Economist. WITH a nudge from their pastor, the 25,000 members of the New Birth Missionary Baptist Church near Atlanta opened their hearts, and their wallets, to Ephren Taylor. And why not, given his glittering credentials? Mr Taylor billed himself as the youngest black chief executive of a publicly traded company in American history. He had appeared on NPR and CNN. He had given a talk on socially conscious investing at the Democratic National Convention. Snoop Dogg, a rapper, had tapped him to manage a charitable endowment.
So when Mr Taylor’s “Wealth Tour Live” seminars came to town, faithful ears opened wide. Eddie Long, the mega-church’s leader, introduced Mr Taylor at one event with the words: “[God] wants you to be a mover and shaker…to finance you well to do His will.” Mr Taylor offered “low-risk investment with high performances”, chosen with guidance from God.
Divine inspiration, alas, has given way to legal tribulation. For many investors, the 20% guaranteed returns proved illusory. Mr Taylor (whereabouts unknown) stands accused of fraud in a number of lawsuits. Bishop Long, a co-defendant, has urged Mr Taylor to “do the right thing” and cover any losses. The charges are not the first blot on the minister’s reputation: last year he settled for an estimated $15m-25m claims that he had coerced young men into oral sex.
Let us prey
Mr Madoff, whose victims lost perhaps $20 billion, perpetrated the largest “affinity fraud” ever. The term refers to scams in which the perpetrator uses personal contacts to swindle a specific group, such as a church congregation, a rotary club, a professional circle or an ethnic community. Once the scammer gains their trust, his scam spreads like smallpox. Most affinity frauds are Ponzi schemes, in which money from new investors is used to repay old ones, or is siphoned off by the promoters.
The Madoff fraud fed on multiple affinity circles: wealthy Jews in Florida and Israel, country-club types and European old money, lured with help from marketers running “feeder” funds. The next-largest alleged investment fraud of recent years, the $7 billion collapse of Allen Stanford’s empire, also concerned specific groups, including the Latin American and Libyan diasporas and Southern Baptists. Mr Stanford’s trial began on January 23rd. He denies wrongdoing.