, in flaunted defiance of their own cease and desist order, to take up the cause as well.
Other states, for that matter, might get in line. Oklahoma, for instance, where church members and widows like Mary Washburn were taken for half a million in Cherokee. Perhaps Texas, where the Houston Graduate School of Theology thought it would have a new campus by now. Even Ohio, where Friends churches in Salem and Deerfield were taken for $150,000, might be interested.
Or–well, a catalog grows tedious when there are 21 states involved. But the future cannot be entirely reassuring for Priscilla Deters, no matter what happens in Wichita.
For Friends, especially evangelicals, the damage done by the entanglement with Productions Plus will not be easy to repair, not least because in too many places it has been so easy to avoid facing. Even worse, it is not the only, or even the largest fraud by which this group has been victimized in the 1990s.
Of that, more presently. In the meantime, what became of Maurice Roberts?
John Chambers has been involved in the Life of Christ painting project since its beginning. Old and sick now, he still comes into his North Atlanta law office, which he shares with his two sons and a daughter, a few days a week. In his personal office there are several boxes of papers related to the painting and its history: Letters, plans, reproductions, news clippings, and legal documents.
Mostly the latter. In one box I found an eight-page summary of the painting’s provenance. From its inception in 1967 to 1993, it had changed ownership no less than ten times. All these owners hoped it would be a gold mine, but none of them had ever succeeded in getting it displayed in public, not even once. Bankruptcy and litigation had followed this ownership trail like a cloud of dust behind a hearse.
Chambers nodded at my astonishment at this record, and offered an explanation.
“My father put a curse on that painting,” he explained. His voice was weak but firm, and without a trace of incongruity or humor. The curse, he went on, came about this way:
During the three years it took to paint the fifty-five scenes, several people, men and women, helped Jackson Bailey with the actual painting. During this time, some marital misbehavior allegedly occurred among this group. When John Chambers’ late father, a man of high moral standards, learned of it, he was enraged. “That’s when he put a curse on it,” his son explained.
There is a double dose of irony in this story for Priscilla Deters. She may well have spent the most money of any single individual in this quest, and may end up paying the highest personal cost; and she did so without ever becoming the painting’s owner. She came close, at least in her own mind, not once but many times. But this was not a game of horseshoes, and if she is ever to fulfill her sense of calling to “raise up the king of kings,” it seems destined that this will not be the way she does it.
Perhaps the Brown family, which disclaims any commercial aspirations for its stewardship of the work, will manage to overcome or escape the “curse.” We shall see.
Or perhaps we won’t. I wonder whether I, or anyone reading this report in 1998, will live to see this work displayed for public viewing.
After a couple of delays, Priscilla was scheduled to be tried in Wichita on October 28, 1997. She appeared on schedule, but at a preliminary hearing to consider her competence, her performance was discursive, rambling and bizarre.
She not merely maintained her innocence, she was quite indignant about the entire proceeding. She rambled in court about being a slave of the state, insisted that her rights were being trampled, and asserted her conviction that since she was a resident of California, a court in Kansas had no jurisdiction over her.
Her days of hiring expensive attorneys were over; Deters was represented by Federal Public Defender, Steve Gradert. Gradert proposed that she be psychiatrically evaluated, to determine if she was indeed competent to stand trial. The judge granted Gradert’s request, but denied his motion to have it conducted by a private physician. instead, he ordered that it be conducted by federal authorities, and an even more indignant Deters was thereupon taken into custody.
She was sent to a federal medical facility near Chicago. After several weeks, she was pronounced competent, and released just before Christmas. Her trial was rescheduled for February 24, 1998.
As for Maurice Roberts, he is a survivor. By the spring of 1995, he had found another job, with an old friend and colleague, and was on his way to the Pacific Northwest.
His new employer was a company in Stanwood, Washington. His boss was a Quaker businessman named Philip Harmon.
The Scourge of Skagit Valley
“Quakers make good victims,” Steve Schroeder says.
He should know; as a federal prosecutor since 1974, he’s seen lots of them. Lots of fraud victims, that is; Quakers were a relatively new experience. In particular, the ones who quoted the Bible to him about staying out of court.
I thought he was referring to Paul, and the familiar passage from First Corinthians 6:
“If one of you has a dispute with a fellow Christian, how dare he go before heathen judges instead of letting God’s people settle the matter?…Would it not be better for you to be robbed?” (V 1, 7)
But Schroeder thought not. He was certain it was the Gospel that had been quoted to him, but was unsure of the specific passage.
Me too. The closest I can find is Matthew 5:25f (repeated in Luke 12:58f):
“If someone brings a lawsuit against you and takes you to court, settle the dispute with him while there is time, before you get to court. Once you are there, he will turn you over to the judge, who will hand you over to the police, and you will be put in jail. There you will stay, I tell you, until you pay the last penny of your fine.”
One might think this verse was directed more at wrongdoers than victims. But perhaps one would be mistaken. The first sentence could be construed as advice to stay out of court regardless, and the rest taken as a not-so-veiled threat that going to court would backfire. Accepting such an interpretation would indeed set one up to be a “good victim.”
Especially if you were a friend of Phil Harmon.
It was Halloween, October 31, 1997 when Philip E. Harmon formally pleaded guilty to federal charges of conspiracy and tax fraud in Seattle, Washington. The event was a major story in the city’s newspapers and TV news shows. These headlines were but the latest in a series, as the story had unfolded over the previous year:
First had come the news of an investigation by Washington state investment authorities, which began in early 1996. Then a federal court issued a restraining order in February, 1997, followed by an injunction in mid-March. A week later, on March 26, 1997, Philip Harmon was arrested, and spent almost a week in jail before being released on $350,000 bail. In May, Harmon was forced into involuntary bankruptcy.
By August, facing a list of felony charges including obstruction of justice and money laundering as well as several varieties of fraud, Harmon had signed an informal plea agreement to reduced charges of conspiracy and tax fraud.
All this was well-publicized; the news of Harmon’s arrest even made it into the pages of Quaker Life, the magazine of Friends United Meeting. The journal’s thirst for of justice in this case, contrasted with its kid glove treatment of Maurice Roberts’ fall, was undoubtedly intensified by the fact that this time its editor and staff were among the victims.
Despite the publicity elsewhere, when Northwest Yearly Meeting gathered in late July on the campus of George Fox University in Newberg, Oregon, the minutes of its six days of sessions recorded no mention whatever of Harmon or his legal difficulties.
Of all the silences surrounding these Quaker scandals, the silence at Northwest YM is the loudest, the deepest, and the most troubling of all. Consider these items:
Harmon had sold Northwest its health insurance plan for employees and pastors. When this plan collapsed in February, 1997, the yearly meeting was left with $20,000 in unpaid medical bills.
Harmon had defrauded numerous prominent members of the Yearly Meeting, or their children, of their life savings. Among these were some of Harmon’s own relatives.
Harmon’s son Steve, and his son-in-law Terrill “Terry” Beebe, who were implicated in the frauds and faced possible indictment, were prominent in the yearly meeting in their own right; Steve Harmon represented the Yearly Meeting on the George Fox University board, and the campus featured a dormitory named after Beebe’s father.
When I asked Northwest’s Superintendent, Joe Gerick, about the lack of references to the Harmon scandal in the minutes, he grinned and shrugged.
“Nobody brought it up,” he said.
Acknowledged or not, Phil Harmon is about as pure a native son of Northwest Yearly Meeting as one could hope to find.
Where Priscilla Deters’ background is shrouded in obscurity, Harmon’s is an (almost) open book. His family has been part of Oregon/Northwest Yearly Meeting all his life. His parents, Howard and Mary, took their three children to the McKinley Avenue Friends Church in Tacoma, Washington, where Howard worked as a landscaper and gardener.
McKinley Avenue was a strongly holiness-influenced church, where pastors preached the importance of knowing Jesus, and the duties of plain living and avoidance of perilous worldly influences like movies, dancing, makeup and bobby sox. An uncle, Ed Harmon, spent his entire career as a pastor in the yearly meeting. His salary the first year in the pastorate was $45.18; now that’s simplicity.
A friend who knew Philip’s parents, describes them as “fine people, simple, hardworking, rough-hewn.” An elder in the yearly meeting can recall young Howie, Phil and their sister Leona as peppy and lively kids at Oregon’s church summer camps.
Howard Harmon’s sons Howard Jr. and Philip were clearly ambitious, and as the saying goes, the apples did not fall far from the tree. Both enrolled in George Fox College, and Howard went into the ministry, where he rose to finish his career as Superintendent of what had become Northwest Yearly Meeting.
Philip took a different course, but in the same stream. Starting at George Fox in 1954, he dropped out after two years, in his own words, because “Quite frankly, I didn’t have enough money.” To earn money, he became a salesman, and by 1959 had moved from Oregon to Seattle, where he was active in Friends Memorial Church, Oregon Yearly Meeting’s congregation there.
In 1970, Harmon was licensed to sell insurance in Washington state. He was a good salesman, and some of his best customers were Quakers. In September of 1972, he formed the National Friends Insurance Trust (NFIT), which Friends United Meeting and the Evangelical Friends Alliance were the first two groups to join. At its peak, NFIT covered as many as 1750 people, from 25 yearly meetings and other groups.
The idea of the trust was simple: Harmon pooled the insurance premiums of member groups, and used their joint buying power to get discount rates on group health coverage. And for about fifteen years, it appears that’s just what the Trust did.
By 1978, Harmon had moved from Seattle to Camano Island, Washington, a small town about an hour north of the city. Business must have been good, because he settled into a mansion-sized house with shore frontage. From its wide, rambling deck, Harmon could look out along a scenic stretch of Puget Sound.
Besides the house, the Harmon compound ultimately expanded to include a sizeable enclosed swimming pool, a two-story four-bay garage, and enough additional acreage for his son Steve to build a house of his own next door. (We’ll hear more about Steve’s house.)
There was no Friends Church on the island, so the Harmons settled into the Camano Chapel, an independent church of an activist, neofundamentalist character. The church was growing rapidly, ran lively youth programs, and its members were prominent in disputes over teaching about sex and evolution in local schools. Harmon also began investing in local real estate, and within a few years he and his family had become the town’s leading citizens. One mark of their stature was that Steve Harmon ultimately became chairman of the Camano Chapel’s board.
The Harmons remained visible among evangelical Friends too. The trio of Phil, Steve and Terry Beebe were a fixture at yearly meetings and other Quaker conferences, where they manned booths for NFIT and recruited potential investors. They paid special attention to the superintendents of pastoral yearly meetings. These were their kind of people; moreover, when properly stroked, they could bring along their pastors and staff as a group onto NFIT’s rolls.
In the early 1980s, Phil decided he needed to finish his college education, abandoned in 1956. George Fox College obliged with a special individualized program of study. At the 1982 commencement, Phil stepped up to receive his diploma the same day his son Steve collected his. This achievement received prominent coverage in the George Fox alumni publication.
Harmon was at the time a member of the George Fox College Board of Directors. He also served on the boards of Barclay College, the Houston Graduate School of Theology, and the Friends Center at Azusa Pacific University in California.
As was perhaps to be expected of a fast-rising, successful businessman, Harmon soon began collecting things besides board memberships. Among them were a series of antique cars, “hobby cars” he called them. This seems to have become a passion. His collection ran into the dozens over the years– I’ve seen figures as high as eighty in legal documents. Besides the four-bay garage at the Harmon compound, he parked some at the Camano Closet, a nearby rental storage facility he owned. More were at another large garage, with at least sixteen spaces, tucked away on a back road just outside of town.
What kind of cars? Not all were luxury models, though Phil was said to have a fondness for convertibles, such as a Model A replica he posed with for his graduation feature. His property listing for the bankruptcy court listed a 1951 Rambler and a 1968 Lincoln. But also included was a 1952 Jaguar, which wouldn’t be considered an economy model. Local sources told me of a 1927 Willis Knight, a 1930 Pontiac, a mid-1930s Rolls Royce, and something called a Manavertti. This last was a Swiss model, supposedly one of only four that were produced, which Harmon bought and had restored.
The same local sources tell of these cars being driven in Homecoming parades and other public events. Harmon’s son Steve also reportedly liked to cruise around Camano and nearby Stanwood in them. The Harmons were highly visible in their domain.
And not only on land. By 1982, Harmon could boast to his alma mater of being the skipper of an “85-foot yacht once owned by gangster Al Capone.” Perhaps this vessel’s provenance became problematic for him, for he later acquired a more modest 53-foot model, which he named the Harmony Mist.
Besides cars and boats, Harmon began collecting tracts of land and houses, like some enthusiastic Monopoly player. By the mid-1990s, there were –besides the proliferating Harmon compound itself– three beachfront condos on Maui; a lakefront cabin and camp in Idaho; several more condos in Camano, and numerous houses and tracts of land elsewhere in Washington state, a total of 62 pieces of real property, according to the feds. Among them was a popular Taco Time fast food restaurant in Stanwood, owned by son Steve.
Atop all this stuff perched a honeycombed maze of corporations, trusts and foundations, with names like the Olympic Group, Skagit Valley Associates, Northwestern Investment Company, Family Investment Corporation, Landmark Leasing, Capital Investors Limited, Island Mortgage Company, the Foundation for New Dimensions, Camp Harmony Foundation Trust, and so forth. All the ownership of these many interconnected entities was held by Phil Harmon and his family members, principally his wife Esther, son Steve and Terry Beebe.
With such a small and stable ownership group, one might wonder why it was necessary to keep piling on legal shells. It would be enough to give pause to what financial professionals call a “sophisticated investor.”
Fortunately for him, Phil rarely seemed to run into one of those, especially at the Camano Chapel, or among Friends.
When did the stealing start?
This question is more a matter of journalistic or even biographical concern than a legal one. Only vague answers can be extracted from the piles of court documents in the Harmon cases.
(For the record, there were, as of February 1998, three actions: a criminal case against Phil, a civil case with a receiver seeking to recover funds for investors, and a bankruptcy case involving some of Harmon’s assets and various claimants. There will soon be other cases, however. The one certainty about Harmon’s future is that the litigation spawned by his frauds will go on well into the next millennium.)
Regarding timing, the criminal complaint says only that, “Beginning at an exact time unknown, but in or prior to 1986…Harmon began selling unregistered securities….” Harmon himself says he began selling investments in 1981.
Prosecutor Steve Schroeder said he didn’t think the investments were ever legitimate, but were probably a Ponzi scheme from the beginning. That is, Harmon took in money from investors, spent most of it on personal pursuits and possessions, then paid off clamorous early investors with some of the funds from later ones.
The criminal complaint is a bit more helpful about the course of Harmon’s health plan, the National Friends Insurance Trust. It suggests that for seventeen years after its creation in 1972, NFIT apparently did what it was supposed to do, namely pool insurance premiums from various yearly meetings to buy group health insurance at favorable rates.
Then, the complaint asserts, “beginning sometime in 1989…Harmon and his coconspirators stopped purchasing health insurance…and began operating an illegal, unlicensed health insurance company under the name National Friends Insurance Trust….”
Why did they do this? Probably because it paid better. The short-term profit possibilities were laid out by Judy Swem, a state insurance investigator who examined piles of Harmon’s business records.
The insurance premium payments coming to Harmon’s company from the various yearly meetings and schools totaled as much as $300,000 per month. From this amount, Swem testified, Harmon’s staff was told “that all excess funds’ were to be transferred from NFIT’s bank accounts to the Northwestern Investment Company, another of…Harmon’s entities.”
But, she continued, what “Harmon referred to as excess funds’ were not truly surplus funds; Philip E. Harmon simply transferred funds whenever one of his entities needed money.” His staff reported “that these excess funds’ were rarely if ever returned to the NFIT bank account.”
In short, the premium money was being illegally diverted to other purposes. Stolen, if you will. Swem estimated the total amounts diverted from legitimate insurance purposes over the years to be as much as $15,000,000.
Perhaps the most egregious example of this diversion that Swem turned up occurred in February of 1995:
On the 21st of that month, the sum of $42,035.00 was withdrawn from the NFIT account and deposited in the First Interstate Bank. That same day, Steve Harmon withdrew the very same amount, $42,035.00, from the same bank, to make a down payment on the house he was building next to his father’s estate on Camano Island.
The down payment amount? $42,035.00.
But how did NFIT pay its insurance claims, if its premium income was being diverted elsewhere?
The short answer is, increasingly, it paid them late, and sometimes not at all. As investigator Swem testified, “The NFIT benefit checks were held at Harmon’s…office until funds were available….” She was “…advised that checks were sometimes held for months at a time before funds were finally available in the NFIT bank account.”
Slow pay was only one effect of the diversions. Another important wrinkle involved something called “stop-loss” insurance.
Many companies and groups are “self-insured,” that is, they collect premiums and pay claims themselves, without going through an insurance company. But a few high-cost medical claims can drain the funds of even a well-managed self-insurer. To cope with such cases, self-insurers can buy backup insurance, called “stop loss,” from outside companies. This “stop-loss” coverage has a very high deductible, say $80,000. the self-insurer pays a claim’s cost up to that amount, and then the “stop-loss” policy kicks in to cover any additional expenses.
Harmon bought such “stop-loss” coverage for NFIT, and filed “stop-loss” claims for cases involving very costly treatments. The stop-loss company sent him payments which were supposed to be forwarded by NFIT to the hospitals and other providers involved.
The stop-loss checks were deposited in the NFIT account. New checks were then written on the NFIT account, made out to hospitals and physicians.
But many of these NFIT checks were never sent. The deposited “stop-loss” money likewise was diverted for other purposes.
In January of 1997, Investigator Judy Swem found dozens of unsent NFIT checks in a drawer in Harmon’s office. One check, made out to the UCLA Medical Center in California, was more than a year old, and was for $216,346.24. What happened to the “stop-loss” money that had been sent to NFIT to cover it, is anybody’s guess.
Well, not just anybody’s. Steve Schroeder and David Reese Jennings, another federal prosecutor, are making it their business to find out where the money went. They talk proudly of the feds tracking hundreds of thousands of financial transactions between Harmon companies, investors and insurance customers, and entering all of them onto computer spreadsheets. Schroeder says this is a pioneering effort in fraud law enforcement.
Schroeder and Jennings insist that when this massive data entry project is finished, they will be able to tell at the touch of a computer key which insurance customer’s claim money was used to buy which “hobby car,” and which investor’s nest egg went for which of his numerous condominiums.
As the recipients of these ill-gotten gains come clearly into view, Jennings will turn loose a battalion of other lawyers to sue them in order to recover some or all of the money. Among the potential targets are companies with deep pockets who, the lawyers will argue, should have known better than to deal with Harmon and thus could be held liable for negligence. The “stop-loss” carrier; the company that processed NFIT’s claims; and a liability company which provided Harmon a form of malpractice coverage are all plausible targets.
We’ll see. So far, almost a year into this effort, the receiver has recovered exactly–zero.
But this dismal result is not for lack of trying. The feds seized all of Harmon’s assets that they could identify–condos, cars, houses and so forth, and they’re still sniffing around for more. No slackers there. Unfortunately, it turned out that virtually all the substantial property was already mortgaged to the hilt. And in a bankruptcy case, creditors with secured mortgage claims get first pick.
Take, as an example, the Harmony Mist, Harmon’s 53-foot yacht. It was appraised as being worth about $130,000. But Phil had managed to get a bank and a wealthy buddy to loan him $175,000 on the boat, or $45,000 more than it was worth. Which means that when these creditors sell it, they will lose money, and there will be exactly zero left over for all the other 230 unsecured creditors, who have a claim to nothing but worthless pieces of paper.
This is not to mention the 330 additional health plan subscribers who were left with hundreds of thousands in unpaid medical bills, some of whom have been unable to find replacement insurance at all.
The three beachfront condos on Maui were in the same situation. Ditto Phil’s big house on Camano. And so forth.
One of the bankruptcy lawyers told me he thought that when all the available properties had been found and disposed of, and the mortgage claims paid off, there might be as much as a million dollars left over to divide among the unsecured investors.
This to cover investor losses estimated in excess of $14,000,000. Which would come to about seven cents on the dollar–and that’s before the receivers take their cut for legal fees, which are already well into six figures.
Where did all that money go? And how much was there? Adding up the $14 million from investors, plus the estimated $15,000,000 in diverted funds from NFIT, we can see why prosecutors told the judge the theft total was “more than $20,000,000 but less than $40,000,000.” There is much murmuring around Camano Island about the possibility of money and assets being hidden. Steve Schroeder was vague on that point, but an FBI report described Harmon as not “sophisticated” in such concealment.
But where, then? Could the Harmons really have blown $20-$40 million on their nouveau riche-provincial gentry lifestyle? That’s the other possible conclusion; but estimating such spending is out of my league.
If that’s what happened, Phil managed to do it without enriching the public purse. For instance, in a financial declaration for the bankruptcy court he indicated that in 1994, before his troubles surfaced, he had a personal adjusted gross income of $244,508, but a taxable income of only $1,862.
This means he paid less income tax, a lot less, than, say, I did that year, even though my income was about ninety per cent smaller. A lot less. No wonder the IRS wanted in on his case too.
In any event, if there is to be any substantial recovery for investors and NFIT subscribers, it will likely come at the end of lawsuits against the third-party deep pockets–if they succeed. If it was my money that had been lost, I wouldn’t be holding my breath.
Still, the feds are making a game effort. The Harmon investigation brought together a remarkable coalition of state and federal agencies: Washington’s Insurance Commissioner and Financial Institutions staff, plus agents from the FBI, IRS, and the U.S. Labor Department, along with the U.S. attorneys. The resulting task force was even given a name: Operation Islandscam.
Phil Harmon thus becomes the first Quaker since Richard Nixon to have his own officially-designated scandal.
Steve Schroeder is very proud of this cooperative investigation, and considers it a model for the prosecution of white collar crime. “State agencies by themselves have a hard time stopping these frauds. Most don’t have the enforcement clout. So unless you get the attention of the feds, it’s hard to get convictions. But state agencies have expertise that we need–insurance, securities.”
Here he is in tune with the message from the top. Attorney General Janet Reno told a recent interviewer that, “I was often times frustrated as a local prosecutor because I didn’t have the jurisdiction to reach beyond the boundaries of one county, and I didn’t have investigators in another part of the country that I could direct to find out more about what was going on.”
Now she does, and she says she has made white collar crime a Justice Department priority, adding, “It’s the U.S. attorneys who have been successful in these cases and particularly those that have reached out to state and local law enforcement who can, as I say, do so much in terms of supporting or doing it themselves. If we work together, if we provide our investigative resources in other parts of the country, it can truly make a difference.”
So Schroeder is on the cutting edge as a white collar crime fighter. He’s also a canny veteran, who once convicted seven of the eight members of the Scranton, Pennsylvania school board for taking bribes. Nevertheless, he was surprised at the extent of Harmon’s fraud. “This is the biggest case I’ve ever seen involving middle class people. Other cases may involve more dollars, but from fewer people or companies.”
He also says, “It’s a tragic case. In most Ponzi schemes, the victims have some larceny in their hearts too, because they’re promised unreasonably high returns. [E.g., by Productions Plus.] But Harmon didn’t promise his investors outlandish returns, just a few points higher than more conventional stocks or funds. So his investors thought they were being reasonable and prudent.”
But they weren’t, really. Harmon’s “investments” may have sounded reasonable, but they lacked some of the basic features of legitimacy, which would have been red flags for a truly prudent investor. They were not registered, for one thing. And for another, few of the investors ever saw a prospectus, the legally required document which lays out the details of a security, and describes its potential risks.
Few of the investors were familiar with such documents, and anyway they didn’t think they needed such paraphernalia from good Christians like Phil Harmon and his associates. More folly, but a very common one.
The same goes for the yearly meeting superintendents. One after another signed on to NFIT without doing a serious check into its financial and legal status. Several became investors as well. Why not? Harmon was their friend, a fellow Christian, and a champion schmoozer. An incident in September of 1996 shows this side of him in full bloom.
For many years, the superintendents and secretaries of yearly meetings and major Quaker organizations of all the branches in North America have met annually in an unofficial retreat. “Supes and Sects” it has been called. It serves as a quiet pipeline for communication and safe ecumenical discussion. Each year, a different yearly meeting plays host.
In 1996, it was Rocky Mountain Yearly Meeting’s turn to host, but Phil Harmon offered to take over the logistical planning. The actual legwork fell to one of his employees, who had come on board only a year or so before, as his Chief Operating Officer.
The employee’s name was Maurice Roberts.
Roberts was an ideal person to set up such a meeting; after all, as Superintendent of Mid-America Yearly Meeting, he had attended his share, and knew the drill.
(Maurice Roberts was not the only former superintendent Harmon hired in his efforts to keep the lid on. When Bob Garris, the veteran executive of Western Yearly Meeting in Indiana, retired, Harmon began paying him $450 per month to act as a “consultant” for NFIT in Western’s territory. This relationship didn’t net Garris much, though; Harmon took him and his wife for almost $29,000 from their IRA).
The bulk of the 1996 “Supes and Sects” sessions were held at Camp Brotherhood in Washington, not far from Camano Island. The big issue there was not insurance, but the announcement by the leaders of the evangelical yearly meetings–Southwest, Eastern Region, Mid-America, Northwest and Rocky Mountain, along with the head of Evangelical Friends Mission– that this would be their last “Supes and Sects” retreat.
They explained that their evangelical agenda of overseas missions and intensive domestic church planting, plus the theological and cultural tensions between them and the more liberal unprogrammed groups, made the gathering no longer useful or relevant to them.
Other superintendents, like Indiana’s David Brock, pleaded with the evangelicals to reconsider. The fellowship and communication was valuable in itself, he felt. Besides, among the pastoral groups, pastors often moved from one region to another, and it was helpful for superintendents to be in touch to for background. This was wasted breath; when the “Supes and Sects” gathered in 1997, Brock was present, but the evangelicals were absent.
Doubtless many of the executives were glad to put this wrangling behind them and move on to the highlight of the gathering, which was a long cruise around Puget Sound on none other than the Harmony Mist. Phil Harmon and Terry Beebe served as captain and crew.
As it happened, this cruise came just as the steel-jawed trap of law enforcement was about to close around Harmon’s ankles. In fact, barely a month before, on August 7, 1996, he had sent out a letter to his investors which contained the first open acknowledgment of impending financial trouble. He had said nothing in the letter about the NFIT health plan; and when a couple of superintendents gathered on the deck asked him about it, he blithely (and falsely) told them it was fine.
In retrospect, the whole performance seemed designed to keep the yearly meetings on board, and those premium payments rolling in, as long as possible. Harmon needed to do something; NFIT’s slow pay pattern had already induced several groups to jump ship and find more conventional insurance; and others were beginning to ask some embarrassing questions. His schmoozing ability had carried him and NFIT a long way; but its power was not unlimited.
Even so, when the axe fell in February, 1997, several yearly meetings were still signed on. Indiana’s David Brock has taken the lead in attempting to sort out the damage, and he estimates that the 330 subscribers were left with well over a million dollars worth of unpaid medical and pharmacy bills, plus some “stop-loss” claims that were supposedly paid, but weren’t. Ten of the groups have hired a Seattle attorney to monitor the recovery process.
When this was written, many of those unpaid bills were still being negotiated by the affected yearly meetings. If the federal receiver’s suits against deep-pocket third parties ever produce some recovery, they might get a share. Again, it may not be much, but it seems to be their best shot.
Lawsuits aren’t the only thing that Operation Islandscam is likely to produce. Last Halloween, when Phil Harmon formally entered his guilty plea, Steve Schroeder told reporters he expected there would be up to a half dozen more criminal indictments in the case. When I asked if this was just grandstanding, he said flatly, “I don’t bluff.”
He doesn’t hurry, either. Schroeder said in January, 1998 that the new round of indictments probably won’t be announced until spring, maybe late spring. For that matter, Phil Harmon is not to be formally sentenced until May 4, six months after his plea. In the meantime, he remains somewhat at liberty, though subject to numerous restrictions.
Why the delay? On the one side, Schroeder and his colleagues want to squeeze as much information from Harmon as possible before he goes off to jail, to aid the recovery effort.
And on the other, Schroeder was frank to admit that, “Fraud cases are among the hardest cases to prove. The defense usually is that this was just an honest business deal that went bad, not a fraud. Sometimes it’s true. How do you tell the difference? Then again, a lot of frauds start out as legitimate businesses, then they go sideways. People begin to lie and send out false information. And the people usually look nice. Trustworthy.”
He said it again: “They’re tough cases,” then added, “that’s why I like them.”
But it also means they take a long time to prepare. And he need Harmon’s information to build the cases against the others.
Which others? That would seem to be the question of the year. Officially, Schroeder couldn’t say. But he admitted that in the cases of Steve Harmon and Terry Beebe, “It really isn’t a matter of if,’ but when.’”
So that’s two.
Another source, outside the U.S. Attorney’s office but close to the investigation, points at two of Harmon’s former employees in the financial side of his operation as likely candidates. The feds found evidence that these two had embezzled funds from Harmon while working for him.
Schroeder grinned when asked about this. “Hey, when you’re working for an outfit that’s mainly involved in stealing its customers’ money, what do you expect?” He hinted that these two might be able to bargain for lesser charges and light sentences by testifying against bigger fish.
Another possible target would be Harmon’s daughter, Sandy Harmon Kintner, who worked in the business and had ownership shares.
I can’t deny, though, that the name I was most curious to hear was the one Schroeder was most resolutely coy about:
Will Maurice Roberts be defendant number six?
“That decision has not yet been made,” Schroeder said cryptically.
I pressed. What goes into such decisions?
“As a general rule, we don’t charge people who didn’t profit from the fraud. So an employee getting a lower middle class salary would not likely fall into that category. But if somebody was making $200,000 a year, that’s a different matter. And we look at who’s making the decisions about illegal actions.”
Based on the court documents that I read, these standards leave Maurice Roberts in a grey area, or perhaps, teetering on the edge. Consider:
He worked very close to the center of Harmon’s empire, as Chief Operating Officer.
He signed many of the checks included in the list of diverted funds found by Judy Swem.
Phil Harmon described Roberts as an “extremely close personal friend” and a member of his personal “support group” on a court petition last May, asking permission to contact some of his investors and former employees for personal reasons. (The court okayed contacts with seven of those on the list–not including Roberts.)
On the other hand, the records are not clear on how much Roberts was paid; from the available figures, I estimate about $50,000 per year. That’s good money, but not $200,000. In addition, the receiver reported that Roberts was cooperating fully with efforts to get a clear handle on the tangled web of Harmon’s companies and holdings.
Furthermore, a very curious incident occurred on January 22 and 23, 1997, when Operation Islandscam agents, led by the FBI, arrived at Harmon’s offices with a subpoena for business records. This incident deserves a closer look.
What the agents discovered was that Harmon’s personal office “was very sparsely furnished as compared with the rest of the office complex.” Indeed, it was almost empty.
Then the agents received a phone call from a confidential informant, who had in turn been tipped by “a current employee in a position to have firsthand knowledge, who indicated that records from…Harmon’s office and his secretary’s office had been moved in anticipation of Agents arrival.”
Closer inspection revealed many indentations in the carpet where filing cabinets had been removed, and furniture moved around to conceal the fact.
The agents “approached Roberts about the indentations in the carpet, and he readily admitted that a file cabinet had been removed….”
(In addition, there was a paper shredder in the office, and Judy Swem says she was told by two former employees that many documents had been shredded during the previous weeks.)
Who was the current employee, in a position to know, who tipped the confidential informant to call the agents and blow the plan to hide the records?
There are only a few possibilities, and Maurice Roberts is one of them. Moreover, it would be entirely appropriate for the FBI to maintain cover for him, by having him call a “confidential informant” who served as a cutout between him and the agents in the office.
But enough of the cloak and dagger. This incident, like the others, leaves me confident that Maurice Roberts will play a major role in Steve Schroeder’s future prosecutions.
But what role? There are, I think, two possibilities.
He will either be:
A. Criminal defendant number six on Schroeder’s target list. Or
B. A key prosecution witness against all the other defendants.
If it is B, he will repeat in Seattle a role he is set to play in Wichita.
As intriguing as these speculations are, courtroom drama is not what this case is about. Its “bottom line” is the theft from 230 people, mostly elderly, of their life savings, and of health coverage from several hundred more.
Yet when Harmon comes back to court again, on May 4 of this year, they ought to produce some drama in the courtroom.
The issue then will not be guilt or innocence; Harmon has already admitted his culpability. What is to be decided is how much jail time he will get.
Harmon pled to two counts of conspiracy and tax fraud. The prescribed sentence for the first is five years, and the second, three. But at the formal sentencing in May, it’s the judge’s call whether Harmon will serve these terms concurrently, for a total of five years behind bars, or consecutively, for a total of eight.
Before passing sentence, the judge will hear from all interested parties. That’s when the victims get to come and speak their piece before the judge and their victimizer. This should provide some melodrama. In fact, there’s already been some tense scenes like this, at creditors meetings for Harmon’s bankruptcy case. Numerous investors showed up at these sessions, as did Harmon. Judy Swem, who also sat in on some of them, says she thought “they were going to tar and feather him right there.”
What will the judge be likely to hear? Some of the victims have already said their piece. Esther Hardinger is one of them.
A retired schoolteacher and a widow from Coldwater, Kansas, Esther Hardinger invested with Harmon after her husband’s death. She put in her entire savings, $40,663.48. “Because of him,” she said, “I lost my financial security.”
Hardinger spoke last November in Washington DC. She was part of the press conference staged by the North American Securities Administrators Association, dealing with “affinity group fraud.”
“In July 1996,” she said, “I received a letter from Phil Harmon saying there would be no more money. The money was gone! I was in great stress and depression as my Social Security is not enough to live on.
“I would call the Harmons and ask for some money but they would only ignore me…. I have health problems and the medicines are costly….
“Because of Phil Harmon’s greed and dishonesty he has not only robbed me—but my children and future generations….
“Many of the families who have been robbed by Phil Harmon are applying to Welfare for commodities to even exist, and I will be one of them….
“My question is–how could…the judge decide to give him just an eight year sentence when he has ruined so many lives…?”
Beside Hardinger stood another widow, her sister, Lois Hutson, of Wichita. Hutson said:
“My husband, who was a minister for 46 years, passed away suddenly in 1992 and left me $100,000 to live on for the rest of my life. I invested my monies with a man who was part of my church organization and he is now being prosecuted for fraud. And I can only hope to get back a tiny percentage of my original $95,000.
“In 1996 I had a valve replacement and a heart bypass. I feel very deprived. It is hard to buy the medications I now need. My life is completely changed with the loss of the money. I receive only a few hundred dollars from Social Security. No longer can I buy clothing and other necessities of life. I spend many hours searching coupons for groceries and other items. My car is nearly 11 years old with no hope of ever buying another one. Purchasing things for my home is a no no….
“One time I called Phil Harmon to tell him I was desperate for money. All he could say was, If I send money to you, you will just sue me with it!’”
Her views on the sentencing were direct: “It sounds like the judge may only give him a sentence of eight years which in my opinion is far too small.” [On her written statement, she had written and crossed out the following sentence: “I had hoped it would be for the rest of his life.”]
“I pray that justice will be done for this man and he’ll never be able to treat anyone else like he has treated me and 230 others that have been in this horrible investment company.”
“I want to say,” she concluded, “I’m so thankful for my family and my God’s help during this extremely difficult time.”
The judge could well hear many similar stories. Last June Dave Pinkham, publisher of the Stanwood-Camano News, sat in on a meeting of Harmon investors. The News is a local weekly which has covered the Harmon case extensively.
One investor, Ralph Armstrong, lost $203,000, and had to return to work at age 78 to make ends meet. Another couple, Pat and Joy Getty, lost $125,000, 80 percent of their retirement fund. “We’re both back to work now,” Pat said. Said Edna Fletcher, “I’m 74 years old and I’m working two jobs now.” She and her husband lost $82,000. Others spoke of losing sleep night after night, and their loss of trust in people.
Harmon will also have his defenders, however. At least, some character witnesses, who gave statements to Dave Pinkham praising Harmon’s charitable donations and his fine family values.
But for a moment, let’s you and I play judge: If it were your call, what would it be: Concurrent or consecutive?
Either way, Phil Harmon will soon be a con. And as I’ve read these comments, I was struck by a recurring theme among them, one which is not supposed to weigh heavily with the judge, but is very significant for our purposes.
What I hear and read most frequently about Phil and Steve Harmon had to do with their identification as churchmen.
“I knew him through church,” said Tex Kazda, who lost his $119,000 IRA. “He seemed honest and smart, and had lots of assets and a happy family.”
“He was a pillar in the church and the community,” Joy Getty agreed. “He was a success.”
“I thought he was a good Christian man,” said another woman to Dave Pinkham.
Lots of people around Camano agreed. Fully a hundred of his investors came from the Stanwood-Camano area, many of them from the Camano Chapel congregation. Harmon even held $48,000 of the church’s school fund, on behalf of its pastor, who also lost almost $40,000 of his family’s funds.
“The hardest thing,” says Norma Beebe of Eugene, Oregon, “has been to recognize that such a trust could have been broken in Christian circles.” Beebe is Terry Beebe’s mother. Her late husband was the Presiding Clerk of Northwest Yearly Meeting for sixteen years. After his death in 1989, George Fox College named a building after him. Then Phil Harmon moved in and took her widow’s legacy; she lost $135,000
This record brings to mind a comment by author-psychiatrist Scott Peck, in his book, People of the Lie, that “…one of the places evil people are most likely to be found is within the church. What better way to conceal one’s evil from oneself, as well as others, than to be a deacon or some other highly visible form of Christian within our culture?” (P. 76)
It was this same identification, going back half a century in Oregon/Northwest Yearly Meeting, which opened so many doors (and shut so many mouths) among Friends for Harmon as well.
One closed mouth belongs to Phil Harmon’s brother Howard, who sedulously avoided being interviewed for this report. He and his wife were taken for a total of $96,000. (But lest you think Phil plays family favorites, I hasten to add that his sister, Leona Harmon Lyda, was taken for $59,000 also.)
Yale’s Arthur Leff wrote astringently of what he called the “godcon” versions of confidence games. He noted, however, that “…I am not arguing that religion in general, or organized religion in particular, is a swindle. I am suggesting instead that if one does set out crookedly to acquire money for one’s personal benefit, there are structural components in a religious context which make the job of the conscientious swindler very much easier.”
The refusal to believe one could be victimized by your own is one such component. We have seen this in spades in both the Deters and Harmon situations. Another is a desire to keep quiet about such victimization when it happens. This tendency is widespread among church groups, but it seems highly pronounced among evangelical Friends, and in Northwest Yearly Meeting in particular.
Take the comment by Northwest’s Superintendent Joe Gerick about the absence of the topic from the minutes of their 1997 session: “Nobody brought it up.”
Of course, there was more to it than that. Other sources make clear that in fact the collapse of NFIT was discussed during the sessions, but behind closed doors, within the confines of the Executive Council, a gathering of committee clerks and staff, the minutes of which are not included in the Yearbook.
There the clerks were told that the yearly meeting had been left with approximately $20,000 worth of unpaid insurance claims. These were paid with money from its endowment. But this meant that other program budgets had to be trimmed by an equivalent amount.
This is hardly earthshaking news; $20,000 isn’t peanuts, but it wasn’t going to bankrupt the yearly meeting either. Similar reports were heard in several other yearly meetings, and appeared in their minutes.
For that matter, with a close look at Northwest’s official minutes, one could discern a few telltale signs of the scandal’s impact, in the work of the Nominating Committee: it brought forward the name of a new health insurance consultant, a post that Phil Harmon had filled for many years; and it reported that George Fox, which had just become a University, had advised them that one of the yearly meeting’s delegates to its Board, Steve Harmon, was “stepping off” the body and needed to be replaced.
There was no explanation for these changes. They bring to mind the cryptic parenthesis in Mark’s Gospel (13:14), when the “abomination of desolation” is described, and Mark adds: “Let them that readeth understand!”
If you can.
Ironically, even Phil Harmon has said more than that about the collapse of his empire than the yearly meeting whose members he so freely exploited. At least he did to me, when we had our exclusive interview.
Yes, while doing field research in Washington state, I obtained an exclusive interview with Phil Harmon.
Okay, so it only lasted about 30 seconds. And never mind that it took place on the voice mail tape at a friend’s house where I was staying. I had asked questions, Harmon answered, and we saved it. Here it is, in full:
“The only statement that I would have to make is that I feel terrible about the things that happened, and things are terribly distorted. As time goes on, the rest of the story will come out. And I just really grieve for the negative impact that it’s had on the Christian community, and particularly on the Friends. I’m just seeking God’s will on how to work what’s become an unbelievable situation out.”
Harmon’s whole career was built around Christian communities which make much of their commitment to the Bible. One might think that if Harmon even halfheartedly shares this commitment, he would do more than grieve for other people’s losses. By rights, he would also have to consider himself to be in very deep spiritual trouble.
After all, the scriptures resound with denunciations of confidence men. Take the notorious passage in First Corinthians Six, just after the command to avoid lawsuits, where Paul lists the categories of the “unrighteous” who “shall not inherit the kingdom of God.”
In recent years whole denominations have endured agony and schism over whether Paul meant to include homosexuals on this list, in verse 9. But I have seen no questions raised about the legitimacy of the next verse, which specifically names “swindlers” as destined for the outer darkness. It’s a category that here to stay.
For that matter, a chapter earlier, in 1 Cor. 5:11, Paul insists that Christians are “not to associate with any so-called brother if he should be…a swindler–not even to eat with such a one.”
And while his victims lose sleep over paying their medical bills and buying groceries, do any of the Harmons ever wake up in a cold sweat, hearing echoes of Matthew 23:14: “Woe to you, scribes and Pharisees, hypocrites, because you devour widows’ houses, even while for a pretense you make long prayers; therefore you shall receive greater condemnation.”
Or maybe Isaiah’s searing censure: “Woe to those who…rob the poor of my people of their rights, in order that widows may be their spoil.” (10:1)
I cite these verses because Phil Harmon clearly had a thing for widows. He could smell one with a nest egg, especially a devoted Christian, from miles away. Even the mother of the police chief of Stanwood wasn’t safe. A widow, Phil got to her through her son, and took them for $159,000.
Does Harmon feel their pain?
In any event, he feels his own. The mighty have fallen far in this case.
Ironically, even Phil Harmon has said more than that about the collapse of his empire than the yearly meeting whose members he so freely exploited. At least he did to me, when we had our exclusive interview.
Yes, while doing field research in Washington state, I obtained an exclusive interview with Phil Harmon.
Okay, so it only lasted about 30 seconds. And never mind that it took place on the voice mail tape at a friend’s house where I was taying. I had asked questions, Harmon answered, and we saved it. Here it is, in full:
“The only statement that I would have to make is that I feel terrible about the things that happened, and things are terribly distorted. As time goes on, the rest of the story will come out. And I just really grieve for the negative impact that it’s had on the Christian community, and particularly on the Friends. I’m just seeking God’s will on how to work what’s become an unbelievable situation out.”
Harmon’s whole career was built around Christian communities which make much of their commitment to the Bible. One might think that if Harmon even halfheartedly shares this commitment, he would do more than grieve for other people’s losses. By rights, he would also have to consider himself to be in very deep spiritual trouble.
After all, the scriptures resound with denunciations of confidence men. Take the notorious passage in First Corinthians Six, just after the command to avoid lawsuits, where Paul lists the categories of the “unrighteous” who “shall not inherit the kingdom of God.”
In recent years whole denominations have endured agony and schism over whether Paul meant to include homosexuals on this list, in verse 9. But I have seen no questions raised about the legitimacy of the next verse, which specifically names “swindlers” as destined for the outer darkness. It’s a category that here to stay.
For that matter, a chapter earlier, in 1 Cor. 5:11, Paul insists that Christians are “not to associate with any so-called brother if he should be…a swindler–not even to eat with such a one.”
And while his victims lose sleep over paying their medical bills and buying groceries, do any of the Harmons ever wake up in a cold sweat, hearing echoes of Matthew 23:14: “Woe to you, scribes and Pharisees, hypocrites, because you devour widows’ houses, even while for a pretense you make long prayers; therefore you shall receive greater condemnation.”
Or maybe Isaiah’s searing censure: “Woe to those who…rob the poor of my people of their rights, in order that widows may be their spoil.” (10:1)
I cite these verses because Phil Harmon clearly had a thing for widows. He could smell one with a nest egg, especially a devoted Christian, from miles away. Even the mother of the police chief of Stanwood wasn’t safe. A widow, Phil got to her through her son, and took them for $159,000.
Does Harmon feel their pain?
In any event, he feels his own. The mighty have fallen far in this case.
“Things are terribly distorted,” and “the rest of the story will come out.” With these hints, we may be able to get a sense of what Harmon’s version of what happened would be, if he were prepared to speak it. Here are some of the other villains that have been suggested:
- Congress. In his letter to investors of August 7, 1996, Harmon said his financial troubles had begun in Washington, DC. His investments had been built on real estate tax shelters, he explained, and quite successfully. “However, in 1986, Congress unexpectedly turned the real estate tax shelter world upside down with the passing of the 1986 Tax Reform Act’, which completely eliminated the benefits of this type of real estate partnership tax shelters.”
- Excessive generosity. Harmon wrote that as a result of the tax reform, many such tax shelter partnerships ended in bankruptcy, but “that was not a course I felt I could follow. I sincerely believed I could bail out everyone’s investments…I thought I could turn our circumstances around by voluntarily stepping in to support the partners’ equity. In hindsight, I now painfully realize that it was not realistic….
- A Missing real estate turnaround. “Over the past several years, I continued to pour my personal assets into the operations, thinking it would all work out, and that the higher appreciation in real estate I had realized in the past would return. It simply did not happen! It never seriously occurred to me that any client would lose substantial amounts of money.”
- Embezzlement. When FBI agents searched Harmon’s office, we have already heard that they were seeking, as their report stated, “records relating to an embezzlement by a former employee; files about an alleged embezzlement by another former employee,” and that while some of these records had been removed, they were later recovered. The amounts involved are unspecified, but Steve Schroeder indicated that the allegations were credible, and the amounts were substantial enough that the two persons involved might well be indicted as a result.
Harmon approached this topic very elliptically in his letter. “Through the years, ” he wrote, “I have seen myself as a vision person. I have focussed on conceptual ideas and opportunities. Day to day management has never been my strong point. Consequently, I surrounded myself with competent professionals, albeit some more competent than others….I should have paid far more attention to detail on every phase of our operations.”
In sum, these data suggest the following as a possible counter-explanation for Harmon’s downfall: His business succumbed to the fourfold blows of congressional betrayal, slumping real estate values, internal fraud, and his management neglect.
Keep in mind that Harmon later pled guilty to fraud, so most of these statements (except the ones about embezzlement) must be taken with a grain of salt. But their general thrust is that of the basic defense against fraud charges: he wasn’t swindling anybody; his was an honest business venture that went bad in a risky, uncertain world.
Assuming that Steve Harmon and Terry Beebe are also to be indicted, the outline of their defense is likely to follow closely the unsuccessful effort they made to avoid being included in the injunction which preceded Phil Harmon’s indictment. Their argument in that case was simple: We didn’t know what was going on.
They portrayed themselves as simple, highly-focussed insurance salesmen, who paid no significant attention to what went on above their heads in the rarefied world of investing.
The federal attorneys heaped scorn on these contentions, pointing out that both men were Directors of Phil’s holding company, and highlighting such incidents as the down payment on Steve’s house made with funds diverted from NFIT. And the court did not buy it. But a criminal trial is a more demanding arena than a restraining order, and they will likely have another chance to make this case.
In the meantime, incidentally, life goes on while these two wait for Steve Schroeder’s other shoe to drop. Steve Harmon has moved from Camano to Mt. Vernon, about fifteen miles north, and is still selling insurance. Terry Beebe has stayed in Stanwood, and has found another job.
To hear Phil tell it, the adjustments forced by his change in fortune have been drastic. He is required to file monthly financial reports with the bankruptcy court; and in the last months of 1997 he reported monthly expenses of over $3000, with no income except the $693 his wife Esther was earning working as a part-time supervisor at the Stanwood Taco Time fast food restaurant owned by Steve.
(How long this place will stay afloat is an open question. When I visited Stanwood, we drove past this Taco Time; it was nearly deserted, in the middle of the day. “A boycott is on,” a well-informed local resident advised me. “It hasn’t been announced or anything; people are just staying away.”)
The Harmony Mist is gone, sold by its creditors late in the fall. The Maui condos were sold about the same time.
In January, 1998, the Harmons moved out of their shorefront estate, following Steve to Mt. Vernon. Presumably Phil’s main agenda items in those days was working with the feds on the recovery efforts, and preparing to go to jail for either five or eight years. People close to his case tell me he has been in touch with Chuck Colson and Colson’s Prison Fellowship group.
Phil may still retain a few of his cars, though. I found a 1952 Jaguar at the Camano Closet, the storage depot which the Harmons still own. It was parked away from the street, but still stuck out among its otherwise very middle class milieu of other cars, RVs and small boats. The Jaguar was dark green, and looked sleekly middle-aged.
Phil Harmon stole much more money than Priscilla Deters. Yet his story takes much less time to tell. This narrative discrepancy grows mainly out of a marked differential in imagination and ambition.
Deters, for all her lies and theft, was out to build a monument to a vision. An outlandish and twisted vision, perhaps, but not lacking in scope and ambition. She comes from a subculture dominated by gaudy church empire builders: Rex Humbard and his Cathedral of Tomorrow in Akron; Robert Schuller and the Crystal Cathedral. Her obsession with Jackson Bailey’s painting led her down a trail of legal and financial complexity that would take several books to untangle completely.
Had she succeeded, the Florida landscape, already pocked by tourist spectacles, would have had yet another, and one with a plausible claim to something unique. And chances are it would have produced a lot of revenue, possibly for the philanthropic work Priscilla never stopped talking about. Plenty of the religious landmarks and shrines which are revered today have histories no less dubious, if examined as closely.
By contrast, Phil Harmon’s criminality, while by far the more productive and efficient, seems to have had no ambition higher than to establish a line of provincial gentry. His role was that of founding robber baron-patriarch, the donor to local charities and collector of cars, the doting grandfather who took his progeny to Disneyland at age five and to Hawaii when they turned fifteen.
Had he gotten away with it, he would likely have devoted some of his declining years to a methodical airbrushing of his past and reputation. It would probably have worked, too; such refurbishing is one of the most time-tested traditions of the American wealthy.
The difference between these two is evident in their business names: Most of Harmon’s are local: Skagit Valley Associates, Family Investments, Northwestern Investments. When Deters formed a Florida company to buy the Life of Christ painting, she called it the International Artorium of the Masters, Inc. I have no clue what an “artorium” is, but the scale of aspiration is clear.
I admit it: between these crooks, I feel a grudging admiration for the kitschy visionary Deters. Finding out something of the truth about her has made for a fascinating journalistic odyssey, whereas even an hour aboard the Harmony Mist talking about antique cars would have bored me to tears.
Grudging admiration, yes; sympathy, no. When I remember the victims, especially the widows, I say: a pox on both their houses.
The victims of these frauds, however, were not only individuals. Their costs have been paid by institutions as well. Among Friends, especially the groups influenced by Wesleyan holiness thought and culture, the roll of groups that have been damaged is long, and it needs to be tallied. Here is a partial list:
- The schools: George Fox University, where Eugene Coffin, Phil and Steve Harmon were honored members of its inner circle for years. Barclay College and the Houston Graduate School of Theology, both of which were put at serious financial risk, with Houston not yet out of the woods. Barclay’s president paid with his job, and in Houston, Delbert Vaughn recently stepped down to Chancellor.
- Northwest Yearly Meeting. Right under its nose, and even nourished in its bosom, has come what Steve Schroeder calls the largest white collar fraud scheme he’s ever seen, a scam big enough to qualify for its own federal code name. One could perhaps be forgiven for thinking that the scale of these events alone would merit some explicit attention and open concern.
Or if not the scale, then surely the plundering of some of its leading members by one of its own would be, one might think, traumatic enough to be a catalyst for discussion and action to understand what happened and avoid future depredations.
Instead, the Harmon affair has highlighted a wall of silence so thick and entrenched that even the world’s people have noticed. “There’s something very secretive down there,” a key investigator of the Harmon case remarked to me not long ago, referring to Northwest Yearly Meeting.
- North Carolina Yearly Meeting, where a basically sound structure was deliberately undercut by an ethically dubious administrator in search of partisan advantage, and the processes of accountability were shredded, short-circuited and silenced.
- The Friends Ministers Conference, utterly discredited, perhaps beyond recovery.
- Its sponsors, Friends United Meeting and Evangelical Friends International, damaged as instruments of inter-yearly meeting cooperation, their leadership shown up as irrelevant to efforts to prevent or stop such raids. (Friends United Meeting, however, by reporting the Harmon scandal in Quaker Life, has managed to regain some credibility.)
- YouthQuake, the one place where these scandals touched the unprogrammed branch of Quakerism, now has a shadow on its integrity, due in part to a tawdry pattern of stonewall and whitewash, and in part to the lingering possibility of actual misconduct.
- Mid-America Yearly Meeting, where a Superintendent’s exposure and disgrace was followed in short order by the effective banishment of the Trustees who had the courage and integrity to call him to account, and save the body from financial calamity.
Students of what is called “affinity group crime” emphasize that just about any ongoing group is vulnerable to criminals who know how to exploit the trust that comes from a common bond, be it religious, ethnic, family, or even professional. In the holiness culture, part of the bond is the conviction that sanctification removes all desire or inclination to sin. This belief tends to increase trust, especially in those whom “God has raised up” as leaders.
Recall Maurice Roberts facing down the Trustees in 1993. Rodney Pitts had a Dun and Bradstreet report showing the shady character of Productions Plus; but what was that up against Roberts’ wife, who had prayed with Priscilla Deters?
Or remember R.J. Wegner, the North Dakota Nazarene Superintendent, who defiantly insisted that he would take the word of people “in the church”–specifically Priscilla Deters and her agent Chuck Crosby–over worldly interlopers like the state Securities Commissioner.
Such “believers” warm the hearts of con artists. They are like sheep that cannot scamper fast enough into the arms of their shearers.
Yale’s Arthur Leff described this phenomenon clearly in 1976: “…those who join such mark pools are believers,’ in a more general sense than that they happened to believe in this particular scheme….the members of an operative Ponzi seem to have a larger-than-usual complement of a common psychological impulse which may be called commitment momentum.’ This tendency…is peculiarly useful in retail buncos like Ponzis….”
Leff goes on to tease out some of the factors making up this “commitment momentum”: “it does seem as if patsy’ is an extraordinarily unattractive self-image for most people….Though there are notable exceptions…it is agreed among all observers that, by and large, fleeced marks go home nice and quiet. That, of course, could be understandable as an attempt to avoid the obloquy and shame of public exposure. What is more to the point is the clinically common’ experience (reported by all conmen) of not being able to blow off the mark because he wants another play. That is, the mark isn’t merely avoiding the consequences of facing his ripoff; he cannot even bring himself to see himself as a rippee….The social-psychological tendencies [congames] tap are apparently deep and pervasive.”
Wegner and his “Dakota Project” are prime examples of such folly. It was five years before he sheepishly, and furtively, admitted that the $527,000 he had so enthusiastically collected for Deters, from nearly two score churches and individuals around the state, was lost. Only in October of 1996 did he finally file a claim with Receiver Richard Clements.
A shrewder Dakota Nazarene, whose church opted out of the “project”, summed up this studied gullibility this way for the Grand Forks Herald: “Like Billy Sunday said, Sinners can always repent, but stupid is forever.’”
Finally let us not forget the refrain of the newly penniless Camano Islanders about Phil Harmon: “I knew him from church.”
But let our brush strokes not be too broad here. There are plenty of good people, and some shrewd ones too, in the evangelical yearly meetings. I think of Chuck Hise, for one, thwarting Deters by taking no chances with Quaker Gardens’ $100,000. In North Carolina there were Scott Parker and Carter Pike. They may have been outmaneuvered by Billy Britt, but they did their duty, and weren’t gulled by his grasping after its treasure for Deters’ scheme and Delbert Vaughn’s overweening ambitions.
Still, neither Priscilla Deters or Phil Harmon would have gotten very far unless they knew how to identify and play on the weak points in their holiness culture. The loud silence among so many of the Nazarene victims reinforces this sense.
Another corroboration comes by contrast. In the east there are Quakers of a different sort–theologically liberal, and nonpastoral. Several of these yearly meetings have sizeable budgets; one, Philadelphia, manages a portfolio in the hundreds of millions. A couple of years ago, nonprofit groups and churches in Philadelphia and in many other places were rocked by the New Era scandal, a Ponzi scheme like none other, which raked in something like $150 million.
The basic ploy of New Era could have been cribbed straight from Priscilla Deters, if were not a classic before either of them came along: the mastermind, one John G. Bennett of Philadelphia, persuaded his victims he could double their money without risk, because he had a network of “anonymous donors” who would match his clients’ deposits. The money poured in. Sound familiar?
Bennett is now behind bars, and some of the money has been recovered. But the point in mentioning him is this: among his scores of victims around Philadelphia, including some of the most prestigious cultural and religious groups, Quaker names were notably, strikingly absent. And this in William Penn’s city, where there are far more Quaker meetings, schools, colleges, hospitals, service groups and so forth, than anywhere else. All of them need to raise money, yet I’ve not heard of one which fell for Bennett’s scam.
How did they avoid it? Principally, it seems, by virtue of a paradox; these theologically liberally Quaker groups are fiscally quite conservative. Their money is hedged about by policies and traditions which keep it in safe and unspectacular vehicles.
Phil Harmon came to Philadelphia once, to sniff out the prospects for signing up the American Friends Service Committee, with 100-plus employees, for the National Friends Insurance Trust. They didn’t bite. And after the New Era bubble burst, AFSC’s fundraisers reported to its top staff that they had not even been approached by Bennett. He must have known they were too stuffy to fall for his scheme.
This does not mean that the Eastern Quakers are or have been immune to financial scandal. (I know of one Quaker-related group in Philadelphia which was looted from within and destroyed a few years back.) But there are institutional safeguards which are widely in place among them, and which make a major difference in effective prevention.
Take regular outside audits, for example. Philadelphia has them routinely; so do most of the other large nonpastoral groups. But too many of the evangelical bodies do not. North Carolina didn’t, until after its $100,000 and its longtime Superintendent were gone. Audits are a basic institutional precaution, worth the cost. As the 1996 Auditor’s report for Philadelphia Yearly Meeting put it, “…we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.” Put more plainly, auditors are paid to look for fraud.
A more unusual “remedy” is one that is impossible to institutionalize, but which needs to be named just the same: it is the raising up of some superintendents who are also prophets, ready to break ranks with the guild mentality and blow the whistle on scams or malpractice among and by their own kind. Such prophetic gifts were notably lacking in the crop of incumbents among whose flocks Deters and Harmon ran rampant.
For individuals, especially of the holiness groups, these cases suggest a need to reexamine the widespread attitude of blind trust in sanctified leaders and others “in the church,” especially when it comes to money. The appropriate level of skepticism in matters financial could be summed up in the following advice, which I believe is also theologically sound:
Trust in Jesus; check out everybody else.
Checking things out does not require taking on worldly cynicism. It merely calls for taking seriously Jesus’ counsel that, “I send you out as sheep in the midst of wolves; therefore be wise as serpents and harmless as doves.” (Matthew 10:16) I have always felt that the point of this advice is that unless we study to be wise, we will not succeed in being harmless as doves. Instead, we’ll be like the sheep, ready to be shorn, or turned into mutton.
Checking things out also means items as basic as insisting on a prospectus (Phil Harmon didn’t have one), and verifying securities licenses (he didn’t have one of them either, nor did Deters). These, along with repeating to oneself the cliche that if something financial sounds too good to be true, it probably is.
(One of Priscilla Deters’ early brochures for her matching program anticipated and tried to neutralize this question: “Isn’t the [matching] concept too good to be true?” The reply cited an irrelevant Bible verse, then declared, “It is not too good to be true – it is GOOD BECAUSE IT IS TRUE!”)
In 1997, a sadder but wiser David Brock, surveying the wreckage of the Friends Ministers Conference, saw it differently. “This is nothing very original, but when you think you’re getting something for nothing, you’re probably headed for trouble.”
None of these measures is foolproof, of course. Liberal Quakers get flimflammed too; prospectuses and licences can be faked; auditors can be fooled, at least for awhile. So perhaps the most important counsel for those who are victimized is this:
Speak up. Get mad.
Raise hell, like Mary Washburn, and Leatha Hein.
Don’t suffer in silence.
Janet Reno told an interviewer that, “It is very important, and I just urge anyone who is reading this to understand how important it is to call, to call and let us know if you have been the victim of a crime….”
Dick Johnston agrees. “The situation with white collar crime today is not unlike the underreporting of rape a few years ago, when we couldn’t get many victims to come forward. We’ve done good work in overcoming that with regard to rape; but we’re not there in this area yet.”
To which I would add: don’t expect an instant response; we’ve seen how difficult law enforcement work in these cases is.
But keep the heat on. Another cliche still applies–The squeaky wheel gets the grease. Remember how feverishly Priscilla and Phyllis and Eugene Coffin worked to keep Will Haworth quiet? A fraud victim’s embarrassed silence aids the crooks.
In the Harmon case, the two Quaker heroes are the widowed sisters, Esther Hardinger and Lois Hutson. They had the nerve to overcome their shame. They stood up in front of the Washington press corps to speak of their victimization, and their anger. Their small voices make the orchestrated silence in places like Newberg, Oregon echo even louder and more hollow.
Phil Harmon is going to jail. Priscilla Deters may end up there too, along with several others we have spoken of. In a few years, or maybe longer, authorities in Washington and California might recover some money for Phil’s brother Howard, his sister, Terry Beebe’s mother Norma, the Dakota Nazarenes, Cherokee friends, and so many others. Keep your fingers crossed.
But even if all the money in these two scams were returned, and all the perpetrators locked up, there will be–there already are–new “affinity group” con artists waiting to take their places. Satan never sleeps, or plays theological favorites. The prophet Jeremiah said it: “The human heart is deceitful above all else…who can understand it?” (Jer. 17:9)
New swindlers will be targeting you and me, our life savings, and our churches’ bank accounts. This is as sure as sunrise tomorrow. We had better be ready.
Friends are advised.
Copyright (c) by Chuck Fager. All rights reserved. Reproduction in any form prohibited without written (i.e., hard-copy) permission from the author.
Note: Neither of the defendants in these cases is talking to reporters. However, each has left a significant paper trail, which has been followed up as diligently as was practical given the limitations of time and resources.
(Note: most of these interviews were conducted by telephone,)
Bailey, Anthony Jay
Bales, Elenita and George
Brown, George and Janet
Chambers, John, Sr.
Coffin, T. Eugene
Cole, George W.
Crystal Cathedral Information Staff
Hacienda La Puente (CA) School District
Haynes, Patricia Devol
Houghton College (NY) Information Staff
Indiana Wesleyan University Information Staff
Jennings, David Reese
North American Securities Administrators Association
Walnut (CA) Police Department
And several who prefer to remain unnamed.
(Note: Duplications of names between this and the preceding list refer to separate statements.)
Chambers, John Sr.
Hagemeier, L. Charles
Overstreet, Stanley Spencer
Steiner, Bradford A.
- 1991–Desist and Refrain Order, California Department of Corporations
- 1991–Cease and Desist Order, North Dakota Securities Commissioner.
- 1992–Theme Park Ventures, Inc. vs. The Graves Company of Kissimmee, (Florida)
- 1993–The Graves Company of Kissimmee vs. Theme Park Ventures, Inc. (Appeal-Florida)
- 1994–Application for Search Warrant, California.
- 1995–Troy B. Cooper and Mamie L. Cooper vs. Theme Park Ventures, Notice of Sheriff’s Sale. (Orlando, Florida)
- 1995–The People of the State of California v. Productions Plus; World-Wide Community Service Custodial Trust; Priscilla J. Deters; and Does 1 through 200. (Injunction-Receiver)
- 1996–United States of America v Priscilla J. Deters. (Criminal Indictment)
Cease and Desist Order, November, 1996 (Washington State Department of Financial Institutions)
Criminal–U.S. v. Philip E. Harmon
- March, 1997–Complaint for Violation
- March, 1997–Arrest Warrant
- May, 1997—–Motion for Clarification of Conditions of Release
- August 1997—Plea Agreement
- September, 1997-Information (Indictment)
(Supporting documents and reports for this case also reviewed.)
Civil——-U.S. v. Philip E. Harmon, Philip S. Harmon, Terrill D. Beebe, Philip E. Harmon Assoc., Inc., Northwestern Investment Co., Inc., Island Mortgage Company, Inc., and Marvel enterprises, L.L.P.
- February, 1997–Complaint for Injunction
- February, 1997–Temporary Restraining Order & Receivership
- March, 1997 –Preliminary Injunction
(Several volumes of additional documents pertaining to this case also reviewed.)
Bankruptcy—–U.S. Bankruptcy Court, Western District of Washington.
- In re: Equity Trusts I & II; and
- In re: Philip E. Harmon, d/b/a Island Trust, et al.
(Several volumes of related documents reviewed.)
Yearly Meeting Minutes
- Mid-America Yearly Meeting, 1992-1995
- North Carolina Yearly Meeting, 1975, 1993-1996
- Oregon Yearly Meeting, 1930s-1970
- Northwest Yearly Meeting, 1997
- Productions Plus Financial Statements for: 989-1995
- Batsell, Jake. “Scam ripped off thousands.” Seattle Times, November 1, 1997.
- Gassert, Gina Stappas. “Biblical painting fighting obscurity.” DeKalb Daily News (Georgia), June 4, 1992.
- Lebowitz, Lawrence J. “Painting’s resurrection sparks legal war.” Orlando Sentinel (Florida), June 2, 1992.
- Lee, Stephen J. “Church investment’ plan likely scam.” Grand Forks Herald, (North Dakota) November 10, 1991.
- ——————–. “Pomeroy puts brakes on California scam involving N.D. churches.” Grand Forks Herald, (ND) November 2, 1991.
- Maurer, Johan. “Risky Business.” Quaker Life, May, 1997.
- McCartney, Diane. “Woman indicted in fraud of churches.” Wichita Eagle, December 20, 1996.
- Mcleod, Don. “To catch a Thief: Reno on Fraud.” AARP Bulletin, December, 1997.
- Miller, Yvonne. “In Good Faith? Cherokee Friends Church Scammed for Over $450,000.” Alva Review-Courier (Oklahoma), November 1997.
- Paulson, Michael. “Swindlers showing an affinity to rip off their own.” Seattle Post-Intelligencer, (Washington) November 13, 1997.
- Pinkham, Dave, Numerous reports in the Stanwood-Camano News, (Washington), 1996-1998.
- Quaker Life. “Ministers Conference Experiences Shortfall,” and “Maurice Roberts Resigns as Mid-America Superintendent.”, December, 1994.
- ——————-. “Deters Reneges.” March, 1995.
- ——————-.”Concerns raised About National Friends Trust.” January/February, 1997.
- ——————-. “National Friends Trust in Limbo.” April, 1997.
- ——————-. “Harmon Arrested.” May, 1997.
- ——————-. “Harmon Files Plea.” October, 1997.
- Leff, Arthur Allen. Swindling and Selling, New York: The Free Press, 1976.
- Painted Word, Inc. The Painted Word. Atlanta, GA: The Painted Word, 1980.
- Paine, S. Hugh. Founded on The Floods: A Scientist Looks at Creation. Walnut, CA: Productions Plus, 1993.
- Peck, M. Scott. People of the Lie. New York: Simon & Schuster, 1983.
There is a large body of associated material involved in the research for this report, including letters, memoranda, funding agreements, brochures, photographs, art reproductions, press releases, and notes. Much of this material is folded as exhibits into other documents (especially court pleadings) in ways that make organizing and indexing extremely difficult, and beyond my resources. However, I am maintaining a file of all the material I have assembled, and these files will be deposited in a Quaker archive for the use of historians and other interested persons.
A Friendly Letter/Kimo Press
Copyright © 1998 By Chuck Fager. All rights reserved.
This publication may not be reproduced by any means without
specific written — that is, hard-copy — permission of the author.
ISBN NO. 0-945177-15-1
A Friendly Letter
P.O. Box 82
Bellefonte PA 16823
Special Thanks to:
- Anne Thomas, for pushing me over the edge.
- Dennis and Marilyn Lone for putting up with me.
- Mark and Flay for putting me up.
- Bonnie and Dale Ward for saving a key video and serving a fine dinner.
- Dave Pinkham for showing me Stanwood-Camano, and for staying on top of this story.
- Joe Condon, for service above and beyond.
- Becky and Larry Ingle, especially for the Flowering Quince.
- Chel Avery, for her promise to listen.
- Lynne Heritage, for window, closet, and other solutions.
- The staff of the Quaker Collection at Haverford College, for their fine collection of yearly meeting minutes and ready help in
- navigating them.
- A brave North Carolina pastoral couple; you know who you are.
- And my apologies to those I’ve forgotten in my haste to finish.