US church first to use fraud victim donation law

Reuters
US church first to use fraud victim donation law

WASHINGTON (Reuters) - For the first time, a gift is being made to a U.S. fund for victims of investment fraud, with a church donating $2.3 million for people bilked in a scam by a church member, authorities said on Friday.

The First Church of Christ, Scientist has donated the money under a previously unused section of the federal Sarbanes-Oxley business reforms adopted by Congress after corporate accounting scandals at Enron Corp. and other companies.

The reforms allowed the U.S. Securities and Exchange Commission to set up funds to get harmed investors more of the money obtained from actions against corporate wrong-doers. The reforms also said that gifts could be made to the funds.

"This is the first such donation made" to an investor aid fund under Sarbanes-Oxley, the SEC said in a statement.

"We just wanted to do the right thing and so we did," said Peter Osterlund, a spokesman for the Boston-based, international church.

The church's gift stems from an investment scam involving Eric Resteiner, who "defrauded more than 50 investors out of more than $47 million," said federal prosecutors last month when Resteiner pled guilty to seven criminal fraud charges.

Arrested in Singapore in 2004, Resteiner is presently in prison awaiting sentencing, the SEC said.

As a Church of Christ Scientist practitioner, Resteiner exploited trusting church members, to whom he bragged of having a "God-given gift" as a trader, prosecutors said.

Promising no-risk, 50-percent annual investment returns, he claimed to be one of the world's few traders able to do bank debt deals usually reserved for the rich, officials said.

Between 1997 and 2000, dozens of people, many of them church members, gave Resteiner and associates millions of dollars, authorities said. Some of the investors got money back, but most of that was taken from others' payments in what is often called a Ponzi scheme.

Resteiner kept a large home in the Bahamas, a 176-room villa in St. Moritz, Switzerland, servants, a 110-foot (33 meters) yacht, an airplane, a helicopter and luxury vehicles, officials said.

Late in 2004, the Boston church told the SEC it suspected Resteiner had donated $2.3 million to a church building fund in 2001 using money from defrauded investors. Investigators determined the church's suspicion was correct, the SEC said.

"We're optimistic about getting this money back to investors within the next several months," said David Bergers, head of enforcement in the SEC's Boston field office.