LANSING, Mich. – State regulators on Thursday charged two investment advisors with stealing as much as $16 million from investors through a Ponzi scheme, part of which was run out of MidWest Financial CU and its CUSO Financial Services program.
One of advisers charged in a cease and desist order issued by the Michigan Office of Financial Regulation, Mark Carpenter, operated out of the credit union’s Ann Arbor office and was a dual employee of MidWest Financial and CUSO Financial.
Under a Ponzi scheme, scamsters collect investments from individuals, then pay off early investors with funds from later investors to make it appear as if the scheme is profitable.
Carpenter worked for Michael Winans, Jr., a member of the gospel-music family in Detroit churches, to sell bogus bonds purported to be backed by Saudi Arabian oil contracts.
Michael Stevens, president of MidWest Financial, said the credit union learned of the scheme and alerted regulators as far back as September 2009, 11 months after Carpenter had left. He said about 20 credit union members may have invested as much as $3 million in the scheme. The $200-million credit union sent letters to all of its CUSO Financial customers in December apprising them of the situation.
"This was totally unauthorized," Stevens told Credit Union Journal yesterday. "He didn’t share it with anybody. This was all a secret."
Audio tapes required for investment programs such as this one were non-existent, said Stevens. "It looks like they weren’t recorded."
State regulators say as much as $5 million may have been invested by credit union members.
Officials at CUSO Financial said they had no knowledge of Carpenter's scheme and none of the investments cited by Michigan regulators were authorized, approved or reviewed by the company. "CFS and MidWest remain committed to promoting the interests of our customers and we are cooperating with the regulatory authorities in their ongoing investigation of Mr. Carpenter," said Amy Beattie, co-founder of the company, in a statement yesterday.
Regulators said Winans and his TGBG Financial Planning – an acronym for “To God Be Glory” – used connections in Detroit churches to get investors and told them they could double their money in 60 days. Detroit police identified at least 180 investors.
The bonds turned out to be fake and never were registered with the state regulator or with the Securities and Exchange Commission.
The total amount of money invested in the scheme is unclear. "We don’t know what’s happened to the money," Stevens said. "We don’t have the money. We don’t know where it is."
Regulators on Thursday said Carpenter told them he never intended to invest the credit union members’ in oil bonds but in a company called GetMoni that had plans to mine silver and gold in Arizona.
A lawyer for Carpenter did not return a phone call seeking comment. Winans could not be reached.
