It's a classic example of one of the fastest-growing categories of fraud called affinity fraud, where groups are targeted based on religion, race or their age.
We first exposed the ruse in a KOMO 4 investigation last February (read earlier story here.) We learned people had lost tens of thousands of dollars to a man who came to the Puget Sound area, changed his name to Stone Phillips III, and presented himself as a financial advisor and investment advisor. Three months later, our investigation finds he took more than money, and now his victims are just praying he'll be caught.
Charismatic, "Faith-Based" Financial Advisor
Without exception, everyone who's come in contact with Stone Phillips III uses the same adjectives to describe him: charismatic and extremely persuasive. Phillips is a self-proclaimed "faith-based" financial advisor. He gave workshops at local churches to entice investors into his company, Northwest Financial Solutions.
Laurie Balthis of Grays Harbor County says she lost more than $40,000. Kojo Aako lost more than $5,000, and Cynthia Johnson-Colston lost her entire retirement savings.
"We're talking about $116,000," Colston told us in January. Because the investments turned out to be unregistered, and the rollover application was a suspected fraud, Cynthia also faced tax penalties from the IRS.
In each case, the money is gone, and so is Phillips.
KOMO News obtained video of Phillips at Mt. Zion Baptist Church in Seattle in late 2002. In it, he presents a lengthy, almost eye-glazing recap of the historical evolution of the Federal Reserve System. He offers himself as someone able to help them with loans and investment advice in the future.
Consumers and local pastors confirm Phillips also preyed on the faithful at St. John Baptist Church in Tacoma, Bethlehem Baptist in Tacoma, and Christian Faith Center in Sea-Tac.
"I feel like people were abused under my watch, in my environment," said Christian Faith Center Pastor Casey Treat.
When we took our investigation to the state in February, we learned the Department of Financial Institution was also conducting an its own investigation and the day before our report aired, issued a Cease and Desist order to Phillips and Northwest Financial Solutions citing securities violations.
Not Just Money, But Houses Too
Our investigation took us to Charlotte, North Carolina, where two investors saw my first report on the KOMO News Web site and discovered they'd not only lost their retirement savings to Stone Phillips III, they lost their house.
"He was taking us all the time. He was sitting there, looking at us, in the face," said Johnella McAuley from her kitchen table in Charlotte. She and her husband Emanuel McAuley invested with Phillips' company after he came to their church in Tacoma.
Like Kojo Aako and Cynthia Johnson-Colston, Emanuel took money out of his retirement fund and rolled it over to Northwest Financial Solutions.
"I think it was about $93,000," said Emanuel.
But that was just the beginning. While they were getting settled in Charlotte, Stone Phillips III took their house in Tacoma. What would make them give their house away?
"We didn't know we were giving it away!" Johnella explained.
We've learned Phillips also promoted himself as a property manager, arranging mortgages, placing renters -- and for the McAuleys -- offering to help sell their Tacoma home when they moved to Charlotte.
But because they were living in North Carolina, the McAuleys told KOMO 4 News that Phillips told them they would need to sign a legal document, so he would have authorization to handle the paperwork on the sale.
"Of course, not knowing myself all the ins and outs of real estate or whatever, I signed it," said Emanuel.
The legal document turned out to be a Quit Claim Deed, giving Phillips their house for free. Pierce County records show Phillips sold the house for $160,000. The McAuleys got nothing.
"We trusted him," said Steve Shriver of Tacoma. Steve and his wife Mary say they lost their rental house in SeaTac because of Phillips. They say Philips offered to manage it for them, but failed to forward the rent to the mortgage company and it foreclosed.
Then, another shock
"And then we find out that he owns the home that we're living in," exclaimed Mary. As with the McAuleys, the Shrivers say Phillips convinced them to sign a Quit Claim Deed, giving Phillips their current home.
"We had no idea what we were doing at the time," said Steve. "He belonged to our church. He was an usher at our church at one point. He was actually setting us up."
Now the Shrivers are investing money in an attorney. Clay Selby says Phillips is befriending vulnerable people who are in a financial bind or need expertise they believe he can provide.
"He is persuading these folks," Selby said. "He's taking them in under trust. And once he has their trust, he then takes something from them."
Now, the state is also digging into Phillips' records for possible real estate fraud. And, as a direct result of our investigation, HUD is looking at Phillips for possible fraud and theft, tied to his rental activity through the King County Housing Authority.
Elusive, Evasive And Unresponsive
During our four-month investigation, we linked Phillips to multiple Social Security numbers, more than a dozen different names, a driver's license from Missouri, and phone numbers and addresses in Missouri, Washington, California, Georgia and most recently Arizona.
As a result of our first report, Phillips was fired from a mortgage company in Vancouver, Washington. We learned he was dismissed prior to that from a lending company in the Phoenix area.
The owner of the Chandler, Arizona home Phillips was renting told KOMO 4 News Phillips was evicted for non-payment of rent, shortly before our first report aired.
We made numerous calls, left numerous messages and sent certified letters in an attempt to get Phillips' response to the complaints. He has ignored every attempt to contact him.
In the meantime, the estimated dollar value of his alleged theft and fraud brought to our attention so far, is nearly $750,000.
Police Don't Know About Him
So why aren't police after him? They don't even know about him! Attorney Clay Selby says people don't realize they can file fraud reports with police.
Upon learning about that option, Cynthia Johnson-Colston has now filed a report with police in Federal Way, where Phillips ran his business. Since he also used Post Office boxes and mail to collect money and correspond with investors, victims should file a complaint with the U.S. Postal Inspection service. You can write a letter to Postal Inspection Service, P.O. Box 400, Seattle, WA 98111, or call 206-442-6300 or fax 206-442-6304.
Why hasn't the state picked him up? For one thing, they can't find him. They were only recently successful in serving the order they filed in February. The papers were delivered to a house in Chandler, Arizona but the person who signed for them was not Phillips.
Even if police and state investigators could physically locate Phillips, they need formal complaints to support their case, and I'm told many of Phillips' victims, including his ex-wife, refuse to come forward because they're ashamed, or afraid of upsetting Phillips, their friends or their church.
Federal authorities say that reluctance is one of the reasons people who target special interest groups like churches, are able to continue preying on new victims.
The Shrivers and McAuleys say putting personal pride over moral obligation is counter to what being a Christian is suppose to be all about.
"I don't mind letting people know that yes, I made a mistake. Yes, I trusted Stone Phillips," said Emanuel McAuley.
"We are embarrassed," Steve Shriver told us. "More than anybody can imagine how much we're embarrassed, and I understand how those other people who won't come forward are feeling. But you need to step out of your comfort zone and speak up. I could say, being the Christian man I am, 'God will handle that. I'll put it in God's hands and let him do that.' But there are some things that have to be handled under God's law, and man's law."
Billion Dollar Industry
The Stone Phillips investigation is one of what investigators say are literally hundreds, if not thousands of calculated scams targeting church groups, racial minorities and senior citizens.
The close-knit nature of the groups allows the scammers to build credibility through word-of-mouth referrals of people who never know anything about them, other than they appear to share the same interests.
According to the North American Securities Administrators Association, there were at least 80,000 fraud victims ripped off between 1998 and 2001, in religious investor scams alone.
The total amount taken? An estimated $2 billion.
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