Greed As Gospel

In the late 1980s, when Wall Street was busy churning out Armani-clad traders and chilling the champagne, a small Texas brokerage house was in the midst of a holier mission. Peddling investments in goodwill, AMI Securities sold more than $250 million in bonds on behalf of American churches between 1986 and 1989. But according to a Securities and Exchange Commission suit filed against the firm last week, the bond offering was no blessing to tens of thousands of unsuspecting investors.

Charging AMI with fraud, the SEC claims that purchasers were duped into believing the bonds were risk-free. The SEC alleges that AMI misrepresented the financial condition of the churches involved, a number of which were so distressed that it was unlikely they'd ever be able to return investments. The suit also claims that AMI guaranteed customers that their money was insured, when in fact the firm had only $2 million to cover more than 100 times that amount in bond sales.

Unfortunately, many of those who participated in the AMI offering were elderly churchgoers who had drawn funds from retirement savings. Remarked SEC attorney Spencer Barasch: "These people relied greatly on the expertise of AMI, and they will suffer." But not if their dollars went to help fund the Rev. Jerry Falwell's Old Time Gospel Hour, a television show that accounted for $13 million in bonds issued via an AMI subsidiary. Falwell, who has not been charged with any wrongdoing, promised to return "100% of principal" to investors.