Sometimes
even the professionals can’t be trusted.
When the Pakachoag Church in Auburn received a $2.7 million bequest
in 1980, the church sought out a professional advisor to invest the
funds.
But 20 years later, the church discovered it had been defrauded of $1.2
million by that advisor, according to findings recently released by
the U.S. Securities and Exchange Commission.
“We put our trust in a person, and that person abused that trust,” said
Al Esposito, the church’s attorney and a member. “Nobody was very experienced,
and the church totally trusted the company.”
Esposito said that on the surface, it was very difficult to see that
there was a problem, because the stock market was doing well and the
church’s endowment was growing rapidly.
“The church was making money. The endowment grew every quarter, so who
asks questions?” he said.
Eventually,
he said, the church’s former pastor caught on to what was happening.
The SEC issued its findings in the case in July, ordering the church’s
former investment advisor, Sage Advisory Services of Wellesley, to pay
Pakachoag Church $304,800. According to the Commission’s findings, the
advisory firm is unable to pay back any more than that.
Esposito said civil and criminal suits are also pending against Sage’s
former chief executive, Gordon J. Rollert, who was the church’s advisor.
The church was Rollert’s biggest client.
The SEC findings state that Rollert “churned” the church account, buying
and selling stock solely to receive commissions. The SEC also stated
that Sage fraudulently sold the church investment interests in a “shell
entity” that Rollert set up.
Esposito said the church has learned its lesson, and now hires other
financial professionals to keep an eye on its investors.
Susannah Baker, Associate Conference Minister for Policy and Administration,
said that what happened to Pakachoag Church is an important lesson for
all churches.
“Churches are run by volunteers and it is time consuming and difficult
for volunteers to manage portfolios or to oversee those who do,” Baker
said. “That is why the Conference recommends that churches with endowments
invest in either the United
Church Foundation or the Massachusetts
Congregational Fund.”
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