The pastor of California Church of the Healthy Self has agreed to plead guilty to federal criminal charges that he orchestrated a church-based investment scam that took in more than $33 million, United States Attorney Nick Hanna announced today.
The scam, in what has been labeled a Ponzi scheme, could see the pastor face 23 years in federal prison.
Kent R.E. Whitney, 38, of Newport Beach, has agreed to plead guilty to a two-count information charging him with mail fraud and filing a false federal income tax return. The criminal information and a related plea agreement were filed Wednesday in United States District Court.
According to his plea agreement, from September 2014 until April 2019, Whitney engaged in a scheme to defraud investors through the Church of the Healthy Self (CHS), a non-profit corporation, and its related entities, including CHS Asset Management, Inc. Whitney founded these entities, operated them out of a strip mall in Westminster, Orange County, and claimed to be the pastor of CHS.
At Whitney’s direction, CHS representatives appeared on television and at live seminars at CHS offices to solicit investments in CHS Trust, the church’s investment arm. Recordings of these appearances frequently were uploaded onto YouTube.
In these appearances, at Whitney’s direction, CHS representatives made false or misleading claims, including:
CHS Trust guaranteed an annual rate of return of 12 percent;
CHS Trust guaranteed a return of principal with no risk because it was federally insured;
The worst return received during the previous five years was a 1.5 percent profit for the month of January 2015;
Traders used by CHS had not lost money in 15 years; and
CHS was audited by accounting firm KPMG.
It is claimed that, in reality, little investor money went into any trading accounts, according to court documents.
Relying on these false statements, victim-investors sent more than $33 million to CHS from 2014 to 2019. As part of the scheme, Whitney directed that monthly statements be sent to victims that contained false reports of investment returns. Whitney intended to lull victims into believing their money had been invested and was consistent with the false claims made by CHS representatives.
Whitney also admitted in his plea agreement that he knowingly and willfully signed and filed a false federal income tax return that reported that his total income for the tax year 2018 was $17,539. In fact, as Whitney knew, his true income for that year was at least $452,872, of which approximately $435,333 was obtained via Whitney’s CHS fraud. The resulting tax loss was at least $130,808, the plea agreement states.
The FBI investigated this matter, with the Securities and Exchange Commission providing substantial assistance with the investigation.
This comes on top of other Christian organizations charged with fraud. In February, Mark MacArthur, whose father John MacArthur is the senior pastor at Grace Community Church in California, was charged with Failure to Disclose Financial Conflicts of Interest at Criterion Wealth Management Insurance Services, Inc.
Meanwhile, earlier this month, a Christian event promoter has been charged with fraud over the raising of $3 million from investors. Promoter Jeffrey Wall and his business, Lighthouse Events, was found guilty of raising money from Christian investors to run church-based events, when in fact the money raised was going to pay back past debts.
The biggest fraud case in recent years is that of Singapore megachurch pastor Kong Hee, who has recently been released from prison after being convicted of misusing church funds.
The megachurch pastor of Singapore’s City Harvest Church was convicted in 2015 of Criminal Breach of Trust in the Singapore courts and served his sentence at Changi Prison until the 22 August 2019.
Following a 2012 arrest and a trial beginning in 2013 into the allegations that Kong and five other church leaders illegally used $24 million of church funds while misusing another $26 million in a cover-up, Kong was found guilty in 2015 as the “key man” behind the scandal who had guided his five accomplices by the Singapore court of three charges of criminal breach of trust.