Fleecing the Faithful—Again: Former YWAM Leader Defrauds Many


A Swedish Christian businessman swindled friends, family, and missionaries of millions of dollars

Ken Walker | posted 6/08/2011 09:52AM

When Jan and Henny Pauw visited Le Rucher on a summer missions trip, they never dreamed it would wind up costing them their retirement nest egg. The Dutch couple became ensnared in a faith-based Ponzi scheme that operated for a dozen years before it unraveled.

Nestled on two acres at the base of France’s Jura Mountains and the nearby Swiss Alps, the Le Rucher retreat center opened in 1994 to help stressed-out missionaries recuperate. But Le Rucher became the setting for the promotion of the fraudulent Nordic Capital Investments (NCI), which has created resentment toward Le Rucher co-founder Erik Spruyt. Last October, Swedish businessman Kristian Westergard, the founder of NCI and a close associate of Spruyt’s, was convicted of gross fraud in Sweden and sentenced to prison.

In 1998, the Pauws went to Le Rucher—then associated with Youth With a Mission (YWAM)—with their evangelical church in Ermelo, the Netherlands. An industrial chemist by trade, Jan had never been on a Christian mission. On the couple’s first trip, Spruyt suggested they consider becoming long-term volunteers. Jan replied that they couldn’t afford it.

When the Pauws returned the following summer, Spruyt repeated the suggestion. Jan demurred. Then, they say, Spruyt introduced them to NCI, a special investment fund that paid interest of 15 percent a year (the rate on a contract they later signed). It had the potential to generate enough income to support the couple. Part of the attraction was the promise that some of the fund’s earnings would generate charitable support for select Christian missions. The Pauws invested euros worth $260,000. The following year they moved to Le Rucher as volunteers.

In total, the couple received more than $230,000 before payments ceased. But the principal amount of their nest egg has vanished. They still rue their decision to trust Spruyt’s referral to NCI. In a 2001 e-mail with a sample NCI contract, he said, “If you want to take this seriously then this is the procedure that I recommend to you with the amount you want to invest.”

“All we have now is our old-age pension and a small pension from my work as an industrial chemist,” Pauw says. “Sometimes we think, How could we have been so stupid to believe them? Why did we trust them?

Read the rest of this article at Christianity Today here >>>

Some remarks

I guess what we are reading here is how well affinity frauds work. You gain the trust of the leaders or as a leader you have a natural amount of trust associated with you and from there on it becomes easier to lure in new victims. And for the record this works the same with all these marvelous business opportunities that lure in the small people. It is not surprising that these business opportunities are so often targeted at church communities: there is a naturally higher level of trust.

Part of why this works is that lack of financial understanding, business understanding, innumeracy so you which is being replaced by trust in the person offering you the opportunity. It is for this reason that leaders are targeted first. Once you have the leader over the bridge the rest of the sheep will follow. And for the record, no one is immune and we all run a risk of falling for it.

On Affinity Fraud

Affinity fraud is when one person gains the trust of others because they share the same religion, race, ethnicity, career or other social characteristic and then deceives them in some kind of financial transaction. Now this is not necessarily intentional, as this may also be the result of a misguided participant in one scheme or another, a gifting club or pyramid scheme or the pyramid scheme posing as a legitimate MLM.

In a world of increasing complexity many do not know how to properly investigate the credibility of an offering and trust becomes an increasing factor relied on.

“You can trust me, because I’m like you. We share the same background and interests. And I can help you make money.”

The normal process of cautious skepticism is replaced by social blah blah, and for the record, it works. Another tactic used is to first lure in some prominent members of a group and once that is done the others are pitched using the credibility and good name of the group leaders: the elder, the pastor etc.

With the hierarchy of leaders and followers already established, the investment becomes merely an extension of our desire to belong and be accepted.

The fact that some of the earlier entrants, the ones you know and trust, are receiving good money is not a guarantee that it is all good, that is the essential working of a pyramid scheme, the high INITIAL returns. The case outlined in Christianity Today show that exactly and there are many more known cases throughout history.

What makes those types of scams extra attractive is that  once an affinity fraud victim realizes that he or she has been scammed, all too often the response is not to notify the authorities but instead to try to solve problems within the group. This usually just ensures that the fraud continues without anyone reporting it to the authorities until it is too late to recover funds. Scammers recognize that the tight-knit structure of many groups makes it less likely that a scam will be detected by regulators and law enforcement officials, and that victims will be more forgiving of one of their own members.

Some tips

Some way to revent becoming a victim of affinity fraud are:

  • NEVER TRUST PEOPLE BLINDLY.
    No matter how well you know someone or think you can trust them, always be cautious when it comes to handing over your hard earned money. Ask questions about the scheme and keep on doing that until you understand the scheme. Let them know that you are aware of all the scams that are taking place regularly in today’s world. Just because a person is a fellow Christian, it does not mean that he or she is a good person who will not cheat you, intentionally or out of ignorance.
  • DO YOU DUE DILIGENCE; CHECK THINGS OUT THOROUGHLY
    Use the Net, call others with financial; insights and not associated with the scheme or seek professional advice, but whatever you do, never step into a scheme you do not understand.
  • DO NOT GET GREEDY
    The strange thing is that many of these schemes promise high yield on low risk or even risk free investments. In the financial world however the principle  is usually exactly the other way around: the higher the returns the higher the risks. Greed is a sin, not just because the Bible tells us it is, but because nothing good can come of greed. It leaves us wanting more and more, no matter how much we already have. Desist from this emotion and you and your money are safe. Know that God will provide you in all your needs which is something different than all your wants.

Possibly Related articles

Multilevel Marketing (MLM), Network Marketing, Pyramid Scheme


Time and time again I see those articles about whether or not multi-level marketing or as sometimes referred to network marketing (MLM) is a pyramid scheme. We all have heard the stories about those companies that offer you a “business opportunity.” In straight terms, these companies usually offer you an opportunity to be self employed whilst building a business is all about recruiting other into doing the same.

In these hard economic times more and more of these schemes are offered in all kinds of shapes and forms to those gullible under financial pressure or in search of “freedom.”

Apparently there are some MLM’s out there that actually are legitimate, yet I have to see the first that is actually offering a real opportunity. Most of the MLM’s out there end up being a money maker for a lucky few at the top of the pyramid and at the bottom there are thousands of “independent business owners,” independent distributors making the money for the lucky few at the top with these “proven systems.”  Across the board 90-99% of the people involved in these “businesses” end up making nothing or even lose money. So, you might as well keep working for a boss or keep looking around for something that offers real potential.

PROSUMERISM & TRIPLE R
The trick in all this MLM business: as well as making money on the sales you make personally, you make money on the sales of other people that have been introduced to this business either by yourself or by someone else in your so called “downline.”

More than once I get questions in my mailbox about yet another business opportunity with the question of whether or not this is a legitimate MLM or a scam or pyramid scheme. Admittedly the difference between a legitimate MLM (if any) and an illegal pyramid is not always easy to make. Personally: I have a hard time calling anything to do with MLM a business opportunity on mathematical grounds alone. The identified loss rates therefore have nothing to do with your ability as a business person or sales person and everything with the scheme’s design and operation.

Most of the schemes end up being the same and are formed along the lines of ex-Amway giant Dexter Yager through whom I was introduced to the term “prosuming”.

What it comes down to is a Triple R system (and for those of you that have followed me over the years, I am not referring to the Recruitment Risk Reduction approach for businesses and recruiters I developed). The triple R stands for REGISTER (as a distributor), REDIRECT (your shopping), RECRUIT (teach others to do the same). And eh … oh yeah, you could of course consider actually selling the product(s) to others.

So here you are a “business owner” and you end up spending lots of dollars buying product from your own store (prosuming) often at highly inflated prices regardless of distributor discounts. Many of the MLM schemes end up making considerable bucks for the producer of the goods because the distributors are also the buyer themselves. Goods are often overpriced and in some instances one could speak of a product scam: and yes one of the product scams I am referring to is MonaVie.  MonaVie is presented, at least by its distributors,  as some sort of super juice that could cure well basically anything. However, in December 2008 Consumer Magazine reported after testing that:

  • these super juices are highly overpriced and at their recommended doses deliver no more of an antioxidant boost than a glass of ordinary fruit juice;
  • one should check the level of sales required to make a decent living before signing up to a MLM to sell these super juices.

And this is just one example.

JAMMING AND BLASTING
Finding information that could highlight the pitfalls of these schemes is a challenge in itself as these companies or others on behalf of them are using the tactic of blasting or jamming the internet with false negative reports. Typically you will find titles like “Is, … Monavie, USANA, Amway, Quixtar, A2K, Herbalife, ACN, etc… a scam?”, only to find that these articles are nothing else than promotional material for the MLM in question.

Well, keep in mind that many distributors never end up making any sales except for to themselves and that recruitment is at the center of attention most of the times. I remember well a recruitment meeting for A2K (Amway in New Zealand) where the presentation of more than one and a half hour only once mentioned the word selling/sale. It was all about building a downline and recruiting. In fact the idea of actually selling Amway products was something that cam as an “oh yes before I forget, you could of course make some money by selling the products to others with a mark up.” A mark up on an already overpriced product, that does not make too much sense does it? At least not as a business opportunity. So in most cases you end up “direct selling” to yourself as the others do in the pyramid below you (or so you wish your “sales organization”).

MLM OR PYRAMID SCHEME
I like to keep things simple and usually refer to section 24 of the Fair Trading Act here in New Zealand:

  1. No person shall promote or operate a pyramid selling scheme
  2. For the purposes of this section, the term “pyramid selling scheme” means –
    a) A scheme –
    i) that provides for the supply of goods and services or both for reward; and
    ii) that to many participants in the scheme, constitutes primarily an opportunity to buy or sell an investment opportunity, than an opportunity to buy or supply goods or services; and
    iii) that is likely to be unfair to many participants in the scheme in that –
    A) The financial rewards of many of those participants are dependent on the recruitment of additional participants
    (whether or not successively lower levels); and
    B) The number of additional participants in the scheme must be recruited to produce reasonable financial rewards to
    participants in the scheme is not attainable by many of the participants in the scheme.

As said I like to keep things simple, so for me I use the test: does this scheme have its emphasis on recruitment (pyramid scheme) or on actually selling products outside the organization to real retail clients (legitimate MLM). I guess the law and your own common sense should be enough to test the waters should one of these fantastic opportunities be offered to you.

CHECKLIST
Should you be wondering, perhaps try too answer the following questions:

  • Joining Fee? Or obligatory purchase of a substantial amount of products?
  • Promises of spectacular earnings? How are these earning presented: remember that sales revenues is not the same as profits!
    By the way taking into consideration the dubious validity of these promises, passing them on to others could mean you’d be breaking the law.
  • Where do these spectacular earning come from; Sales or recruitment?
  • What products or services are to be sold at what price levels?
  • What is your actual market; prosuming v retail sales?
  • How much inventory do I need to purchase upfront? Can I actually sell that?
  • No sales experience required.

Some other warning signs are:

  • Anonymous or untraceable references/testimonials;
  • The organization involved does not have a physical address;
  • The use  of free email addresses such as @hotmail.com, @yahoo.com, @gmail.com instead of business domains;
  • No additional training required or training is obtained from your upline against a fee (the second “tools” pyramid of for instance the Amway business). Legitimate businesses will generally have a vested interest in having you succeed and will offer training and seminars against a zero to minimal cost since it is their gain;
  • Endorsement or approval from some sort of government agency, which they will never give out.

Remember that if it sounds too good to be true it usually is. If in doubt, perhaps run the offer past your financial adviser or an organization like the Commerce Commission here in New Zealand.

REFERENCE MATERIAL/SOURCES TO HELP YOU MAKE INFORMED CHOICES

Some of the sites I recommend reading are:

Or perhaps just ring the Commerce Commission. Contact details can be found here >>>