Tuesday, December 1, 2009
Court of Appeal Upholds Conviction in Ponzi Scheme Targeting Black Churches
By KENNETH OFGANG, Staff Writer
The Court of Appeal for this district has upheld the conviction of a real estate entrepreneur on charges resulting from a Ponzi scheme that targeted African American church congregations, often using unwitting pastors in an effort to convince members to invest.
Div. Four Wednesday affirmed the conviction of Phoebus Vincent Smith, sentenced nearly nine years in prison on multiple counts of grand theft, sale of unqualified securities, using false statements to sell securities, and scheming to commit securities fraud.
He was initially charged with bilking 33 victims, but only eight testified, and all counts pertaining to the other 25 victims were dismissed after the close of the evidence, along with 18 counts of money laundering.
Smith’s court-appointed appellate lawyer, Mark S. Givens, argued that the verdict was tainted because jurors had been allowed to consider documentary evidence, and hear arguments by counsel, related to all 33 of the alleged victims.
Evidence Properly Admitted
But the Court of Appeal, in an opinion by Justice Nora Manella, said the evidence was properly admitted to show the nature of Smith’s scheme and that any error in admitting it would have been harmless because any reasonable juror would have convicted on the basis of the other evidence.
According to testimonial and documentary evidence, the eight victims signed documents with Mr. V & S Investments or MV&S, both of which were said to be names used by Smith, who also called himself “Mr. Vince.” The signers agreed to become members of the “Antelope Valley Banking System” or “AVBS” and to invest certain amounts in anticipation of returns of 25, 50 or 100 percent within 60 days.
Prosecutors, pursuant to a pretrial ruling by Los Angeles Superior Court Judge Curtis B. Rappe, introduced about 150 similar contracts signed by alleged victims who did not testify.
In allowing the evidence, Rappe said it could not be used to prove individual counts of grand theft or securities violations relating to those victims, because the testimony of the victims was necessary to establish reliance and other elements, but that it could be used to prove the existence of a Ponzi scheme.
Several of the investors who did testify said they had attended meetings at which Smith explained that the money was being invested in housing developments in Lancaster, Las Vegas, and other parts of the world. They testified that Smith said he was offering them opportunities because he wanted to help fellow Christians, but that when they tried to get their money back—after investing at least $5,000 each—months later, they were told by Smith that he was having personal and marital problems that were delaying payment of the funds.
News accounts said Smith had targeted the Antelope Valley Christian Center in Lancaster, the West Angeles Church of God in Christ, and the United Christian Fellowship in Palmdale, among others. They said he had paid thousands of dollars in supposed returns to pastors in order to get them to convince their members to invest.
Sheriff’s Detective David Lingscheit, a fraud investigator, explained that when warrants were executed for financial records of Smith and his companies, it was learned that several bank accounts had been closed and that thousands of investors had signed agreements similar to those described by the witnesses.
The detective said that if all of the investments described in the contracts were actually made, Smith received about $8.8 million, and that there was no evidence of actual business activity being conducted.
An accountant testifying as a prosecution expert said he had traced millions of dollars that went through the bank accounts and opined that Smith was running a Ponzi scheme. He said that between 79 and 83 percent of the funds went to investors, while most of the rest went to Smith or persons close to him, including his wife, girlfriend and lawyer.
Witnesses, including the defendant’s civil lawyer, testified that Smith actually tried to develop property. But the lawyer admitted on cross-examination that Smith could not have generated the short-term profits that would have been necessary to meet the terms of the contracts.
The defendant’s accounting expert said the prosecution’s expert underestimated how much money went into business activities, but admitted that there were no sources of income other than investments.
Manella, writing for the Court of Appeal, said the trial judge did not abuse his discretion in admitting the investment contracts entered into by the non-testifying witnesses. Those documents were relevant—and were more probative than prejudicial—because they showed that Smith’s dealings with the victims who did testify were part of a fraudulent scheme, and illustrated how the scheme worked.
In any event, she went on to say, jurors would have convicted Smith without the evidence because “they would have been aware from the testimony of the victims who did appear that appellant’s operations attracted large groups of people eager to listen to appellant and to take advantage of the opportunity he purported to offer.”
Jurors also would have learned that there were thousands more agreements, that large sums of money passed through those accounts, and that there was no evidence of legitimate, income-producing activity, she said. “The admission of the contested documents did not substantially alter the picture of appellant or his operation presented by the other evidence,” Manella concluded.
Copyright 2009, Metropolitan News Company