Moral Compass

Opening statements are expected today in the trial of five people, including alleged ringleader Isreal Owen Hawkins, accused of selling unregistered worthless shares to more than 9,000 investors.

Petro America Corp, a Kansas-based oil company, had no oil, no evident plans for buying, transporting or storing large amounts of oil, no assets to speak of, and no employees beyond president and CEO Hawkins (photo).

Isreal: is fake

Petro America did have revenue, however. Lots of it. Not from oil-market transactions, but from the thousands of people who were persuaded by their pastors to sink their savings into the shadowy company.

According to the U.S. Justice Department,

Investors lost from $100 to $100,000 each. Initially, many of the investors were drawn into the scheme with the promise that $100 would buy 100,000 shares of Petro America stock, the affidavit says, which Hawkins claimed was “book valued” at $2 per share. As the scheme progressed, conspirators raised the price to invest and claimed an ever-higher “book value” for the shares. The affidavit alleges that this allowed conspirators to unload shares to new investors at an increasing profit.

Which makes it a classic Ponzi scheme.

Hawkins allegedly promised “meteoric returns” on investments. At the height of the scheme, the affidavit says, up to $700,000 flooded into the company each month.

In the end, more than 9,000 gullible victims invested more than $7.2 million.

Where’d the money go? Hawkins and his co-conspirators went to pimp town and spent wads of cash on luxuries such as fancy cars, expensive jewelry, a $5,700 fur coat, a $37,000 boat, and a $5,200 piece of Louis Vuitton luggage.

The scheme probably wouldn’t have been nearly as successful if it hadn’t been for two holy men: the Rev. Edward D. Halliburton of Kansas City, Kan., and his colleague Joseph Harrell, of Waco, Texas.

Harrell, acting as the CFO of Petro America, told anyone who would listen that the company was worth as much as $284 billion (which would have made it bigger than Wal-Mart and the Coca-Cola Co.). When touting the “once-in-a-lifetime investment opportunities” to his eager marks, the good reverend often wrapped those sales pitches in Bible talk, stressing that Petro was a blessing from God.

Oh, and while he was bilking believers out of their nest eggs and living the high life, Harrell also enjoyed the comfort of having a little revenue stream on the side: government handouts, including food stamps.

Meanwhile, Halliburton, a pastor of more than 20 years, was the president of the Ministers Alliance, a group of about 15 ministers (mostly from the Kansas City area) who aggressively sold the worthless Petro shares to their congregants and others. The faux-pious hoodlums informally called themselves the White Hat Guys, as each of the ministers received a white fedora. All participated in regular Thursday night conference calls with hundreds of investors in dozens of states. Following the calls, many of the White Hat Guys went to the Epicurean Lounge, a local night club for people looking to get it on.

Like Hawkins, the men of God spent investors’ money with abandon. The Reverend Halliburton paid off his mortgage and purchased a Mercedes S500. Through it all, educating himself about the word of God™ was never far from his mind: for the low low price of $1,794, he also bought a doctorate degree from Tabernacle Bible College, for which he did no actual course work.

In separate appearances before a magistrate judge, both Harrell and Halliburton pleaded guilty to conspiracy to commit securities fraud and wire fraud.

The trial that’s scheduled to start today involves Hawkins (by all accounts the chief crook) and four other accused scammers charged in connection with Petro America. All have pleaded not guilty.

According to the Kansas City Star, whose early reporting on Hawkins and Petro America tipped off investors that something was amiss, among those expected to testify are:

• A 79-year-old California man who still hasn’t told his wife about investing in Petro for fear it would worsen her already serious health problems.

• A Louisiana lawyer who grilled Hawkins in Petro’s rented Kansas City office on behalf of a Petro investor and then had to chip in $20 for gas money when Hawkins and a secretary gave him a ride back to the airport.

• A legally blind Texas investor whom Hawkins took to fancy Kansas City restaurants, often sticking him with the bill, and who was hit up for bail money when Hawkins was arrested.

[Hawkins image via COGIC Abuse Watch]

The credits that run at the end of the new movie Not Today list an unusual job: prayer coordinator.

The film, about a wealthy young American who finds God when he travels to India and is affected by the plight of the poor, is an indie Christian endeavor whose $1.6 million budget was raised with collection-plate contributions from the members of Friends Church in Yorba Linda, California.

About the prayer coordinator, the church’s Creative Arts Pastor Brent Martz explains that the job was vital to the project.

“For us at the church, having people praying from the very beginning of this project and even up to today and this opening weekend has been a huge part of it,” Martz said. “We believe that God led us into making this film, and he’s ultimately responsible for it, and so every bit of this journey has been covered through this prayer team, and they’ve been so faithful to pray for all us during the writing and during the production and during the post-production and now during the marketing and PR.”

Whether all the earthly beseeching of the Creator of the Universe has been effective remains to be seen.

The plentiful praying certainly didn’t stop director Jon Van Dyke from filing a federal lawsuit, alleging fraud by church leaders. Van Dyke’s version of events involves a biblical deluge of internal bickering, cheating, and outright fraud. He was director of the Friends Church media department when he wrote the movie script. To hear him tell it, Martz, his boss, demanded a co-writer credit he wasn’t really entitled to, or he would fire Van Dyke. The young director says he was terminated when he raised concerns after the movie wrapped, including a claim that

the budget was “significantly inflated to include numerous illegitimate and improper expenses” in an effort to dilute profits.

According to Martz, the profits from the movie are intended to build hundreds of schools for children from India’s Dalit caste. But box office revenue this past Friday through Sunday — opening weekend, when the movie was shown on 41 screens — was only $96,347. Under a typical indie distribution deal, the producer (essentially, Friends Church) will get maybe 40-50 percent of that.

More revenue should come in from TV rights and rentals, presumably. Will it be enough to generate fat profits so that Dalit children may get an education? Let’s hope so, and let’s also hope that the lawyers don’t gobble up al the money.

If the project stays awash in red ink, I suppose the church could always hire additional prayer coordinators to get those schools built.