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Of Prophets and Ponzi Schemes
David McQueen made a lot of money from his business ventures and decided to share some of that wealth with his local church. Over a few years, his companies — Accelerated Income Group and Multiple Return Transactions — had earned him more than $45 million. During that time he gave about $300,000 to Resurrection Life Church in Grandville, Mich. which was spent on various ministries over a six-year period.
This inspiring story of hard work and Christian charity fell apart last year when McQueen was convicted of running a Ponzi scheme. He had promised investors a 10 percent return and paid interest to the early marks out of investments from the new marks. McQueen is now in a medium-security federal prison and has been ordered to pay millions of dollars in restitution — money that he spent a long time ago.
To help make the conned investors whole again, the government is going after any McQueen money it can track down. That’s why Assistant U.S. Attorney Matthew Borgula asked Resurrection Life Church to turn over that $300,000 in donations. The church said no.
“Resurrection Life Church had no knowledge of the source of the funds, nor was it in any way complicit with this donor,” The Rev. Bernard Blauwkamp, secretary of the church’s Board of Elders, wrote in a letter obtained by MLive and The Grand Rapids Press.
The letter, addressed to Borgula, said elders “have read and considered the detailed information contained in your email of November 26, 2014, regarding the tithe monies and gifts given to the church by Mr. David McQueen. We were saddened to hear the news of his wrongdoing, and pray that God will work in his heart and life and bring repentance.
“We have prayerfully considered your request that the Church return all or part of this donor’s gifts and tithe monies, and must respectfully decline to do so.”
The suburban megachurch is now upset that the government, in a letter to McQueen’s victims, has ID-ed the church and noted that the non-profit refused to return the money. Victims are now calling the church to ask for restitution.
Blauwkamp said inclusion of the church’s letter in the notice was “grossly inappropriate” and unfairly singled out the church in an attempt to make it look bad.
“It’s unprofessional to include that letter, like we’re to blame,” he said. “The guy to blame is in jail.”
“That was six years ago. You don’t have money laying around that long. We feel for the victims. It’s not like we have a pile (of money) to be distributed,” he said.
What say you, Ricochetti? Is is right for this church to hold on to the money or should they return it at once? Should they base their decisions on the law, scripture, or their own sense of morality? Does the fact that Resurrection Life is a huge megachurch change your thinking, and if so, why?
Published in General
If I were one of the elders of that church I would do what I could to get the church to raise the money to distribute to the people who were cheated.
That it’s a megachurch doesn’t affect my thinking.
I do think what Borgula did was pretty scummy though, unless he fingers everyone McQueen spent money with.
Accelerated Income Group and Multiple Return Transactions?! Good grief! Why didn’t he just call his business Ponzi Financial Corp.?
It shouldn’t matter whether the church is huge or tiny, as justice should be blind. I think that the law should dictate the resolution of the matter.
I do find it hard to believe that a megachurch couldn’t find some way to repay the $300k, but at the same time, it seems unreasonable to return funds taken in good faith by the recipient. If there is a legal way to force the church to cough up the cash, fine. If not, then that should be the end of the matter.
Are they going after the money he paid to banks for mortgages? Are they chasing the money he paid for vacations, or hotels, or cars, or restaurants? What about his income taxes? Can they go after that money as well?
Did he donate to political causes? I imagine if he was supporting traditional marriage referendum, then they’ll chase that money, but if he was supporting same sex marriage those donations are safe. Did he donate to Michigan Democrats – then the money is safe. The Michigan GOP? Not so safe.
They are strictly chasing targets of opportunity, and they think that a church cannot weather the bad PR by saying no.
Being that the church was not complicit in McQueen’s crimes, it seems unreasonable that they be obligated to return the money.
If McQueen had been a lefty and donated to the ACLU, SPLC, or some such organization, would they be expected to return the money? I realize this may sound a bit conspiratorial, but I can’t help but wonder that this isn’t politically motivated to some degree, even if only tacitly.
Suppose that it was not money that was stolen. Suppose that the guy stole cars and gave the church one. Would they keep someone else’s car? I doubt it.
Money is in a way more abstract and so easier to argue over. But it might also be more difficult to return. It might have already been spent or budgeted.
Of course the church should make an effort to reimburse the victims. But they needn’t do it all at once, depending on their financial circumstances.
As a matter of law, it makes sense to prioritize the initial victims over accidental benefactors to prevent situations involving thieves taking jail time to enrich another party. The families of criminals cannot keep ill-gotten gains for this reason.
I believe the church should reconsider its position. While it may have not known at the time, what it received were not tithes or gifts. Tithes come from our first fruits, not those stolen from others.
If I were in an elder’s shoes, I’d suggest a special offering to raise the money, then return it to those that our brother defrauded.
The church’s stated mission is to help spread the gospel of Jesus Christ. That mission is hindered by hanging on to the money. Therefore, they should return it.
However, it sounds like they don’t have the money, in that it has long since been spent. The article notes there was a building project going on during the years that McQueen donated money, so one could argue some of the money is there. But what kind of building project was it? Did they attach a new addition to their existing building? That’s rather hard to unwind and turn back into cash.
From a practical standpoint, then, it may be impossible for them to return the original money, per se. However, given that they are a megachurch, perhaps they have the capacity to make it good. Say, take out a loan and tighten their belts for a decade.
“Let your light shine before men in such a way that they may see your good works, and glorify your Father who is in heaven.”
If they didn’t have the car?
There is, it’s called fraudulent transfer litigation and it’s a standard activity of a trustee in a ponzi scheme case. Let me add that the bankruptcy code specifically addresses what to do when the recipient is a non-profit and gives them an exemption from being sued in some cases, but not in ponzi scheme cases. The exemption only applies up to a limit, and only to what are called “constructive” fraudulent transfers. Transfers in ponzi schemes are what are called “actual” fraudulent transfers. See 11 U.S.C. Section 548(a)(1)(A) (actual fraudulent transfers) (a)(1)(B) (constructive fraudulent transfers) and (a)(2) (the exemption).
I don’t know this specific case, but having represented trustees in ponzi scheme cases, my educated guess is “all of the above.”
In Christianity, charity is a gift of the Holy Spirit. It is a manner of being, not an action. Charity is what inspires one to give.
It is the self-sacrificial aspect of love. Love is so intent on the other person that one’s own needs are all but forgotten.
The Christian choice here would be to accept the greater burden to relieve other victims, even though the church too was victimized. There are many forms that response might take.
Yeah. I knew that.
Probably.
Maybe…
Churches, large and small, love big donors. I’m sure the money is already spent. A church doesn’t have a way (normally) to make money – all money is from donations from parishioners. So they are the ones who would have to pay it back, which seems unfair. However, as a life-long church-goer, I can’t imagine not wanting to return the money once you know it is ill-gotten. You wouldn’t want to have an education wing paid for by stolen funds, or even something as pedestrian as new pews or A/V equipment. “And these are our ponzi scheme stained glass windows” just doesn’t have a Christian ring.
Well clearly there is some kind of bias going on here. As others have stated, unless EVERY recipient of money from David McQueen is being asked to give back every red cent, then the state is being prejudicial in its efforts. Unless the law states that every person must be hunted down and the money returned then the law should not be permitted to pick and choose, and of course there is what I would call the Slap it Forward issue. If everyone who received the money had to give it back then they are now victims of McQueen and to whom do they file their grievance? Will Rolex and Cartier hand over money from watches and jewelry which were purchased and long since gifted or secreted away? Borgula is a disgrace and should be thrown out of service for his jack-booted efforts.
Now, on the side of the church. OF COURSE THEY SHOULD SEEK TO RETURN THE MONEY. A wrong was done to the greedy investors who banked on beating the system because, as we all know, money is easy and getting easy money is best especially when there aren’t too many pesky details about how it was made. Regardless of the motivations of the investors, it is both necessary and correct for the church to do all it can to return the fruits of wickedness as Fricosis Guy correctly points out. The elders should most certainly reconsider their position and after prayer, which I believe could yield no other result than a conviction to repay, make every effort to return what they can.
Marley, ordinarily every net recipient (party who received more than they put into the scheme) over a threshold established by the trustee will be sued. A threshold is established simply because of the cost of pursuing the lawsuits. There’s little sense in spending $1000 to recover $100. In addition, the cases will generally be settled for substantially less than the amount of the claim. There are important defenses that a party sued can interpose as well. I don’t know the facts of this situation well enough to say whether the church is likely to have one, but I’m sure it has retained a bankruptcy attorney to help it evaluate whether it does.
The one thing I can tell you with some comfort probably isn’t happening is bias in how the suits are pursued. Bankruptcy trustees are eminently practical dollars and cents oriented people, and they get what amounts to a commission on what they recover. They have every incentive to recover from everyone they reasonably can.
Admittedly there is a moral hazard in freezing the fraud in place, rather than seeking restitution.
Yet the government is now in the position of making the stupid whole at the expense of the innocent. Why would they not then turn around and ask those who funded the scheme (i.e., fell for it, but hey) to return the recovered monies to the government to help defray the cost of the recovery?
I hold the idiots more culpable than the church. And this Borgula should be prosecuted. It is not his place to conduct a public relations campaign targeting the church. His actions should conform to approved collection methods. Publishing the letter is unconscionable, and I would hope the church now has standing.
The church may have a moral duty to return the money — that’s up to the church, and they don’t feel that they do. I don’t see a legal duty, [edit: I stand corrected] and since the gubmint already went there, leave it there.
If you invest in a get-rich-quick scheme, your risk/reward sensor is out of calibration, and loss is what fixes that. The greater moral hazard is in rewarding excessive risk-taking by idiots (and enforcing excessive risk-taking by otherwise responsible businesses!). Have had enough of that from the government. Let the stupid hurt.
One of the things you have to keep in mind about these situations is that everybody gets screwed. There’s no way to change that. The perpetrator has made a lot of money disappear and there’s no way to recover much of it so everybody’s a victim. The system exists primarily to try to make the “screwing” as “fair” — as between the victims — as possible. And by the way BDB, the costs of recovery come off the top from what’s recovered.
I think he’s scummy even if he does finger everybody who received money from McQueen. I don’t know what the law is on this matter, but an AUSA should make his case in a court of law, not the court of public opinion. To make public information one only knows by way of a trusted public office is immoral. To do so with the intent of getting what you want is a form of blackmail, even if badly executed and ethically justifiable. We can debate whether blackmail should be illegal, but it is illegal, so AUSA’s shouldn’t be doing it.
If who received money from McQueen should be a matter of public record, let him make his case in court, where it will become public record.
Morally, they should try to return the money. However, they are unlikely to have anywhere near that amount on hand (churches are not very profitable enterprises), so they will probably need to secure a loan.
If there is a legal case that they have to return the money (if I understand Cato Rand correctly), then they should immediately try to work out a deal with the scammed parties to see if they can reduce the amount they need to pay.
That is what will most likely happen, after some legal maneuvering. You always need at least a little legal maneuvering, else how are the lawyers going to run up any billables and get their cut.
I’m sure there is presidence for this situation. Recovered stolen property must be returned. Fun stuff.
People who fall for Ponzi schemes are idiots. I’ve met a few victims and had a couple proposals. I told the proposal people that I’d hate to feel so mad that their kneecaps would be hit with a bat. One did jail time later. He did about six years and he was a class A jerk, quite worthy of a post.
The topic, eh, I see both sides but since it’s a mega church it should return it for image sake. From a legal standpoint it seems like Cato is the man here.
I don’t know anything about the Resurrection Life Church, and I’m not interested enough to find out, but it’s obvious they were not the only party in this mess that didn’t look a gift horse in the mouth.
Further donations will dry up if the Church makes restitution. If donors know their gift will be going to compensate investors who did not exercise proper caution, they will send their charity elsewhere where it might do some good.
Any professional financial advisor who steered clients into the Ponzi scheme should be required to make as much restitution as they’re able and should be named and shamed.
Some culpability lies with the public officials whose duty it was to detect and prosecute such frauds. Therefore, compensation to the investors should come from the taxpayers: who just might show their displeasure at the ballot box at the earliest opportunity. Wouldn’t that be horrible.
Any professional church that can’t spin this into a sheep-shearing adventure is not working for their money anyway.
A shaggy bum told me I would be blessed manifold if I tossed a couple of bucks his way. What’s the implied warranty on that blessing? I’m thinking of going to the Feds.
I would like to know if the Government will return tax dollars from this ill-gotten gain. I hear the Government is rich and can afford this. I think people would appreciate the stance that the Government will make these people whole again. Let’s see the “donations” he made to the IRS.
(I have not read all the comments. Let me know if this has been covered.)
I am still waiting for those few dollars.
It will.
What is “it”? “Will” do what?
The government will refund tax dollars paid on false profits declared by the ponzi scheme entities to the trustee for distribution to the defrauded creditors.