SEC Charges Prominent Pastor, Financial Planner in Scheme to Defraud Elderly Investors

The Securities and Exchange Commission yesterday charged the pastor of one of the largest Protestant churches in the country and a self-described financial planner in a scheme to defraud elderly investors by selling them interests in defunct, pre-Revolutionary Chinese bonds.

The SEC's complaint alleges that, in 2013 and 2014, Kirbyjon Caldwell, Senior Pastor at Windsor Village United Methodist Church in Houston, and Gregory Alan Smith, a self-described financial planner who the Financial Industry Regulatory Authority has barred from the broker-dealer business since 2010, targeted vulnerable and elderly investors with false assurances that the bonds-collectible memorabilia with no meaningful investment value-were worth millions of dollars. Caldwell and Smith raised at least $3.4 million from 29 mostly elderly investors, some of whom liquidated their annuities to invest in this scheme. Caldwell and Smith are alleged to have taken approximately $1.8 million of investor funds to pay for personal expenses, including mortgage payments in the case of Caldwell and luxury automobiles in the case of Smith. Offshore individuals received most of the remaining funds.

"Our laws do not tolerate materially misleading statements to exploit vulnerable investors who, in this case, looked up to a prominent pastor," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. "Caldwell took advantage of his victims, encouraging them to remain faithful even as he and Smith broke that faith, stealing from elderly investors in an outright fraud."

The SEC encourages investors to check the backgrounds of people selling investments by using the SEC's investor.gov website http://www.investor.gov/ to quickly identify whether they are registered professionals and confirm their identity.

The SEC's complaint alleges that Caldwell and Smith violated the registration and antifraud provisions of the federal securities laws, and seeks civil penalties, disgorgement, and other forms of relief.

In a separate complaint, the SEC charged attorney Shae Yatta Harper of Monmouth Junction, New Jersey, with, among other things, aiding and abetting Caldwell's and Smith's antifraud violations. Harper agreed to settle the SEC's action against her without admitting or denying the SEC's allegations. Among other things, Harper agreed to pay a $60,000 civil penalty and to the issuance of an administrative order suspending her from appearing or practicing as an attorney before the Commission with the right to request reinstatement after five years.

The SEC's investigation was conducted by Jacqueline M. O'Reilly and Andre J. Zamorano, with assistance from Allen J. Genaldi, and supervised by Thierry Olivier Desmet in the SEC's Miami Regional Office. The litigation will be led by Wilfredo Fernandez.