<nettime> Tales from a christian pyramid scheme

[Felix Stalder <stalder@fis.utoronto.ca>]

[I admit to being fascinated by pyramid schemes. They seem to manifest our
eternal desire to belief in miracles and salvation. This one is
particularly interesting for its Christian and surrealist overtones and
the fact that it never paid out any money at all.]

http://www.iht.com/IHT/TODAY/MON/FPAGE/ponzi.2.html

Paris, Monday, September 4, 2000
A World of Cash Betrays a Small Town's Con Game

----------------------------------------------
MATTOON, Illinois - Money has never put in much of an appearance in Mattoon.

Folks eat in places like Gill's Diner, circa 1940, where the
all-you-can-eat walleye special (two side orders included) goes for $4.99

They work at factories like the Lender's Bagel plant, sponsor of the annual
Bagelfest, the town's biggest event.

So more than a few eyebrows began arching when a handful of people in this
small central Illinois town suddenly seemed to be sitting pretty. A deputy
sheriff wound up with a new boat, a Harley-Davidson and lots of antique
cars. A struggling construction contractor purchased dozens of shiny new
trucks in the blink of an eye.

A retired electrician started offering people interest-free loans to build
nice houses and start new businesses: the sparkly Bluebird Diner, Our Own
Original Bakery, Jimmy John's Sandwich Shop, Billy Block's Pre School and
Day Care, Auctions Buy Us.

At one point, word has it, the post office handled a package so full of
cash that it actually burst at the seams.

''When people start buying property with cash, opening businesses with
cash, when they have only a job that pays minimum wage, well then, you
start to wonder,'' said Mayor Wanda Ferguson, a 65-year-old former donut
shop worker.

Last week, federal law enforcement officials gave foundation to years of
Mattoon gossip. They charged 11 Mattoon residents and eight other people in
a bogus financial investment scheme that, authorities say, hoodwinked more
than 10,000 people around the world out of more than $12.5 million. Most of
those charged in Mattoon were longtime residents, the deputy sheriff, the
former police officer, a minister, a lawyer and businessmen.

As prosecutors describe it in a 91-page indictment, the scheme was
orchestrated by a 66-year-old retired electrician in Mattoon named Clyde
Hood, who started a sham investment fund in 1994, representing himself as
an international banker who had worked for several Fortune 500 companies.
(In court on Thursday, Mr. Hood said he could not remember the names of the
Fortune 500 companies but thought they were in ''the New York area or the
Florida area, probably.'')

The fund, called Omega Trust & Trading, promised a 50-to-1 return on each
investment and couched its campaign in Christian terms, with phrases like
''keep the Lord's warehouse full.''

Money flowed in from people in all 50 states and countries including China
and Australia, prosecutors said, with some investors following quizzical
instructions to wrap their cash contributions in tin foil.

Millions of dollars in cash wound up in Mattoon, prosecutors say, where Mr.
Hood began to launder it by setting up businesses with acquaintances in
Mattoon or giving them interest-free loans to build upscale homes or buy
expensive cars.

''It makes you feel bad, like I worked all my life and I'm driving this old
truck,'' said Joe Utley, 56, a custodian at Washington Elementary School,
who like many in Mattoon, started hearing about the fountain of money a
couple of years ago but figured it was best to steer clear. ''You see all
these buildings going up. Why are all these things happening here, where
there is nothing much that goes on?''

Lawyers for the defendants, who face a range of money laundering,
conspiracy and fraud charges, say they are not guilty. Stephen Ryan, a
lawyer for Mr. Hood, said the charges were ''based on misinformation and or
misinterpretation of the information that they have.'' He declined to
elaborate.

In an especially odd aspect of this unusual case, Mr. Hood and two of the
other defendants have apparently tried to assert that the U.S. government
does not exist and therefore cannot try them. As the federal investigation
wound down and a grand jury was convened, they mailed papers to
prosecutors, court clerks, Mattoon police officers, the county sheriff and
the U.S. Supreme Court stating that ''any judicial proceeding,
determination, ruling, order, decree, entry, penalty, fine or arrest
warrants which issues from these 'courts' is null and void.''

Investigators also found identity cards with pictures and signatures of Mr.
Hood and another defendant, Arlene Foust Diamond, a 63-year-old real estate
and insurance agent from Los Angeles, who solicited investments for Omega.
The cards identified Mr. Hood and Ms. Diamond as ''ambassador and minister
of justice for the Free State of Eden.''

Prosecutors said that Ms. Diamond tried to use her card to claim a kind of
diplomatic immunity and get out of submitting handwriting and fingerprint
samples to the grand jury. Mr. Hood testified in court Thursday that he
signed the card as a joke.

Prosecutors said in court records that they had found bank accounts for Mr.
Hood and Ms. Diamond in Dubai, and accounts for Ms. Diamond in Belize and
other countries. Mr. Hood and his wife, Patricia Ann Hood, 64, are also
charged with filing false tax returns. According to the indictment, the
Hoods claimed only $9,919 in total income for 1995 and $11,222 in 1996

Soon after Omega started, federal, state and local agencies began getting
complaints from Omega investors and employees, as well as suspicions from
people in Mattoon. Investors in all 50 states and a dozen countries, had
sent cashier's checks and money orders after being told that the money
would be invested in foreign bank debentures, prosecutors say. They were
promised that each $100 would net them $5,100 in 275 days, and that if they
''rolled over'' the $5,100, they would receive $255,000

Prosecutors say that for years, Mr. Hood had an investor phone line with
recorded messages saying the payoff was just around the corner and blaming
the delay on bankers or the government.

Unlike a classic Ponzi scheme, where early investors make a profit so that
they will help entice other investors, Omega investors never made any
money, prosecutors say. But, partly because of the fund's Christian
overtones, many investors, some of whom planned on using the money for
charity, apparently still believe that Omega will pay off, prosecutors say.

Linda Stark, of Apple Valley, California, said she invested $1,600 in 1998,
sending money orders to Ms. Diamond for forwarding to Mr. Hood. She thought
she would receive $5,100 for every $100 in two months. She said Ms. Diamond
told her, '''Everything is going well and be patient.' She was very, very
nice, always a delight to talk to.''

Ms. Stark said she knew about 20 people in her community who had invested
with Omega, most of them Christians like her. ''I hold no animosity,'' she
said of Mr. Hood and Ms. Diamond. ''It saddens me they have to sit in jail.
Their lives are spoiled by their greed.''

As the investigation progressed, Hawaii and Missouri issued
cease-and-desist orders to keep Omega from marketing itself there. Yet the
fund continued to solicit investors in those states, prosecutors said.




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