A representative of the LDS Church said Wednesday that church leaders are "deeply concerned" about a rising tide of fraud and warned members to not let their "natural trust" blind them to the people trying to exploit them. He likened those who commit fraud based on bonds of trust to child molesters.
Michael Otterson, managing director of public affairs, pointed to the increase in recent years of affinity fraud, in which members of a group who share friendships and trust are exploited by people peddling fraudulent investments. The problem of affinity fraud has been especially acute in Utah, where 60 percent of residents belong to the LDS Church.
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"The Church of Jesus Christ of Latter-day Saints recognizes the significance of this problem and is deeply concerned about the harm it can cause," Otterson told about 325 people gathered at the University of Utah for a Fraud College conference whose aim was to educate Utahns about avoiding fraud.
As much as what he said, Otterson’s presence at the event spoke to the increased awareness within the church leadership about the scope of the problem in Utah and among its members. At the first Fraud College event, in Utah County in 2010, the LDS Church declined to send a representative despite pleas from law enforcement and regulators that its participation in anti-fraud efforts was essential to combating the problem.
Authorities estimate that $2 billion worth of fraud is under investigation or being prosecuted in Utah courts.
Otterson said those who commit affinity fraud and child molesters are both "predators who exploit one of the things we value most: the trust that makes our communities what they are."
Otterson called on LDS members to "cultivate a healthy skepticism of all investment opportunities" and to consult with people qualified in risk assessments.
"To Latter-day Saints, I would say this. Should someone inside or outside of the church come to you with a financial proposition, ensure that you practice financial discretion and consult qualified, professional advisers with well-established public reputations," Otterson said. "There is a difference between trust and naiveté, and church members must be informed and cautious."
He was one of three religious leaders who spoke Wednesday.
Rabbi Ilina Schwartzman said religious figures have to give their congregations the confidence to say "no" to those within their faith when approached about an investment and to tell others if they suspect a problem.
"Just as you would protect your own family, we have an obligation to protect our communities," she said.
A panel discussion led by regulators and law enforcement officers pointed to warning signs for fraud and generated tips on how to avoid getting scammed.
"Anyone who tells you they can get fantastic returns with little or no risk is lying," said Keith Woodwell, director of the Utah Division of Securities.
James Malpede, who directs the white-collar crime unit of the Salt Lake City FBI office, said Utahns should watch out for anyone who’s flaunting the trappings of wealth they say came from successful investments. Panelists cited the case of Travis Wright, who siphoned off about $15 million from his Waterford companies that turned out to be a multimillion-dollar Ponzi scheme. Wright, now serving a prison sentence, used some of that money to import cobblestones from France for the driveway of his house.
"Most people who earn their money don’t spend it in that way," Malpede said.
Jennifer Moore of the Securities and Exchange Commission said potential investors need to do the math on what they are being pitched to see if there’s a legitimate return being offered or one that can’t possibly be achieved. She also said potential investors should always ask for audited financial statements of the company offering an investment.
Gov. Gary Herbert told the gathering that Utahns’ trusting nature sometimes makes them victims. He quoted President Ronald Reagan’s famous line, "trust but verify," and called for a change in culture in the state.
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