Gifting
Scheme Case
How Gifting
Pyramids Get You In Prison
In The Texas Case Of Elite
Activity Ringleader
HARVEY JOSEPH
DOCKSTADER, JR
(who checked
into prison May 2008 - Out May 2010)
Affirmed and
Opinion filed July 31, 2007.
In The
Fourteenth Court of Appeals
NO.
14-06-00182-CR
HARVEY JOSEPH
DOCKSTADER, JR., Appellant
V.
THE STATE OF TEXAS, Appellee
On Appeal from
the 180th District Court
Harris County, Texas
Trial Court
Cause No. 1032644
O P I N I O N
A jury convicted appellant Harvey Joseph Dockstader, Jr. of
promoting a pyramid promotional scheme and assessed punishment at two years’
incarceration in the Texas Department of Criminal Justice, State Jail Division,
and a $10,000 fine. Appellant raises nine issues on appeal. We affirm.
Factual
and Procedural Background
Appellant is the founder of an
organization known as Elite Activity. Since 2001, Elite Activity has maintained
an internet website where people are invited to participate in a Acycle of
abundance@ through the giving and receiving of monetary gifts. Participation in
Elite Activity is based on the payment of money, the receipt of money, and the
recruitment of new members. No products or services are sold. For a monthly
fee, participants in Elite Activity may subscribe to the organization’s
internet service and track their progression through pyramid-shaped panels of
gifting. Appellant traveled to numerous churches across the southern United States
to speak about Elite Activity, which he claims is inspired by God and based on
the teachings of the Bible.
On June 24, 2005, in response to
the arrest of one of Elite Activity’s participants, appellant held a press
conference on the front steps of the Harris County Criminal Justice Center. In
his statement to the media, appellant repeatedly invited people to participate
in Elite Activity. A videotaped excerpt of appellant’s statement was broadcast on
the Channel 39 evening news in Houston.
On July 1, 2005, a Harris
County grand jury
indicted appellant. The indictment alleged that Aon or about June 24, 2005,
[appellant] did then and there unlawfully, intentionally and knowingly
contrive, prepare, establish, operate, advertise, sell, and/or promote a
pyramid promotional scheme.@ Appellant was convicted and sentenced to the
maximum punishment allowed by law. This appeal followed.
In nine issues, appellant
challenges the constitutionality of the pyramid promotional scheme statute, the
legal and factual sufficiency of the evidence, the trial court’s refusal to
include a proposed mistake of fact defense instruction in the jury charge, and
the conduct of the trial judge which appellant claims denied him his right to a
fair and impartial trial.
Discussion
I. Appellant Failed to Preserve His Constitutional Challenges to the
Pyramid Promotional Scheme Statute
In his first, fourth, fifth, and
sixth issues, appellant argues that section 17.461 of the Texas Business and
Commerce Code (the pyramid promotional scheme statute) is unconstitutional as
applied to appellant. Appellant contends the pyramid promotional scheme statute
violates his rights to free speech, free association, and free exercise of
religion, pursuant to the United
States and Texas Constitutions. See U.S. Const.
Amend. I; Tex.
Const. art. I, '' 6, 8, 19, 27.
A party may challenge a statute
on the grounds that it is facially unconstitutional or unconstitutional as
applied@ to the party. Curry v. State, 910 S.W.2d 490, 496 (Tex. Crim. App.
1995) (en banc. Briggs v. State, 789 S.W.2d 918, 923B24 (Tex. Crim. App. 1990).
In order to review an attack on the constitutionality of a statute as applied,
the party challenging the statute must have raised the issue in the trial
court. Tex. R. App. P. 33.1(a. Curry, 910 S.W.2d at 496; King v. State, 174
S.W.3d 796, 815 (Tex. App.CCorpus Christi 2005, pet. ref’d). Appellant’s first,
fourth, fifth, and sixth issues challenge the constitutionality of the pyramid
promotional scheme statute Aas construed and applied to appellant.@ Our review
of the record shows that appellant did not object to the constitutionality of
the statute at trial. Appellant argued to the jury that his conduct was
justified by his religious beliefs. However, he did not move to quash the
indictment or present his constitutional arguments to the court, and he did not
request a ruling that the statute was unconstitutional. Because no specific,
timely objection was made, appellant’s challenges to the constitutionality of
the pyramid promotional scheme statute as applied to appellant were not
preserved for our review. See Tex.
R. App. P. 33.1; Curry, 910 S.W.2d at 496; King, 174 S.W.3d at 815.
Additionally, appellant’s brief contains no arguments in support of his fifth
and sixth issues and thus presents nothing for our review. See Tex. R. App. P.
38.1(h) (An appellant’s brief Amust contain a clear and concise argument for
the contentions made, with appropriate citations to authorities and to the record.@).
Appellant’s first, fourth, fifth, and sixth issues are overruled.
II. The Evidence is Legally and Factually Sufficient to Sustain
Appellant’s Conviction
In his seventh issue, appellant
argues the evidence is factually insufficient to support his conviction.
Appellant’s eighth issue challenges the legal sufficiency of the evidence, and
his second issue contends the trial court erred in denying his motion for
instructed verdict. Because a complaint about the denial of a motion for
instructed verdict is an attack upon the legal sufficiency of the evidence, we
address appellant’s second and eighth issues together. McDuff v. State, 939
S.W.2d 607, 613 (Tex.
Crim. App. 1997. Myles v. State, 946 S.W.2d 630, 636 (Tex. App.CHouston [14th
Dist.] 1997, no pet.).
A.
Standards of Review
In a legal sufficiency review, we
view all the evidence in the light most favorable to the verdict and determine
whether any rational trier of fact could have found the essential elements of
the crime beyond a reasonable doubt. Jackson v.
Virginia, 443 U.S.
307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979. Salinas
v. State, 163 S.W.3d 734, 737 (Tex.
Crim. App. 2005). The jury, as the sole judge of the credibility of the
witnesses, is free to believe or disbelieve all or part of a witness’s
testimony. Jones v. State, 984 S.W.2d 254, 257 (Tex. Crim. App. 1998). We do
not engage in a second evaluation of the weight and credibility of the
evidence, but only ensure the jury reached a rational decision. Muniz v. State,
851 S.W.2d 238, 246 (Tex.
Crim. App. 1993. Harris v. State, 164 S.W.3d 775, 784 (Tex. App.CHouston [14th
Dist.] 2005, pet. ref’d).
In a factual sufficiency review,
we consider all the evidence in a neutral light. Prible v. State, 175 S.W.3d
724, 730B31 (Tex.
Crim. App. 2005). The evidence may be factually insufficient in two ways. Id. at 731. First, when
considered by itself, evidence supporting the verdict may be so weak the
verdict is clearly wrong and manifestly unjust. Id. Second, where the evidence both supports
and contradicts the verdict, the contrary evidence may be strong enough that
the beyond-a-reasonable-doubt standard could not have been met. Id. In conducting a
factual sufficiency review, we must employ appropriate deference so that we do
not substitute our judgment for that of the fact finder. Jones v. State, 944
S.W.2d 642, 648 (Tex. Crim. App. 1996). Our analysis must consider the evidence
appellant claims is most important in allegedly undermining the jury’s verdict.
Sims v. State, 99 S.W.3d 600, 603 (Tex.
Crim. App. 2003).
B.
Analysis
Under the pyramid promotional
scheme statute, a person commits an offense if the person contrives, prepares,
establishes, operates, advertises, sells, or promotes a pyramid promotional
scheme. Tex.
Bus. & Com. Code Ann. ' 17.461. Pyramid promotional scheme means a plan or
operation by which a person gives consideration for the opportunity to receive
compensation that is derived primarily from a person’s introduction of other
persons to participate in the plan or operation rather than the sale of a
product by a person introduced into the plan or operation. Id. ' 17.461(a)(6). ACompensation@ means
payment of money, a financial benefit, or another thing of value. Id. ' 17.461(a)(1). The
term does not include payment based on the sale of a product to a person,
including a participant, who purchases the product for actual use or
consumption. Id.
AProduct@ means a good, a service, or intangible property of any kind. Id. ' 17.461(a)(4).
1.
Elite Activity is a Pyramid Promotional Scheme
We first consider whether the
evidence is legally and factually sufficient to support the jury’s finding that
Elite Activity is a pyramid promotional scheme. Pastor Sean Riley of the Secret Place
International Church
testified he became involved with Elite Activity after watching a D.V.D. given
to him by another pastor. Riley testified appellant came to Secret Place
Church and introduced
himself as the founder of Elite Activity. Riley began promoting Elite Activity
and was arrested and charged with promoting a pyramid promotional scheme. At
appellant’s trial, Riley testified about the structure and purpose of Elite
Activity. Riley testified new members of Elite Activity were invited to give a
$100 gift to the senior member of a panel or board to begin their
participation. A panel consisted of fifteen participants: eight freshman, four
sophomores, two juniors, and one senior. An individual became a freshman by
contributing $100 to the senior member of the panel. Elevation in status could
be obtained only by recruiting additional people to participate. Recruiting two
new people pushed@ the freshman invitee to the level of sophomore. To move from
sophomore to junior, each of the two people recruited by the invitee had to
recruit two more people. After becoming a senior, the invitee received the $800
in gifts paid by the freshman members of the panel. The invitee then restarted
as a freshman on a different panel by making a new gift and recruiting new
members. The amount of the gift required for participation increased as an
invitee progressed from one panel to the next. Elite Activity panels required
gifts ranging from $100 to $6,000.
Riley testified participation in
Elite Activity was strictly an exchange of money and did not involve the sale
of any product or service. Riley further testified, if I come into Elite
Activity and give a hundred dollars, I cannot move through the activity unless
I go get two people. I have to go get two people to do what I did. I can’t just
give it to you and then expect something in return if I do nothing. . . .
that’s how it works.@ Riley testified he did not know anyone who participated
in Elite Activity without expecting to receive payment in return for their
participation.
Russell Turbeville, the chief of
the Consumer Fraud Division of the Harris County District Attorney’s Office,
testified as an expert on pyramid promotional schemes. Turbeville described
Elite Activity as a typical doubling pyramid scheme in which each participant
is required to recruit two new participants in order to receive compensation.
Turbeville testified perpetrators of pyramid schemes frequently describe their
activity as gifting. Turbeville further testified participants in Elite
Activity were required to pay $100 and were encouraged to recruit at least two
people who in turn would pay and recruit other people and . . . you would
eventually receive an $800 payment.@ Participants then had the option of
reentering the scheme by paying $250 into the chart that had a larger payoff
and you could progress through a series of charts and possibly receive as much
as $82,000.@ Participants in Elite Activity were also required to pay a monthly
fee in order to track their participation on the Elite Activity website.
Appellant testified that the
Elite Activity website provides an accurate description of how Elite Activity
works. State’s Exhibit 6 consists of printed pages of information from the
Elite Activity website, which provide that the goal@ of participation in Elite
Activity is to qualify for receiving gifts.@ The website provides that
participation begins by entering the Head Start@ panel with your $100 gift and
your two invitees ready to accept your invitation. You are now qualified to
become a senior and start receiving gifts on that panel. You will need to have
at least two invitees accept your invitation before you move to a forward
panel.@ Participants progress through seven categories of panels, each of which
requires a greater monetary gift.[1] When a participant becomes the senior
member of a panel, he receives payment from each of the panel’s eight freshman
members. The website makes it clear that gifts are not given in exchange for a
product or service.@[2]
Appellant testified in his own
defense and gave the following description of Elite Activity: When a
participant chooses to participate, they give a gift. They start at the giving
designation . . . .They progress from the giving designation down to the
receiving designation and then they have the potential to receive eight gifts,
period.@ Appellant further testified that Elite Activity would continue to
exist without the recruitment of new members because the existing participants
would continually give and receive.@ However, on cross-examination appellant
testified that Anew participants coming in helps the activity grow.@ Appellant
further testified Elite Activity formerly had more than 250,000 participants,
and currently has approximately 3,500 active participants.
In his factual sufficiency
argument, appellant fails to identify any specific evidence which he claims is
contrary to the jury’s finding that Elite Activity is a pyramid promotional
scheme. See Sims, 99 S.W.3d at 603 (holding appellate court must consider
evidence appellant claims is most important in undermining the jury’s verdict).
Rather, appellant’s brief recites a ten-page quotation from the reporter’s
record and summarily concludes the evidence shows Elite Activity is a Abelief
system@ in which A[b]elievers were requested to invite other believers to
participate in the belief system.@
We have reviewed the entire
record in this case. Pastor Riley’s testimony, which is corroborated by the
Elite Activity website exhibit and the testimony of appellant himself, shows
that Elite Activity is a highly organized plan or operation in which people pay
money for the opportunity to receive money. Riley testified new participants
pay $100 and recruit additional participants in order to achieve senior@ status
and receive $800. Riley testified he was not aware of anyone who gifted@ in
Elite Activity without expecting payment in return. Appellant’s own testimony
shows that participation in Elite Activity is based on the payment and receipt
of money. Appellant testified participants start at the giving designation,@
give a $100 gift, and progress to the receiving designation where they have the
potential to receive eight gifts. It is of no consequence that the transfer of
money is characterized as a gift@ by the person giving or receiving the
payment. See King, 174 S.W.3d at 808B09 (holding woman’s club with gifting
plan@ satisfied the statutory definition of pyramid promotional scheme where
the plan involved a gift of $2,500 for a return of $10,000 and $5,000 for a
return of $20,000, provided a sufficient number of women joined the club). The
statute requires only that the plan or operation is one in which a person gives
consideration for the opportunity to receive compensation that is derived
primarily from a person’s introduction of other persons to participate in the
plan or operation rather than the sale of a product by a person introduced into
the plan or operation. Tex.
Bus. & Com. Code Ann. ' 17.461(a)(6).
Riley testified participation in
Elite Activity did not involve the sale of a product or service. Riley further
testified participants in Elite Activity must recruit two additional people in
order to move through the activity and become eligible to receive payment.
Riley’s testimony is corroborated by the Elite Activity website exhibit which,
appellant testified, provides an accurate description of how Elite Activity
works. The website provides that participation begins with a A$100 gift and
your two invitees ready to accept your invitation. The website further provides
that a participant will need to have at least two invitees accept [his]
invitation before moving to a forward panel. Appellant testified Elite Activity
currently has 3,500 active participants.
We find the evidence legally and
factually sufficient to support the jury’s finding that Elite Activity is a
plan or operation by which a person gives consideration for the opportunity to
receive compensation that is derived primarily from a person’s introduction of
other persons to participate in the plan or operation rather than the sale of a
product by a person introduced into the plan or operation. See id.
2.
Appellant Promoted Elite Activity
Next, we consider whether the
evidence is legally and factually sufficient to support the jury’s finding that
appellant promoted Elite Activity, a pyramid promotional scheme. Promoting a
pyramid promotional scheme@ means inducing or attempting to induce one or more
other persons to participate in a pyramid promotional scheme; or assisting
another person in inducing or attempting to induce one or more other persons to
participate in a pyramid promotional scheme, including by providing references.
Tex. Bus.
& Com. Code Ann. ' 17.461(a)(5). Participate@ means to contribute money
into a pyramid promotional scheme without promoting, organizing, or operating
the scheme. Id.
' 17.461(a)(3). Thus, we must determine whether the evidence is legally and
factually sufficient to establish that appellant induced or attempted to induce
one or more other persons to contribute money into Elite Activity on or about
June 24, 2005. See id. ' 17.461(a)(3), (5).
In his testimony at trial,
appellant admitted he arranged and conducted a press conference on the front
steps of the Harris
County criminal
courthouse on June 24, 2005. We have reviewed State’s Exhibit 1-A, a videotape
of appellant’s press conference, which shows the following statements were made
by appellant:
We invite people who can give in
a possibility that being a blessing to someone else can, in turn, bless their
own life. . . . Our activity is spelled out on our website. . . . We have a
cycle. We begin the cycle by giving a gift. We complete the cycle by receiving
the gift. . . . I invite you to participate in a belief system where giving
opens the way to receiving. . . . Start at the giving designation. Progress
through the sharing and inviting designations and you complete by receiving.
In his factual sufficiency
argument, appellant fails to identify any specific evidence which he claims is
contrary to the jury’s finding that he promoted Elite Activity. In his
statements to the media, appellant repeatedly invited other persons to
participate in Elite Activity by giving a gift. Appellant also referred his
audience to the Elite Activity website, where the activity is spelled out. Our
review of the record as a whole, and particularly the evidence from Elite
Activity’s website, shows that appellant’s statements about the giving of
gifts@ are references to the payment of money. Therefore, by inviting people to
participate in Elite Activity by giving a gift,@ appellant was inducing or
attempting to induce one or more other persons to contribute money into Elite
Activity, a pyramid promotional scheme.
Viewing the evidence in the light
most favorable to the verdict, we find that any rational trier of fact could
have found the essential elements of promotion of a pyramid promotional scheme
beyond a reasonable doubt. See King, 174 S.W.3d at 808B09. (holding evidence
supporting conviction for promotion of pyramid promotional scheme was legally
sufficient where the defendant distributed information regarding the scheme and
encouraged other persons to join). Viewing the evidence in a neutral light, we
find the evidence supporting the jury’s verdict is not so weak that the verdict
is clearly wrong or manifestly unjust, nor is the contrary evidence so strong that
the beyond-a-reasonable doubt standard could not have been met. Because we find
the evidence is legally and factually sufficient to sustain the jury’s verdict
that appellant promoted a pyramid promotional scheme, appellant’s second,
seventh, and eighth issues are overruled.
III. Appellant was Not Entitled to a Jury Instruction on the Mistake of
Fact Defense
In his third issue, appellant
claims the trial court erred in refusing to instruct the jury on appellant’s
mistake of fact defense. Section 8.02 of the Penal Code provides that A[i]t is
a defense to prosecution that the actor through mistake formed a reasonable
belief about a matter of fact if his mistaken belief negated the kind of
culpability required for the commission of the offense. Tex. Penal Code Ann. ' 8.02(a) (Vernon
2003). An accused has the right to a jury instruction on any defensive issue
raised by the evidence, whether that evidence is weak or strong, unimpeached or
contradicted, and regardless of what the trial court may or may not think about
the credibility of the evidence. Murchison v. State, 93 S.W.3d 239, 252 (Tex.
App.CHouston [14th Dist.] 2002, pet. ref’d). However, if the evidence viewed in
a light favorable to appellant does not establish a mistake of fact defense,
then the trial court did not err in refusing an instruction. Id. Therefore, the issue is whether the
evidence cited by appellant, if believed, raises a mistake of fact defense by
negating appellant’s culpable mental state. Id; Legere v. State, 82 S.W.3d 105,
109 (Tex. App.CSan Antonio 2002, pet. ref’d).
Appellant’s arguments regarding
this issue focus on statements made by appellant during the press conference on
June 24, 2005. According to appellant, the issue is whether appellant’s
statements at a press conference to the media assembled in front of the court
house to defend the integrity of his belief in Luke 6:38, if believed, raise a
mistake of fact defense. Appellant does not direct us to any specific evidence
introduced at trial which he contends raises an issue as to a mistake of fact.
During the press conference, appellant attempted to explain to the media why
Elite Activity was not an illegal pyramid scheme. In his appellate brief,
appellant contends that A[a]ccepting appellant’s statement to the press conference
[sic] as true, he could not have >intentionally or knowingly’ promoted a
pyramid promotional scheme, or >intended’ to violate any portion of the
consumer protection act.
Under the pyramid promotional
scheme statute, a person commits an offense if that person intentionally or
knowingly contrives, prepares, establishes, operates, advertises, sells, or
promotes a pyramid promotional scheme. Tex.
Bus. & Com. Code Ann. ' 17.461©; King, 174 S.W.3d at 808. The statute does
not require appellant to have acted with the belief that his conduct was
illegal, or with intent to violate the statute. Tex. Bus. & Com. Code Ann. ' 17.461©;
see also Austin v. State, 769 S.W.2d 369, 372 (Tex. App.CBeaumont 1989, pet.
ref’d) (finding defendant who promoted endless chain scheme was not entitled to
mistake of fact defense based upon his mistaken belief that his activity was
lawful). Based on our review of appellant’s statements at the press conference,
we find that the only mistake@ appellant made was believing his actions were
lawful. Such a belief is not a mistake of fact. Vitiello v. State, 848 S.W.2d
885, 887 (Tex. App.CHouston [14th Dist.] 1993, pet. ref’d). Accordingly,
appellant was not entitled to a jury instruction on mistake of fact, and his
third issue is overruled.
IV. Appellant was Not Denied His Right to Fair and Impartial Trial
In his ninth issue, appellant
claims he was denied his right to a fair and impartial trial because the trial
judge showed favoritism towards the State’s case. Appellant directs us to an
excerpt from the reporter’s record of the punishment hearing, which he contends
shows favoritism towards the State’s case [and] that the judge appeared to be
partial which lead to suspicions as to the fairness and integrity of the
court.@ The State argues appellant failed to show the trial judge acted
improperly or that her comments prejudiced him. We agree with the State.
The parties have a right to a
fair trial. Markowitz v. Markowitz, 118 S.W.3d 82, 86 (Tex. App.CHouston [14th
Dist.] 2003, pet. denied). One of the most fundamental components of a fair
trial is a neutral and detached judge. Id.
A judge should not act as an advocate or adversary for any party. Id. To reverse a
judgment on the ground of improper conduct or comments of the judge, we must find
(1) that judicial impropriety was in fact committed, and (2) probable prejudice
to the complaining party. Id.
The scope of our review is the entire record. Id. at 87. Judicial remarks during the
course of a trial that are critical or disapproving of, or even hostile to
counsel, the parties, or their cases, ordinarily do not support a bias or
partiality challenge. Id.
Such remarks may constitute bias if they reveal an opinion deriving from an
extrajudicial source; however, when no extrajudicial source is alleged, such
remarks will constitute bias only if they reveal such a high degree of
favoritism or antagonism as to make fair judgment impossible. Id.
Appellant claims the trial judge
showed favoritism by stating, I told you that I have made my ruling and that if
I am incorrect, you got me [on appeal]. The trial court’s comment, which was
made in the context of a discussion regarding appellant’s request for a jury
charge on the defense of mistake of fact, does not show impropriety or
prejudice. The trial judge was merely informing appellant that if her ruling
was incorrect appellant would prevail on appeal.
Appellant next argues the trial
judge demonstrated bias by refusing to answer the following question:
[Appellant’s counsel]: Do you
acknowledge the existence of a Supreme Being?
[The Court]: I am not here to
answer your questions, sir. Do you have any objections or anything else that
you would like to put on the record before we get started with the punishment
phase?
The trial judge’s refusal to answer
appellant’s trial counsel’s question regarding her personal beliefs does not
demonstrate impropriety or prejudice. To the contrary, the trial judge’s
refusal to respond avoided the introduction of extrajudicial information into
the proceeding.
Finally, appellant claims the
trial judge showed favoritism by denying his motion for mistrial. Appellant
moved for mistrial on the ground that the State failed to produce a copy of a
D.V.D. made by Pastor Riley.[3] The trial court ruled that appellant was not entitled
to a copy of the D.V.D. because it was not part of the State’s file in
appellant’s case. Appellant does not raise this evidentiary issue on appeal,
and has failed to demonstrate that the trial judge acted with bias or
impropriety in denying his motion for mistrial.
We have reviewed the entire
record in this case and find no indication of judicial impropriety or bias in
favor of either party. Appellant’s ninth issue is overruled.
Conclusion
Having overruled each of
appellant’s issues, we affirm the judgment of the trial court.
/s/ John S. Anderson
Justice
Judgment rendered and Opinion
filed July 31, 2007.
Panel consists of Justices Yates,
Anderson, and Hudson.
Publish C Tex. R. App. P. 47.2(b).
--------------------------------------------------------------------------------
[1] The panel values@ described
on Elite Activity’s website are Head Start ($100), Elementary ($250), High
School ($500), Junior Varsity ($1,000), College ($2,000), Masters ($4,000), and
Graduate ($6,000).
[2] The Elite Activity website
contains the following information: Since the taxes on the gift have already
been paid and because the gift is not given in exchange for a product or
service and is NOT and [sic] investment, these gifts are not required to be
reported as gross income of the recipient (See 26 USC ' 102).@
[3] The State obtained a copy of
a D.V.D. made by Pastor Riley in connection with the prosecution of Pastor
Riley for promotion of a pyramid promotional scheme. However, according to the
prosecutor, Pastor Riley’s D.V.D. was not made part of the State’s file in
appellant’s case because appellant denied having any involvement with the
D.V.D.
PASTOR
RILEY IN ABOVE CASE TESTIFIED AGAINST ELITE ACTIVITY
Pastor Riley: here are the
comments from The Houston Newspaper this church-related fraud when
Pastory Riley was about to go to jail:
Ministering To His Flock Or
Fleecing Them? By Allan Turner - February 19, 2005
Sally Riley was hopping mad at
the devil. Speaking in tongues, brandishing a wooden staff to vanquish God's
enemies Old Testament-style, the co-pastor of the nondenominational Secret Place
International Church
reached a crescendo as she warned that sooner or later all good Christians
would find themselves assailed by Satan.
Pink slips, cancer, crack
cocaine, knuckleheaded kids — the devilish assault would be brutal. But God
would prevail, toss the evil one into a fiery lake and reward his children in
spades.
From a wing chair on the
sidelines, the Rev. Sean Riley exhorted his wife to greater heights, clapping,
shouting and swatting the air as if delivering a knockout punch to an unseen
adversary.
"These hard times are small
potatoes," Sally Riley assured her flock. "We've been surrounded and
battered by troubles, but we've not been demoralized."
To some, the midweek service
might have seemed unremarkable, a generic, if theatrical, admonition on the
rigors of a Christian life. But for the Rileys, captains of the Humble
storefront church and an international television ministry, the sermon resonated
with meaning.
Pyramid Scheme Alleged
Riley, 37, a minister's son who
strayed into drugs and alcohol before returning to Christ, now faces the
biggest challenge of his life.
Earlier this month, authorities
charged him with promoting a pyramid scheme to bilk the faithful and others out
of thousands of dollars.
If indicted and convicted, Riley,
a dapper man whose wardrobe is highlighted by an oversized gold-colored
pendant, could serve up to two years in prison.
"He will not be
indicted," a testy Sally Riley snapped when asked after Wednesday's night
service if her spouse had hired an attorney. She refused further comment,
directing a trio of staff members to eject a reporter from the building.
When agents of the Harris County
District Attorney's Office served search warrants at the church, 7211 FM 1960
West, and the couple's Lee Road mobile home in early February, they confiscated
more than $8,000 in cash, computers and computer records, and forms linked to
Elite Activity, an allegedly illegal "gifting" scheme with national
branches.
Thousands of dollars in $100
bills — the minimum sum needed to enter the group — were found on Riley's
person, a district attorney's investigator attested.
Riley, son of the late Humble
minister Don Riley, founded the Secret
Place in 1999. Since 2001, the church has leased
space adjacent to a liquor store in the Foxwood Place
Shopping Center. The
church's televised services are seen in 200 million homes in Africa, Eastern
Europe and Asia, the church Web site claims.
Riley's sermons often address
contemporary topics such as career, marriage and overcoming setbacks as well as
emphasizing men's "rightful place as leaders and high priests in their
homes."
According to a petition for the
search warrant, church employees tipped the district attorney's fraud division
to the alleged scam, giving investigators DVDs in which Riley urged viewers to
"get a grip on prosperity" by joining Elite Activity.
Elite Activity's Web site
contends it "is not about a business or an opportunity or selling or
pulling people by the sleeve or some kind of illegal pyramid. It's simply A
FRAME OF MIND that once applied and shared with like-minded people becomes so
POWERFUL, it makes achieving PROSPERITY and HAPPINESS a part of our daily lives."
"No Promises Or
Guarantees"
To enroll, the posting advises,
participants must give $100 to Elite Activity and recruit two other members.
Because the money is given with no assurance of financial gain, the site
contends, the undertaking is legal.
"There are no promises or
guarantees of a return of any kind!" it notes. But, at another point, it
entices: "You can receive $800, $2,000, $4,000, $8,000, $16,000, $32,000,
and $48,000 in gifts Over and over again!!"
Despite claims of legality, Elite
Activity meets Texas'
definition of an illegal pyramid scheme, said Assistant District Attorney
Valerie Turner. Federal law also bans such frauds.
"Pyramids will inevitably
fail" as it becomes increasingly difficult for newer members to recruit
additional participants, Turner said. While promoters, and possibly early
participants, can reap handsome sums from the newcomers, most members lose
their money.
"People don't realize how
quickly it gets out of hand," added Assistant District Attorney Russel
Turbeville, who has spent 26 years in the consumer fraud division. "They
don't recognize how impossible it gets to recruit new participants."
Suspicion Of Fraud
Texas law mandates a 6-month to 2-year state
jail sentence for the offense.
"And that's served day for
day," Turbeville warned.
Riley's alleged offense falls
into the most basic category of pyramid frauds, the Ponzi scheme, said James
Kohm, the Federal Trade Commission's chief of staff for the bureau of consumer
protection. "These tend to be small," Kohm said. "They tend to
move around, to be semi-secretive. Sometimes they have masterminds, sometimes
they develop from spores of an original group started by somebody who was
involved moving from one city to another."
Such cases, named after the early
20th century master con artist Charles Ponzi, who amassed a fortune by
manipulating foreign postal coupons, generally involve the simple exchange of
money, with no pretense of manufacturing a product or using the collected money
to purchase stock.
Such frauds frequently target
church groups, social clubs or other close-knit groups whose members' trust can
be exploited for wrongdoing, he said.
Last year, municipal or state
authorities in Arkansas, South
Dakota, Ohio and South Carolina warned of
such frauds, some linked to Elite Activity, occurring in their areas. The scope
and structure of Elite Activity have not been determined.
In late 1999, local authorities
charged 44 people for participating in the "Jubilee Celebration
Paradigm" pyramid scheme, which raked in as much as $10 million across the
nation. At one Houston
meeting, undercover operatives witnessed $2 million change hands. Members, who
were required to pay a $2,000 entry fee, were assured they ultimately could
receive $16,000.
In the Riley case, documents
filed with the court said, an undercover officer witnessed the minister
participate in an Elite Activity promotional meeting held at his church.
In the confiscated DVDs,
described in court documents, Riley explains that the Elite Activity program
provides for 15 positions, divided into freshmen, sophomores, juniors and a
senior. Once a senior received $800, he could leave or advance to a second,
more costly program. Ultimately, he said, a participant could receive more than
$83,000.
'Papa Doc' and 'Mama Doc' Riley
advises participants in the recorded session to subscribe to a computer
database to track their progress through the Elite Activity system. He also
advises them to assume false names. He and his wife, he said, had assumed the
names "Papa Doc" and "Mama Doc," court documents reveal.
Like his wife, Riley, who is free
on $2,000 bond, refused comment on his case after Wednesday's service.
When asked how he was faring, he
responded: "I'm blessed."
