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OPERATION GOOD SAMARITAN
The Case of the Chameleon Con

11/24/04

Locking Up Con Artists graphicCalifornia con artist John Franklin Harrell knew how to run a racket.

First, he concocted a clever investment scheme, built on a series of bold lies told by himself and his associates.

Their pitch went something like this:

… "We have access to a secret $1.6 TRILLION trust fund linked to a direct descendant of Mormon Church founder Joseph Smith." NONSENSE. No such fund ever existed.

… "The funds in the trust will be 'released' once an insurance company is created. Then, it will be converted into insurance policies. Investors will be guaranteed a 100 percent return every year for 99 years." MORE TALL TALES.

… "The investments are totally secure. The risk is 1,000th of one percent. Nobody has lost any money." SOUND TOO GOOD TO BE TRUE? Well, it was.

Then, there was a tug on the heartstrings to seal the deal: "We'll take some of the millions in profit and earmark it for humanitarian projects."

What kind of projects? Well, depended on who was getting conned:

... Religious investors were promised a biblical theme park, a Christian radio station, and faith-based scholarships.
... Philanthropists heard about a series of "social development centers" that would cure the ills of society, helping everyone from single mothers to the jobless.
... The sick were guaranteed miraculous cures for autism, Parkinson’s, and cancer.

To pull off his con job, Harrell had a cult-like following of more than 20 hucksters who helped pitch the scheme across the U.S. Over time, some became suspicious that they had never delivered on a single promise or reported a single dollar in earnings to the IRS. But Harrell kept them quiet by renting them fancy cars and nice places to live.

And who fell for the ruse? Sadly, more than 100 hard-working Americans from coast to coast, who poured over $30 million (for some, their life savings) into the scam.

Enter the FBI, the IRS, and a joint investigation called Operation Good Samaritan, which unraveled the plot and its players. In March '03, agents arrested Harrell and seven associates. Two months ago, agents in California, Utah, and Mississippi arrested seven more associates. Three more later turned themselves in. The charges include money laundering, mail fraud, conspiracy, tax evasion and false returns.

The moral of the story? Be wary of investments that claim to be risk free and promise incredible rates of return. And make sure they're offered by licensed brokerage firms. For more red flags, see our Common Fraud Schemes.

Links: San Diego FBI press release | White Collar Crime page