Scams and the Latter-day Saints
For years, Utah, which has a population of over 70 percent Mormon, has fought against the stigma of being called the Scam Capital of America.
In 1984, Ken Thornberg, Director of the Better Business Bureau office in Idaho, said he believed that, "...a majority of the nation's illegal investment scams originate in Utah.
"`I would say - and I am not exaggerating - that 75 percent of the country's major investment schemes are hatched in the Salt Lake City-Provo area,'" (Ogden Standard-Examiner, 26 March 1984, p. 10A).
Whether the statistics are completely accurate or not, Thornberg is not alone in his assessment that the "majority" of the scams and fraudulent organizations are created in Utah.
"As early as 1969 the Wall Street Journal called Salt Lake City `a locus for shell operations.'
"Then in 1974 the infamous `stock fraud capital' moniker was awarded Salt Lake City in a page one Wall Street Journal article on February 25, 1974. The headline: `Dubious Distinction; Salt Lake City Gains Reputation for Being a Stock Fraud Center,'" (Utah Holiday, October 1990, p. 26).
This downward trend continued to be noticed and ten years later in 1984, Newsweek magazine wrote, "Utah, the land of the Mormons, has earned itself another name: the Stock-Fraud Capital of the Nation," (Ibid, p. 27).
With such national notoriety, people in Utah must have known the con artists were working their area.
Thus, the question begs to be asked, what is the cause of such a phenomenon?
Perhaps the February 6, 1984 issue of Business Week provides an insight into the problem.
"Many (LDS) church members are likely to accept without question an investment recommendation made by another Mormon. Hucksters try to exploit this tendency by trying to bring church officials into investor groups or by portraying themselves as good church-going Mormons," (Utah Holiday, October 1990, p. 27).
In a United Press International article, this rationale was again reiterated.
The UPI said, "Major reasons for the success of scams in Utah are the highly organized, tightly knit structure and trust-oriented doctrines of the Mormon Church," (Ibid).
Apparently realizing the problem, in 1984 Utah's "Governor Scott Matheson appointed a new Securities Task Force, including (Hugh) Pinnock, in part to confront what experts were calling a `Mormon connection' to many of the schemes," (Ibid).
Hugh Pinnock had been a member of the Mormon Church's General Authorities since 1977 when he was appointed to the First Quorum of the Seventy.
According to the March 11, 1985 Forbes magazine interview with Pinnock, "...Utahans were now wiser to swindlers. `They just aren't as unsophisticated as they once were," (Ibid).
However, it would be this same Hugh Pinnock that would feel the sting of a con artist a few years later, at the hands of the infamous Mark Hofmann.
Pinnock would help Hofmann secure a $185,000 "...signature loan at the bank where Pinnock was a director - a loan to buy documents that did not even exist," (Ibid).
In 1986, the San Diego Union provided further information on the scam game.
No longer was the media simply reporting about Utah being the Fraud Capital of America. Now, it was Mormons taking advantage of Mormons.
"In recent years, Utah has been called the fraud capital of the United States, and many defendants in fraud cases have been Mormon officials who used church connections to victimize other members," (5 October 1986, p. A-25).
The problem increased to the point where the Ogden, Utah paper reported:
"The cultural emphasis in the Mormon Church that equates financial success with spiritual success, and an unquestioning allegiance to authority figures, may partly explain why 10,000 Utah investors have been swindled out of more than $200 million during the past decade," (Ogden Standard-Examiner, 26 August 1989, p. 3C).
Not only did the scam artist attract the favor of the LDS families, the elderly, the uneducated and the General Authorities, they also conned the fraud watcher himself.
"Washington, D.C.-based columnist Jack Anderson, A Utah Mormon, admits that he foolishly sent off $12,000 after hearing of [what turned out to be a Utah-based scam] from a friend back in Salt Lake," (Forbes 20 June 1983, p. 33).
The problem seems to be twofold.
First, because of the tight-knit LDS social structure, con artists prey and breed in this atmosphere.
Second, because of the willingness of Mormons to follow blindly an authoritarian structure, con artists are able to use this to their advantage.
The solution to the problem is one that is applicable not only to Latter-day Saints, but also to anyone considering an investment.
As Forbes magazine explains, "Never take people solely at face value, and don't invest your money without checking carefully first," (Ibid, p. 34).