Canada’s God’s Fraud Squad Interview

In August of this year I wrote the BCSC (British Columbia Securities Commission) and asked 10 questions about religious affinity fraud.
I asked for two reasons. One reason was my woeful lack of knowledge about financial issues and the other reason was my woeful lack of knowledge about religious affinity fraud.
My attention around religious affinity fraud was grabbed when charges were laid in the US against a Canadian in May.
Documentation in the case named hosts of a Canadian religious television program. I was fascinated by the cross-border nature of the alleged Axcess Automation/Funds ponzi scheme fallout, the involvement of former employees and president of one of Canada’s largest religious media charities.
The number of people harmed initially stunned me. When that subject was first brought up here at BDBO I was at a loss to know what to say to investors who wrote in.

One of my first questions was motivation. Why?
Why do people get caught up in affinity fraud, why would good people become finders?
I turned to an economics professor and blogging friend in the US for answers to that question. Dr. Mark Byron responded with Innocent Greed.

Next came more basic questions specific to Canadian regulations and  affinity fraud. If I was an investor, what would I want to know?
I’d first read about God’s Fraud Squad a few years ago and I think what they do is remarkable, so I wrote the BCSC with questions for God’s Fraud Squad.

The Ontario Security Commission is responsible for working with regulators in the US in the civil case brought by the Commodities Futures Trading Commission and the Security Exchange Commission against Gordon Driver/Axcess Automation/Funds.
While no trading occured in Canada, much of the alleged 14 million dollars came from Canadians. The OSC has issued to cease orders against three Canadians; Gordon Driver, Glen David (corrected – BD) Rutledge and Steven Taylor.
The USA civil case against Gordon Driver/Axcess was initiated in May 2009. The board and management of Crossroads Christian Communications Inc. have responded with it’s own statements.

The flagship program for the charity Crossroads Christian Communications Inc. – 100 Huntley Street – is broadcast coast to coast across this country.  US court documents state that while over 100+ people invested with Axcess Automation/Funds, at least 85 are Canadian.
According to self-acknowledged finders Ron andReynold Mainse, ‘about 10 to 15′ and ’40 to 50′ investors were drawn into the alleged ponzi scheme through direct involvement with the Crossroads Christian Communications Inc hosts. I wondered where investors turn.

God’s Fraud Squad is a unique program started by the BCSC in 2003. Alarmed by the growing problem of religious affinity fraud, silence and lack of knowledge in one of Canada’s bible buckles, the Commission hired Rev. John Haycock and Fr. Seamus Mackrell, known as  God’s Fraud Squad.
God’s Fraud Squad mandate:

The program has three parts. The first part is an initial visit to educate participants about:

• the role of the BC Securities Commission
• the threat of affinity fraud
• why you should investigate before you invest

The second part is one of reinforcement, prevention and retention measurement. The pastors make a follow-up visit to:

• evaluate how well the audience retains the key messages from the previous visit
• role-play to demonstrate the consequences of not taking action when you encounter a fraud
• reinforce the resources available from the BC securities commission

The third part is to promote and develop partnerships with denominations at the provincial level.

The British Columbia Securities Commission also provided  licenced regulator Lynda Smith to answer a couple of my questions. I am grateful for Lynda and John’s passion, their desire to teach Canadians how to protect themselves from fraud, and their openess to an interview on a blog.:^)

I am particularly struck by Lynda and John’s awareness of system theory; a way of thinking and understanding which opens up community conversation. I hope the care and attention the BCSC has offered in this interview shines a bit of  light on the dark path which betrayed investors walk.

1. Why do fraud investigations take so long?

Securities regulators must review and evaluate the individuals or companies involved for possible violations. The review and investigation may take several weeks, or, in some cases, months, because of the legal processes involved and the complexity of the matter. A complex matter may take several years to investigate.  Lynda Smith

2. When a charity or church spots fraud, what is the responsibility of the board of the church or charity?

Churches and charities who suspect fraud should encourage members to contact the securities regulators and report it.
In British Columbia, currently only about 17% of British Columbians report a scam or spam. Investor notification about a potential fraud are often the securities regulators first indication of wrongdoing. Early warning may allow securities regulators to disrupt activities to avoid or limit further harm to others.
For information on how to contact your local securities regulator, visit the Canadian Securities Administrators website  – Rev. John Haycock

3. What are the ethical public obligations of the ministry?

The responsibility of the church is to report the scam once observed and confront the scammer in their midst.

When we coach church leadership we emphasize that they should expect the congregation to resist talking about fraud being perpetrated in their midst, perhaps even by one of their own.  It is very helpful for any organisation to partner with the Security Commission in addressing such an issue. Not only do you have knowledgeable people supporting you but it helps to lower your own anxiety.  When we are anxious, we loose the ability to talk openly about anything.  Congregational anxiety also lessens the ability to think clearly.  Normally we need someone to share our anxiety in order to think better.

In our experience we encounter people who know the above, become involved in a scam, and still do not report the scam after they discovered they have been scammed.

What is preventing people from reporting a scam, and more specifically, what prevents the leaders from speaking up?
No doubt emotional factors are keeping people quiet and enabling the fraud.  Our program makes the emotional process visible.  It shows how emotional considerations can sometimes undermine our values and beliefs surrounding.  It also offers an alternative emotional process that encourages action to implement values and beliefs that expose fraud. - Rev. John Haycock

4. What do financial regulators do once they suspect a faith group has been targeted by a ponzi scheme?

An investigation is opened and the investigator starts gathering information. The people involved may be contacted for interviews. The investigation may culminate in a public notice summarizing the allegations.

In terms of complaint handling processes and dealing with victims, we recently made further process improvements here in British Columbia.  Since we want to encourage reporting of misconduct, we wanted to try and improve upon our processes.

In addition to ensuring greater accountability and setting clear expectations, perhaps the most significant change is our commitment to follow up with complainants when a case closes.

We will inform investors if we will not be investigating, when
a case is closed during an investigation and when cases are concluded through a hearing or settlement.

We had been providing feedback but not consistently at every point in the complaint handling process. We hope that these changes will ensure that we are providing a uniformly high level of service throughout the complaint process. – Lynda Smith

5. How is Canada doing in terms of clamping down on religious affinity fraud?

In general securities regulators in Canada do three things:

1. Set the rules for securities trading
2. Ensure compliance & take enforcement action when necessary
3. Educate investors and industry

Securities regulators are also working with the police, crown counsel and regulators outside of Canada to help prosecute investment fraud.

Securities regulators focus on investor education programs that help educate investors about possible scams, and give investors tools to help them make informed investment decisions.

In British Columbia, God’s Fraud Squad  is helping to combat affinity fraud by educating churches of different denominations. This is done through workshops and partnerships with other religious denominations. – Lynda Smith

6. When you have a civil case such as Gordon Driver/Axcess put before US courts and most of the investors are in Canada, where do they get factual information?

In addition to the legal proceedings in the United States, the Ontario Securities Commission (OSC) also issued a temporary order against Axcess and Gordon Driver. The OSC should be contacted for further information.
OSC’s Temporary Order
OSC Contact Information

With all securities regulators investigations, the securities regulator cannot comment on investigations until the allegations are proven and sanctions are sought. At this point the allegations are put forward and released to the public. – Lynda Smith

7. The tendency to blame and shame investors in religious groups seems pronounced. What tools do you give victims to move through?

Understanding affinity fraud is an important part of knowing how to help victims.
Talking about their experiences and sometimes discussing it with other victims can be helpful.
Becoming aware of the emotional process involved in perpetrating fraud is critical.  Once victims can observe how they have been scammed, they seem to become less anxious about the fact that it happened.  Coaching them so they can observe what happened, where it happened, who where involved, and when.  These open ended questions allow them to think through the process.

Thinking about our own role in fraud is critical.  Blaming others or myself tends to polarize relationships.  It becomes a matter of them and us.  Blaming and guilt could also cut me or others off from the community. It is as if we as a community are prepared to sacrifice others in the community for the sake of peace and so-called stability or homeostasis within the community.

High anxiety does not allow for open relationships.  Our function as counsellors is to lower the anxiety so that those involved can think.  Another way of putting it is if we could become spectators to what happened to us, we will be able to talk more freely about the facts, the way the scammers operated, how they got me and others involved.  Somehow, in thinking more about what happened, we have less intense feelings about it. It lowers the feelings of anger, of guilt and blame and moves the focus we had on others more to ourselves and how we observe what happened.Â

We are currently focusing on training leadership in observing the role they play in a scam.  Again, it depends how you think. From a systems perspective we are all part of the system in which people have been scammed.  You could say that the system has been scammed.  Once leadership think of themselves as being part of a systems that has been scammed, they could start to ask questions as, for example, How did it happen, and where did it happen and how come we were not aware and if, what was it about ourselves that we did not expose the scam.To put it shortly. What is the part I played?
Â
Blaming members of a congregation and putting them to shame raises the anxiety and polarize the system.  Nobody thinks when this happens.  High anxiety does not allow us to act from beliefs and principles.  We focus on others and the blaming and shaming is symptomatic of what we do. The more we focus on what others are doing, the less we focus on the part we play.

Our coaching sessions are sessions where we coach church leaders to focus on their own behaviour and to separate facts from fiction. It is helpful to ask questions.  What are the facts, and what is fiction?  Is it true that if we, as leadership, blow the whistle by reporting a scam to the authorities, we would loose people?  Is this a fact or is it fiction?  Are we, if we do not report a scam, acting from values, principles and beliefs, and if we are not, what is it then that we do?

Partnering with the provincial Security Commission as churches and members of a community group raises the awareness of Affinity Fraud in the community.  Once leadership take initiative in setting up a partnership with the Security Commission, others follow.  Leadership empowers others to talk about affinity fraud more freely.  We are currently observing this in British Columbia.  Leadership made a move and then, other parts of the system started to move.  It might take years for this to become engrained in the church and for the church to see it as their moral duty to make the community in which they find themselves aware of Affinity Fraud.

The fact is that the Security Commission reached out to the church community knowing that the church communities are soft targets.  The BC Securities Commission has the facts to support this.  In reaching out to the church community they allowed for good emotional contact with church leadership, enabling leadership to talk about the fact of Affinity Fraud in the church.  One BC District church president is at present discussing Affinity Fraud at leadership meetings in his denomination and encouraging them to do the same in their respective congregations. This is leading by example.  He is doing it non-anxiously, openly and differentiating himself as someone who is acting from principles and beliefs.  - Rev. John Haycock

8. What does justice and healing look like in religious groups?

Justice and healing might differ from group to group depending on their beliefs and values.  What we do know, approaching it from a systems perspective, is that irrespective of the religious groups beliefs, they need to discuss what happened: openly among each other and in the bigger group without pointing fingers to those who introduced the scam to their community.  They were scammed themselves.  An open discussion, initiated by leadership who are not anxious about discussing the facts, will help the community to reflect.

Encouraging equality among the participants is important. All participants need to concentrate on their own role in the fraud rather than assigning more guilt to some than others.  This brings inequality to the discussion and allows for openness.

Leaders play a critical role.  They need to distinguish between a feeling process and a thinking process.  Most of the decisions we make are made based in how we feel about it, or him, or her.  A community which has been scammed will be very reactive and highly emotional and expressive.  Leaders  need to make a deliberate attempt to think through what happened to the community.  If they think, they will eventually lower the anxiety in the community of which they are a part, and help the community to observe the facts.

Thinking about who they are as Christians for example, will allow them to discuss what justice and healing means to them.  It could become a time for them as a community to reflect on how their faith impacts or influences their state of being.  It could bring them to act upon what happened, address the scam in partnership with the authorities, and to work with those in their midst who have lost most of their life’s savings.  Acting from values and beliefs comes from people or a group who have a well defined identity, a self. – Rev. John Haycock

9. You educate, teach prevention, reinforcement and work to build partnerships with denominations. What is the most difficult part of your job?

To find a way to openly discuss the possibility of Affinity Fraud in the church community.

It seems as if it is very difficult for the church community to discuss matters related to money and specifically investments.  All other subjects by comparison seems more permissible.

Church communities or religious communities are closed communities. For outsiders to discuss something as sensitive as Affinity Fraud in these communities is very difficult.

We need people who trust us enough to present us to their leadership.  To achieve this we spend time in getting to know leadership and allow them to get to know us.  It took us 6 years plus to create a partnership between the BC Securities Commission and a provincial denomination.
We know that fraudsters target religious communities because of the implicit trust within them.

Dealing with the aftermath of an affinity fraud and in particular, the victims losses, is one of the most difficult things. God’s Fraud Squad members have spoken to many affinity fraud victims and they have seen first hand the social and emotional impact of investment fraud.

Getting information from religious communities is often difficult, especially from victims. But cooperation from victims helps to raise awareness and build bridges that can help to disrupt, stop and prevent fraud.  - Rev. John Haycock 

10. If you asked yourself a question around the Axcess Automation/Funds alleged ponzi scheme, what would it be?

Has everyone who is a victim contacted the securities regulator?
What happened? – Rev. John Haycock

Globe and Mail: Meet God’s Fraud Squad
CTV: W5: God’s Fraud Squad
The Province: They’re God’s fraud squad
The BC Catholic: ‘God Squad’ tackles evil doers amoung the pews
BCSC: InvestRight: Affinity Fraud Prevention