Ephren Taylor’s Disastrous Megachurch Ponzi Scheme

How Ephren Taylor, the son of a small-town minister and self-proclaimed "social capitalist," conned thousands of churchgoers out of their life savings.

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Sep 17 2014, 2:00pm

Ephren Taylor addresses a lunchtime audience at St. Cajetan Church in Denver, CO. Photo by Helen H. Richardson /Getty Images

In 1913, Charles Russell, a restorationist minister from Pittsburgh, was accused of bilking his followers on grain sales. Russell, it seemed, had been charging his flock exorbitant rates for a “Miracle Wheat” that, on further inspection, was not all that different from regular wheat. The scandal, according to a newspaper editorial at the time, proved “that ‘Pastor’ Russell’s religious cult is nothing more than a money-making scheme.”

Although Russell’s followers (now known as Jehovah’s Witnesses) still maintain his innocence, the scheme has become familiar, repeated countless times over the past century by a steady parade of religious hucksters, snake-oil salesmen, and bronzed televangelists looking to make a quick buck off of Bible Thumpers. The scams have gotten more sophisticated over the years—from the fake revelations of revivalist preacher Peter Popoff, to the 80s excess and false lashes of Jim and Tammy Faye Bakker, to Greater Ministries International’s antigovernment pyramid scheme—but the basic idea remains the same: Praise God, promise miracles, and when all eyes are turned up to Him, rob the whole flock blind.

Certainly, that was the MO of Ephren Taylor II, a twentysomething minister’s son and self-proclaimed “social capitalist” who spent most of the years between 2007 and 2010 visiting churches with his Wealth Tour Live seminars, hawking “socially conscious” investment opportunities that would make believers both godly and rich. Taylor was arrested this summer after nearly three years on the run from federal authorities, who claim he was running a multimillion-dollar Ponzi scheme that targeted megachurches around the country.

Initially, Taylor’s appeal was obvious. Marketing himself as the “youngest black CEO of a publicly traded company,” Taylor claimed to have founded two tech companies—and made his first million—before graduating from high school. He promised “low-risk, high-reward” investment opportunities that would “show you how to get wealth and use it for the building of His Kingdom,” as he told a congregation in 2009. In sermons, and later with infomercials, books, and webinars, Taylor would rev up the flock, quoting scripture, exalting Jesus, and sprinkling vague promises of “economic empowerment” and “attainable housing” with disparaging remarks about traditional investment vehicles like stock markets and mutual funds. The audience, he claimed, would be better off “firing their brokers” and buying into one of Taylor’s “no-risk sweepstakes machines”—or, better yet, transferring their money (all of it, ideally) into self-directed IRA custodial accounts, which Taylor’s company City Capital Corporation would then invest in inner-city businesses.

Congregations, including powerful megachurches like New Birth Missionary Baptist Church in Atlanta and Joel Osteen’s behemoth Lakewood Church in Houston, ate it up, opening their doors—and wallets—to the black Elmer Gantry of the new millennium. “Your life is about to change,” said New Birth pastor Eddie Long, then a powerful televangelist, introducing “my friend, my brother, the great Ephren Taylor” to his congregation. God, said Long, wants “to finance you well to do His will.”

Despite these beatific aspirations, however, Taylor’s inner-city businesses—mostly Laundromats and juice bars—rarely delivered the 12 to 20 percent returns he had promised investors (the sweepstakes machines fared even worse). In classic Ponzi fashion, most of the money was allegedly used to cover up losses and pay for other investments, or spent by Taylor himself to pay for improvident branding and PR campaigns, personal credit cards, and apartments and to bankroll his wife’s aspirant career as a pop star. In a lawsuit filed by the Department of Justice in June, prosecutors claim Taylor defrauded investors of more than $5 million, including $2 million lost by victims in Georgia alone. A 2012 complaint by the Securities and Exchange Commission goes even further, accusing Taylor of running an $11 million Ponzi scheme that targeted predominately black churchgoers.

Members of the New Birth Missionary Baptist Church in Atlanta, GA. Photo by John Amis-Pool / Getty Images

Cathy Lerman, a Florida lawyer who is representing some of Taylor’s victims, thinks those numbers barely scratch the surface of Taylor’s scam. “There were literally hundreds of victims of his out there,” she said. And victims, she said, are still coming out of the woodwork. “Religious-affinity fraud is quite common, but it’s not discussed inside the church, and that’s one of the problems. No one wants to admit that it occurs, and that’s how he did this for so long. A lot of these people were ashamed, or they felt from a religious standpoint that what happens in the church stays in the church, and you don’t go telling anybody and you don’t have him arrested and you don’t do anything.”

“Who would dream that someone would come into your church and use your faith as a weapon to steal?” said Lerman. “All of them believed that they were the only ones; they thought they had been stupid.”

In many ways, Taylor’s scheme was a classic case of affinity fraud—a small-scale version of Bernie Madoff’s roughly $20 billion Ponzi scheme targeting European aristocrats and wealthy Jews. And like Madoff, what was perhaps most remarkable about Taylor was that his deception extended far beyond the tight circles of predominantly African American Evangelicals he targeted with his investment schemes. Taylor was profiled by CNN, Forbes, and NPR and appeared in a CNBC segment titled “Secrets of a Teen Millionaire.” Montel Williams had him on as a guest. Taylor even claimed Snoop Dogg had hired him to manage his philanthropic youth foundation, the Snoop Youth Football League. And in 2008, Taylor gave a seminar on socially conscious investment at the Democratic National Convention in Denver. Everyone, it seems, bought into the racket, romanced by Taylor’s choirboy-made-rich narrative. It didn’t matter that, according to people familiar with Taylor, this story was about as fraudulent as his alleged investments.

“The guy was only a couple taps on Google away from having a whole bunch of evidence come up showing that he was being accused of fraud in various parts of the country,” said Kevin Berger, a Kansas City attorney who is representing several of Taylor’s former business partners in a case that predates Taylor’s Wealth Tour Live scheme. “By the time we were done with him, it hadn’t matured into a full Ponzi scheme. He was well known in Missouri. All people had to do was look him up.”

All this raises an obvious question: How did everyone get so played? The answer isn’t totally clear at this point, but Taylor seems to have tapped into a confluence of sentiments particular to the time—distrust of Wall Street, economic desperation, and infatuation with young wealth, young tech wealth in particular—in a way that made people willing to suspend disbelief and critical thinking. More generally, fraud is on the rise in the United States. While the government doesn’t break down the stats, state and federal officials have warned that about half of fraud schemes are affinity-based, accounting for anywhere between $20 billion and $50 billion in investor losses in the last decade.

Religious groups tend to be a popular target for scammers. Researchers at the Center for Study in Global Christianity, which examines church fraud and embezzlement, found that ecclesiastical crime accounted for $37 billion in losses for churches worldwide last year. In the US, Alabama Securities Commissioner Joseph Borg estimates that faith-based fraud accounts for about half of all affinity schemes in the South and that it makes up a substantial portion of affinity frauds nationwide. While the form of the schemes may vary, it basically boils down to this: If faith is paramount, it’s difficult for the faithful to know when not to believe.

“It’s a big hurdle to overcome,” said Borg. “If you can’t trust your church, you can’t trust the members of your church, you can’t trust the leaders of your church, who can you trust?”

Inside the New Birth Missionary Baptist Church, where Taylor persuaded congregants to invest in his Ponzi scheme. Photo by John Amis-Pool / Getty Images

In the case of Taylor, his scheme appears to have specifically homed in on churches preaching prosperity theology, or prosperity gospel—a growing strain of Christianity, popularized by preachers like Osteen and T. D. Jakes, that sees health and material wealth as physical manifestations of God’s blessings and their absence as possible signs of His judgment.

“People like to see their pastors wealthy,” said Kate Bowler, an assistant professor at Duke Divinity School who has studied prosperity theology. “Money and health are evidence of God’s grace; lack of them is evidence of the opposite.” So when Taylor displayed the trappings of wealth—like his $6,000-a-month apartment in Trump Place, or his wife’s pop anthem “Billionaire," his fans and investors saw them not as red flags but rather as proof of his righteousness.

For prosperity churches, Bowler said, “faith is not hope or trust. It is actually a spiritual force that believers unleash in order to move God to act.” Prosperity gospel, she added, “offers a language of ambition and economic hunger for those on the way up. In tough times, it tells people God is on your side, there is always a solution. It allows people to feel they are still in control.”

Bowler said that it’s impossible to say whether prosperity gospel itself fosters affinity fraud. But, she said, “there are aspects of the theology itself that suggest that for some it might predispose them to a certain kind of magical thinking about how money circulates, and how it comes back to them.

“It does seem that for people who are ripe for financial miracles—who are already expecting that God will supernaturally return money to them—that they are likely more invested, excited, and eager to hear a visiting preacher as an answer to their prayer.”

For Taylor’s victims, this promise obviously turned out to be false. After he spent almost three years in hiding, US Secret Service officials arrested Taylor at his low-rent apartment in the Kansas City suburb where his wife was working in a massage parlor under a pseudonym. Lerman says that her clients are still holding out hope for justice, but at this point, it’s pretty clear to everyone that the money is long gone. “I don’t believe he has a dime left,” Lerman said. “I believe he blew it all.”

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