Overview of my most embarrassing moment in business
At 42 years old, I’m executive Pastor of a growing church on the West Coast as well as Vice President of a Missions organization working with children at risk in 18 countries. My passive investments in high risk, high yield ventures are supporting my growing passion for international missions and my speaking ministry is also expanding. My marriage is amazing, and life is good. Nothing could possibly go wrong…right???
While riding this wave, our closest friends and family members asked to participate in our investments, so we hired an attorney and set up simple structures to facilitate short-term group investments with a percentage of the profits going to our Missions work. To our utter amazement, by the end of year one, we had 100 investment partners and after nearly three years we had 1,100 partners. We had begun facilitating Wealth for the Nations conferences for our partners and Kingdom-generosity events for leaders. As things grew, we expanded internationally and took on partners in Canada and other nations. Life was still good.
During this time, our little band of missions-minded believers funded over 150 projects that successfully paid out and blessed many investors and missions around the world. We staffed a full-time intercessor and had a great team managing our charitable giving, plus our leadership and management team was top notch. We had high paid securities attorneys orchestrating our documentation and we developed our own software for partner relations. Our team was ahead of the curve in that we worked and collaborated virtually from our respective homes and offices around the world. It was heaven for a guy like me who loves business, technology and generosity that impacts foreign missions and I jumped out of bed each morning excited for the day.
All 150 of our successful investment projects during this timeframe were with one company in California, but for reasons unknown to us at the time, they began paying late or not at all for several very large projects worth over eight figures combined. We got our attorneys involved and after several months of non-payment and negotiations, we were beginning the process to take over their company in settlement of monies owed. Planning to document their assets for the takeover, our paralegal and I walked off the elevator on the penthouse floor of their office building. We were met by fully armed FBI, SEC and IRS agents as well as local law enforcement officers. They had just seized the business and arrested the owners and operators.
Naturally, they subpoenaed all our records and determined we were unwitting investors in a Ponzi Scheme that duped philanthropic-minded investors out of $160 million dollars. My own family and closest friends were among the largest losers.
This was November 2003. When the trial occurred in 2005, of the numerous investors taken in by this Ponzi-scheme, it was determined that our company had the most meticulous records of all the investors, so I became the star witness for the prosecution. I was on the witness stand for four days and my testimony helped convict the principals of the company that had defrauded Christian oriented investors out of millions of dollars.
Because of the heavy losses, we had to shut our company down. A year and a half later I went back into pastoral ministry for a large church in Texas. In 2007, four years after the government seizure of the fraudulent company, the British Columbia Securities Commission (BCSC) determined that during the time of the aforementioned business, we had violated one of their securities laws in that we did not file the proper type of offering memorandum in their province despite having hired top level securities lawyers at the time, and despite the best efforts of our team in Canada to be compliant. My close friends and partners in Canada reached a settlement agreement with the BCSC in 2007, which I signed off on that resulted in me having a non-criminal securities violation in British Columbia. You can find the violation and the Settlement Agreement via this link if you want more detail.
https://www.bcsc.bc.ca/Enforcement/Settlements/PDF/2007_BCSECCOM_54_pdf/
My responsibility for the overall business was for the U.S. operations, including SEC filings, U.S. investment and investor relations, as well as U.S. team leadership and record keeping. Our U.S. documentation was proven satisfactory and I have no known issues in the eyes of the United States Securities and Exchange Commission (SEC). You can search their database if you like at https://www.sec.gov/ . The guilty party in the Ponzi Scheme (Gregory Setser) was sent to prison for fraud for 40 years. Mr. Setser died in prison in 2017. ( https://www.legacy.com/obituaries/name/gregory-setser-obituary?pid=187131087 )
Summary: It still grieves my heart today that good people lost money in a business which I managed. Our due diligence seemed appropriate at the time, but after the fact, we learned that there were things we should have checked out more thoroughly. This $160 million Ponzi Scheme preyed on mission-minded Christian investors exclusively. There were many investment groups and wonderful individuals that were defrauded besides us.
From a broken heart, I have apologized to our partners. I have sought to learn every possible lesson from the experience, and I am a better businessman today because of what I’ve learned. I still believe that the future of missions funding rests in the business community and I won’t give up on that.
My hope is that this candid explanation will clear up any misperceptions and help you in your own business journey. I have learned that even when your business seems to be flourishing and is radically blessed as ours was for almost 3 years, that ongoing due-diligence must keep pace with business growth. And, that each of us must be aware of the attacks that are certain to come when you are advancing the Kingdom of God, and be prepared to intercept the plans of the enemy when he comes to steal, kill and destroy. Despite working with a very high-level business management team, the attack blindsided us, we missed it, and a lot of incredible people I love got financially hurt.
Sincerely,
Reed
