The Securities and Exchange Commission has filed a complaint alleging that a businessman ran a Ponzi scheme that targeted church investors, including members at Lithonia-based New Birth Missionary Baptist Church.
The lawsuit, filed in U.S. District Court for the Northern District in Atlanta, accuses Ephren W. Taylor II, the former CEO of City Capital Corp., of operating a scheme to swindle more than $11 million from predominately African-American church congregations. The SEC complaint follows a suit filed by some New Birth members last year in DeKalb County that named Taylor, the church and its pastor, Bishop Eddie Long, concerning an investment seminar Taylor conducted at the church in 2009.
The SEC complaint alleges that investors' money was used to pay rent, payroll and expenses at City Capital's various affiliates. It also alleges that while some of the money was used as promised, Taylor secretly diverted hundreds of thousands of dollars that he used to publish and promote his books, pay credit card bills and rent for his New York apartment, and fund his wife's singing career.
The complaint, which identifies Taylor as a "self-proclaimed social capitalist," also names City Capital and Wendy Jean Connor, the firm's chief operating officer until November 2010.
The suit alleges that Taylor used two ways to get money from churchgoers. According to the complaint, he sold promissory notes issued by City Capital and various affiliates bearing annual interest rates between 12 percent and 20 percent. It alleges that he told investors their money would be used to buy and support small businesses such as laundries, juice bars and gas stations. The complaint also accuses Taylor, allegedly with help from Connor, of selling "sweepstakes machines" that he claimed would "generate investor returns of as much as 300 percent or more in the first year."
Taylor, the complaint said, encouraged investors to roll over their retirement portfolios to self-directed individual retirement custodial accounts, which he then invested with himself and City Capital. It said Taylor served as City Capital's CEO and chairman until Oct. 22, 2010.
Neither Taylor, whose last known residence was in New York City, nor Connor, who lives in North Carolina, could be reached for comment.
The complaint seeks financial penalties and other relief.
"Ephren Taylor professed to be in the business of socially conscious investing," David Woodcock, director of the SEC's regional office in Fort Worth, Texas, said in a statement. "He preyed upon investors' faith and their desire to help others, convincing them that they could earn healthy returns while also helping their communities."
Last year, 10 investors from New Birth sued Taylor, City Capital, the church, Long and others in DeKalb County State Court. The suit says the plaintiffs were encouraged by Long and Taylor to invest in City Capital and lost more than $1 million. The suit is ongoing.
What has been uncovered so far appears to be "widespread fraud," said attorney Jason Doss, who represents the plaintiffs. "If you speak to our clients, they were very active in their church and put a lot of weight in what Bishop Long said. He [Taylor] touted himself as a teenage entrepreneur and prodigy. The types of investments he peddled were supposed to be socially conscious. He used all the bells and whistles and terms that would attract a church-going person."
An attempt to seek comment Thursday from Long was met by a response from New Birth. In a statement, the church said: “Although this has been a very difficult process for all involved, we have always remained faithful that Ephren Taylor and City Capital Corporation would be held accountable for their actions in this matter. We are prayerful that they will move swiftly to do the right thing and heal and restore all those who have been harmed by their actions.”
Last year, Long made an unusual video that was posted on YouTube on behalf of several members who he said faced financial hardships because of investments that went awry.
Long urged Taylor and the company to “do what’s right” and return the invested money with interest.
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