March 29, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

Summary ruling try fails > Pastor’s fraud case to proceed to trial

BANGOR — A federal judge Thursday sent a federal securities-fraud lawsuit involving a Bangor area pastor to trial.

Lawyers for the Securities and Exchange Commission sought to avoid the trial. In court on Thursday they asked U.S. District Court Judge Morton Brody to pass judgment on their case against Sherwood Craig, 64, a local pastor and televangelist and Bradley T. Gullett, 45, of Florida, for what the SEC says was their involvment in a scheme to bilk hundreds of thousands of dollars from investors.

In court Thursday, the SEC argued that the facts in the case were undisputable and so clear-cut that a full trial was not necessary.

Brody disagreed, saying that although the SEC had prepared its case well and its claims might be borne out in trial, that material issues still remained in question. And Brody said he had the added responsibility of weighing arguments “in the light most favorable to the defendants.”

No date has been set for the trial, although it is expected to begin in late April or early May.

Craig, who attended Thursday’s hearing, was pleased by the judge’s decision.

“Thumbs up,” he said outside the court room. “This is very good. Now we’re going to be heard.”

The SEC attorneys weren’t surprised by Judge Brody’s decision, but they were surprised at how quickly he made it.

The SEC officials acknowledged before and after the hearing in Bangor that obtaining a summary judgment can be a long shot.

“We’re ready to proceed to trial and we’re happy to do so,” said Celia D. Moore, senior enforcement counsel for the Boston district office of the SEC.

During the more than hour-long hearing, Brody grilled both sides, occasionally interrupting the lawyers in mid-stride.

At issue is whether Craig and Gullett intentionally misled the investors or were reckless in failing to investigate or verify information about the investments. Such a high rate of return should have sent off red flags, according to the SEC.

The investors targeted by the scheme were Christians around the country, including from Maine. For an investment of $25,000 or more, they were promised a share of an investment account in a Mexican bank that netted interest of 85 percent per month, or 1,020 percent per year. The account only earned a fraction of that, about 57 percent per year at most, less than the 300 percent annual return many were expecting.

Craig and Gullett are the only remaining defendants in the lawsuit the SEC filed in July 1995 against four people and one business.

Late last month, the SEC reached a final settlement against Ellis Deyon, 50, now serving time in a Louisiana prison on other charges, who agreed to turn over $407,000 of the more than half million dollars the SEC claims he received improperly.

Craig and Gullett have maintained their innocence and claimed that they were unwitting partners in the affair and that they relied on information from others.

Undermining the SEC’s argument that little was done to review the investment claims, Gullett’s attorney, Paul Chaiken, said his client went to Mexico in May 1995 along with two potential investors and with Ellis Deyon — who the SEC claims was a scheme organizer — to verify the investment information. The problem was, the group met with bank officials who could neither speak nor read English, and thus the investors, and Gullett, Chaiken argued, had to rely on the interpretations by Deyon’s Spanish-speaking associate.

Was this sufficient investigation by Gullett?

Brody seemed to suggest that it could be.

“This makes recklessness hard to show under such circumstances,” Brody told Moore, giving an early indication of where the judge was heading in his summary judgment decision.

As for Craig, Moore argued that he was culpable because he was a licensed securities salesman in the 1960s and through his involvement in the investments had legal obligation to make sure he used accurate information.

Instead Craig used ministry stationery to solicit investors, circulated charts and graphs and other investment information without validating it. And although Craig’s attorney, Lewellyn Michaud, said Craig never received a dime for his work, he was offered a commission.

Even more perturbing to SEC officials is that once the SEC’s investigation became known, Craig still accepted a $25,000 investment from a contributor to his ministries, with the interest earmarked for Craig’s ministry.

“He has to be taken to be reckless,” Moore said.

Craig’s attorney tried to distance his client from the others involved in the investment scheme. Michaud argued that Craig didn’t receive a dime during his involvement in the investment and that his family — Craig’s two sons — were suckered in to the scam for $124,000. And Michaud said Craig never found out about about the bank’s mistatement of investment interest rates until January 1996, five months after the SEC filed suit.

“He’s not part of this alleged scam,” Michaud said.


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