Monday, September 04, 2006
Aspiring Authors Can GetPublished, if Not Sold
By KELLY SPORSStaff Reporter of The Wall Street Journal.
From The Wall Street Journal Online
Question: I'm interested in self-publishing novels, but I can't figure out where to start. I wrote two books, created a publishing company and secured a domain name. Where do I go from here?--D.S., Jersey City, N.J.
Answer: It's easy to self-publish a book, but it's not so easy to sell it.
"I cannot tell you how many people I know that tell me they have 5,000 copies of their book sitting in their garage," says Jan Nathan, executive director of PMA, a Manhattan Beach, Calif.-based association for independent publishers. "What makes someone a good author unfortunately does not necessarily make them a good publicist."
Novelists often struggle with self-publishing because they don't have a natural platform for selling their book, and many aren't stellar self-promoters. Nonfiction books offer advice or information that can draw in readers regardless of how much marketing is done. Novels, though, often require big marketing dollars and enough hype to get the book in readers' hands.
And even with a big publisher on your side, chances of success are slim. About 80% of the 1.2 million books tracked by Nielsen BookScan in 2004 sold fewer than 99 copies and only 2% sold 5,000 or more copies. The average book sells 500 copies. Only 10% of the roughly 120,000 books published each year reach traditional bookstores, Ms. Nathan adds.
Email your questions about starting a business. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.
Three essentials to success as a self-publisher are a professional editor (not your good friend unlikely to demand you rewrite chapters four through eight), a talented cover and page designer and a well-tuned business and marketing plan. There is plenty of help available. Lists of editors, designers, printers and other publishing consultants are available at www.pma-online.org and www.spannet.org.
You will also need a block of International Standard Book Numbers, or ISBNs, which are used to identify one book title or edition from another. ISBNs are sold in blocks, with a block of 10 costing about $270. You can also get copyright protection by registering through the Library of Congress.
Once you're ready to print, there are two basic options. Traditional offset printing is a better deal when printing at least 500 copies, because you'll only pay $2 to $3 a copy for a bulk order. Newer "print-on-demand" technology, using digital printers, lets you buy copies one at a time for about $7 each. Self-publishers serious about wanting to profit from their book, however, should typically use the traditional method and buy at least 2,000 copies of their book, Ms. Nathan says. The higher per-copy cost of the newer technology makes it nearly impossible to profit on sales because stores and wholesalers usually take a big cut. Expect to spend roughly $10,000 on the entire self-publishing process, she adds.
Now comes the hard part: Actually getting people to buy it. Don't assume your local Barnes & Noble will scoop up copies and display them.
When Jacqueline Church Simonds, of Reno, Nev., self-published a novel in 2000 about an 18th-century female pirate captain, she first approached major bookstore chains, only to be turned away.
She ultimately devised a better strategy: marketing her book to consumers most interested in her topic. In her case, pirate re-enacters. She attends pirate symposiums, hosts readings of her book for pirate enthusiasts and writes articles on how pirates dressed and acted. She also maintains a Web site with pirate facts and clothing information. The two blockbuster movies, "Pirates of the Caribbean" and its sequel, haven't hurt her sales either. And even with all her marketing, she's sold only about 3,000 copies.
"It was actually really wrenching, because novelists are usually hermits by inclination," Ms. Simonds says. "So if you want it badly enough, you have to change your behavior."
Online booksellers are usually more receptive to small publishers because they have unlimited virtual shelf space. Amazon.com's Advantage program, for instance, will stock and sell books by small publishers in exchange for a $29.95 annual membership fee and a 55% commission on the retail price of each book sold. You might also try approaching locally owned bookstores, which may be more interested in displaying local authors.
By KELLY SPORSStaff Reporter of The Wall Street Journal.
From The Wall Street Journal Online
Question: I'm interested in self-publishing novels, but I can't figure out where to start. I wrote two books, created a publishing company and secured a domain name. Where do I go from here?--D.S., Jersey City, N.J.
Answer: It's easy to self-publish a book, but it's not so easy to sell it.
"I cannot tell you how many people I know that tell me they have 5,000 copies of their book sitting in their garage," says Jan Nathan, executive director of PMA, a Manhattan Beach, Calif.-based association for independent publishers. "What makes someone a good author unfortunately does not necessarily make them a good publicist."
Novelists often struggle with self-publishing because they don't have a natural platform for selling their book, and many aren't stellar self-promoters. Nonfiction books offer advice or information that can draw in readers regardless of how much marketing is done. Novels, though, often require big marketing dollars and enough hype to get the book in readers' hands.
And even with a big publisher on your side, chances of success are slim. About 80% of the 1.2 million books tracked by Nielsen BookScan in 2004 sold fewer than 99 copies and only 2% sold 5,000 or more copies. The average book sells 500 copies. Only 10% of the roughly 120,000 books published each year reach traditional bookstores, Ms. Nathan adds.
Email your questions about starting a business. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.
Three essentials to success as a self-publisher are a professional editor (not your good friend unlikely to demand you rewrite chapters four through eight), a talented cover and page designer and a well-tuned business and marketing plan. There is plenty of help available. Lists of editors, designers, printers and other publishing consultants are available at www.pma-online.org and www.spannet.org.
You will also need a block of International Standard Book Numbers, or ISBNs, which are used to identify one book title or edition from another. ISBNs are sold in blocks, with a block of 10 costing about $270. You can also get copyright protection by registering through the Library of Congress.
Once you're ready to print, there are two basic options. Traditional offset printing is a better deal when printing at least 500 copies, because you'll only pay $2 to $3 a copy for a bulk order. Newer "print-on-demand" technology, using digital printers, lets you buy copies one at a time for about $7 each. Self-publishers serious about wanting to profit from their book, however, should typically use the traditional method and buy at least 2,000 copies of their book, Ms. Nathan says. The higher per-copy cost of the newer technology makes it nearly impossible to profit on sales because stores and wholesalers usually take a big cut. Expect to spend roughly $10,000 on the entire self-publishing process, she adds.
Now comes the hard part: Actually getting people to buy it. Don't assume your local Barnes & Noble will scoop up copies and display them.
When Jacqueline Church Simonds, of Reno, Nev., self-published a novel in 2000 about an 18th-century female pirate captain, she first approached major bookstore chains, only to be turned away.
She ultimately devised a better strategy: marketing her book to consumers most interested in her topic. In her case, pirate re-enacters. She attends pirate symposiums, hosts readings of her book for pirate enthusiasts and writes articles on how pirates dressed and acted. She also maintains a Web site with pirate facts and clothing information. The two blockbuster movies, "Pirates of the Caribbean" and its sequel, haven't hurt her sales either. And even with all her marketing, she's sold only about 3,000 copies.
"It was actually really wrenching, because novelists are usually hermits by inclination," Ms. Simonds says. "So if you want it badly enough, you have to change your behavior."
Online booksellers are usually more receptive to small publishers because they have unlimited virtual shelf space. Amazon.com's Advantage program, for instance, will stock and sell books by small publishers in exchange for a $29.95 annual membership fee and a 55% commission on the retail price of each book sold. You might also try approaching locally owned bookstores, which may be more interested in displaying local authors.
A Tutorial on Tuition
A contrarian view of the higher cost of higher education
By EDWARD F. MCQUARRIE
AFTER CELEBRATING YOUR beloved child's admission to a prestigious university, it is now the season for writing your first tuition check. This may inspire the same mix of foreboding, anger and despair as that check you wrote to Uncle Sam last April 15. But you should not feel as bad about writing this check.
The College Board publishes summary statistics each year on the average enrollment-weighted cost of tuition at four-year private and public colleges in the U.S. The real tuition cost, after inflation, of private colleges since the 1975-76 school year has risen 165%. It was $21,235 in the 2005-2006 school year, compared to the $8,026 of 30 years earlier.
This trend leads to the familiar headline, "Cost of College Outpaces Inflation Again!"
Everyone who pays tuition believes it to be a bad thing when tuition and fees go up faster than inflation. But is it really?
Consider: In what kind of world would we see headlines like the following: "For 30th year, Tuition Increase Fails to Exceed Inflation."
Answer: A world in which higher education has accounted for a smaller and smaller proportion of Gross Domestic Product.
This doesn't sound so good: "Nation Invests Less in Higher Education for 30th Year; Sector Shrinks 62% since 1975." But these headlines would describe the same world.
If the growth in college tuition did not exceed inflation in an economy experiencing real growth, then the share of the economy represented by the college sector would necessarily shrink. If you believe that higher education is one of the important drivers of economic advancement then you should worry a lot if higher education's share of the economy were shrinking.
Fortunately, the growth in real GDP has almost exactly matched the growth in real private college tuition since 1975 -- the U.S. economy is now 2.58 times as large, in real terms, as 30 years ago.
Rising Rewards
It helps to know the basic structure of university budgets: Tuition equals salaries. When we say that real college tuition is 2.65 times what it was 30 years ago, we are also saying that real faculty wages are about 2.65 times what they were 30 years ago.
The typical college professor excites little sympathy on any count, so let's turn that around: How interested in your job would you be if it paid 60% less than it now does -- would it still seem like an attractive career? If tuition had not grown in real terms over the past 30 years, real faculty salaries would likewise not have grown; and many college faculty would do better today as barbers or auto mechanics.
Higher education is a service. If there is to be real GDP growth in our service economy, and if higher education is not to shrink as a portion of it, then college tuition must rise faster than the rate of inflation. In fact, it has to rise approximately 3% per year faster than inflation to match the expected real growth in the economy.
You have never seen the headline, "Private Colleges Cheaper than Ever Before -- 30 Year Decline Continues." But for some part of American society, this is the true and correct headline. For other parts of American society, the story is just as the conventional headline tells it: "College Slips Further Out of Reach for Many." So, the next part of the story is a tale of class and social division.
Ability to Pay
If we compare tuition to median family income, all the conventional gnashing of teeth comes back. Private college costs have far outstripped increases in median family income -- it's more than twice as hard today for the median-income family to pay for private college tuition as 30 years ago. But this comparison is specious. The median-income family couldn't afford private college tuition 30 years ago, either. The median-income family is simply not the target market for private colleges, except for scholarship students who bring something special to campus. They, of course, are getting a discount to make higher education more affordable.
Private colleges historically have drawn full-tuition students from families in the upper reaches of the income distribution. A family on the border of the upper middle class, at say the 80th percentile of family income, does still encounter a real cost of a private college education that has outstripped the growth in income -- but not by as much as most people think. The same is true for a family near the lower border of the upper class, around the 95th percentile.
But few families in the top strata expect to pay for college out of current income only. Given the incremental wage gains that accrue to a college education, it is in any case fair to regard tuition as the capitalized cost of obtaining those future wage gains. Hence, a proper perspective on the cost of private college tuition has to include capital income as well as wage income.
From the standpoint of families whose income is in the 95th percentile, and who are likely to enjoy substantial capital resources as well as generous wages, private college is considerably cheaper now than 30 years ago. Such a family has seen its real capital resources increase by a factor of 678%. For these folks, the cost of a private college education, relative to family capital, has shrunk by almost two-thirds.
In other words, the cost of sending Mortimer or Abigail to Harvard has shrunk by a great deal relative to the family resources typically available to the upper-income families who pay full tuition.
The real tragedy of increasing college costs has nothing to do with the tuition charged by Harvard and the like.
Increases in public college tuition have actually outstripped the increases in private college tuition -- here the real increase since 1975 is close to 260%. The historical target market for public universities -- median-income families hoping to provide their children with the means to enter the upper income strata -- saw its real income increase by only 27% during the period. This is the real college cost crunch. It is much, much harder for a policeman or a school teacher to send his child to State University today, as opposed to 30 years ago.
On the other hand, the balance between tuition and tax support for public colleges is a decision made by elected legislators. Median-income families and those of similar means, account for the majority of the electorate by far (those in the lowest quartile tend not to vote). If the policeman voted for prisons rather than universities, if the schoolteacher voted for state support of K-12 education rather than university education, then, as Sartre might say, it is inauthentic for them to bemoan the increased costs of a public university education relative to median family income. The voters have had their say on this apportionment, and must now live with the consequences.
Facing Reality
Readers with college-age children should be grateful that Harvard and other elite universities are, by and large, run by ivory-tower idealists who espouse democratic rather than elitist ideals. For if the cost of a Harvard education had kept up with the returns to capital since 1975, tuition today would be $94,500 a year -- not $32,000.
Younger readers, with a newborn child and a bit of surplus family capital, hold fast to this: It is highly likely that a portfolio allocated 80% to 20-year inflation-protected bonds (current real yield of about 2.3%), and 20% to an S&P 500 index fund (real return since 1926 averaging 7% or so) will provide the necessary funds when and if your newborn is ready to attend a private college.
Unless, of course, Harvard and its ilk wake up and begin to charge what the traffic -- families with surplus capital -- could readily bear.
EDWARD F. MCQUARRIE is a professor in the Leavey School of Business at Santa Clara University, a private Jesuit university in California.
A contrarian view of the higher cost of higher education
By EDWARD F. MCQUARRIE
AFTER CELEBRATING YOUR beloved child's admission to a prestigious university, it is now the season for writing your first tuition check. This may inspire the same mix of foreboding, anger and despair as that check you wrote to Uncle Sam last April 15. But you should not feel as bad about writing this check.
The College Board publishes summary statistics each year on the average enrollment-weighted cost of tuition at four-year private and public colleges in the U.S. The real tuition cost, after inflation, of private colleges since the 1975-76 school year has risen 165%. It was $21,235 in the 2005-2006 school year, compared to the $8,026 of 30 years earlier.
This trend leads to the familiar headline, "Cost of College Outpaces Inflation Again!"
Everyone who pays tuition believes it to be a bad thing when tuition and fees go up faster than inflation. But is it really?
Consider: In what kind of world would we see headlines like the following: "For 30th year, Tuition Increase Fails to Exceed Inflation."
Answer: A world in which higher education has accounted for a smaller and smaller proportion of Gross Domestic Product.
This doesn't sound so good: "Nation Invests Less in Higher Education for 30th Year; Sector Shrinks 62% since 1975." But these headlines would describe the same world.
If the growth in college tuition did not exceed inflation in an economy experiencing real growth, then the share of the economy represented by the college sector would necessarily shrink. If you believe that higher education is one of the important drivers of economic advancement then you should worry a lot if higher education's share of the economy were shrinking.
Fortunately, the growth in real GDP has almost exactly matched the growth in real private college tuition since 1975 -- the U.S. economy is now 2.58 times as large, in real terms, as 30 years ago.
Rising Rewards
It helps to know the basic structure of university budgets: Tuition equals salaries. When we say that real college tuition is 2.65 times what it was 30 years ago, we are also saying that real faculty wages are about 2.65 times what they were 30 years ago.
The typical college professor excites little sympathy on any count, so let's turn that around: How interested in your job would you be if it paid 60% less than it now does -- would it still seem like an attractive career? If tuition had not grown in real terms over the past 30 years, real faculty salaries would likewise not have grown; and many college faculty would do better today as barbers or auto mechanics.
Higher education is a service. If there is to be real GDP growth in our service economy, and if higher education is not to shrink as a portion of it, then college tuition must rise faster than the rate of inflation. In fact, it has to rise approximately 3% per year faster than inflation to match the expected real growth in the economy.
You have never seen the headline, "Private Colleges Cheaper than Ever Before -- 30 Year Decline Continues." But for some part of American society, this is the true and correct headline. For other parts of American society, the story is just as the conventional headline tells it: "College Slips Further Out of Reach for Many." So, the next part of the story is a tale of class and social division.
Ability to Pay
If we compare tuition to median family income, all the conventional gnashing of teeth comes back. Private college costs have far outstripped increases in median family income -- it's more than twice as hard today for the median-income family to pay for private college tuition as 30 years ago. But this comparison is specious. The median-income family couldn't afford private college tuition 30 years ago, either. The median-income family is simply not the target market for private colleges, except for scholarship students who bring something special to campus. They, of course, are getting a discount to make higher education more affordable.
Private colleges historically have drawn full-tuition students from families in the upper reaches of the income distribution. A family on the border of the upper middle class, at say the 80th percentile of family income, does still encounter a real cost of a private college education that has outstripped the growth in income -- but not by as much as most people think. The same is true for a family near the lower border of the upper class, around the 95th percentile.
But few families in the top strata expect to pay for college out of current income only. Given the incremental wage gains that accrue to a college education, it is in any case fair to regard tuition as the capitalized cost of obtaining those future wage gains. Hence, a proper perspective on the cost of private college tuition has to include capital income as well as wage income.
From the standpoint of families whose income is in the 95th percentile, and who are likely to enjoy substantial capital resources as well as generous wages, private college is considerably cheaper now than 30 years ago. Such a family has seen its real capital resources increase by a factor of 678%. For these folks, the cost of a private college education, relative to family capital, has shrunk by almost two-thirds.
In other words, the cost of sending Mortimer or Abigail to Harvard has shrunk by a great deal relative to the family resources typically available to the upper-income families who pay full tuition.
The real tragedy of increasing college costs has nothing to do with the tuition charged by Harvard and the like.
Increases in public college tuition have actually outstripped the increases in private college tuition -- here the real increase since 1975 is close to 260%. The historical target market for public universities -- median-income families hoping to provide their children with the means to enter the upper income strata -- saw its real income increase by only 27% during the period. This is the real college cost crunch. It is much, much harder for a policeman or a school teacher to send his child to State University today, as opposed to 30 years ago.
On the other hand, the balance between tuition and tax support for public colleges is a decision made by elected legislators. Median-income families and those of similar means, account for the majority of the electorate by far (those in the lowest quartile tend not to vote). If the policeman voted for prisons rather than universities, if the schoolteacher voted for state support of K-12 education rather than university education, then, as Sartre might say, it is inauthentic for them to bemoan the increased costs of a public university education relative to median family income. The voters have had their say on this apportionment, and must now live with the consequences.
Facing Reality
Readers with college-age children should be grateful that Harvard and other elite universities are, by and large, run by ivory-tower idealists who espouse democratic rather than elitist ideals. For if the cost of a Harvard education had kept up with the returns to capital since 1975, tuition today would be $94,500 a year -- not $32,000.
Younger readers, with a newborn child and a bit of surplus family capital, hold fast to this: It is highly likely that a portfolio allocated 80% to 20-year inflation-protected bonds (current real yield of about 2.3%), and 20% to an S&P 500 index fund (real return since 1926 averaging 7% or so) will provide the necessary funds when and if your newborn is ready to attend a private college.
Unless, of course, Harvard and its ilk wake up and begin to charge what the traffic -- families with surplus capital -- could readily bear.
EDWARD F. MCQUARRIE is a professor in the Leavey School of Business at Santa Clara University, a private Jesuit university in California.
Saturday, September 02, 2006
U.S. churches and congregants are
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Archives losing billions of dollars to fraudBy Rachel ZollTHE ASSOCiATED PRESS
NEW YORK - Randall W. Harding sang in the choir at Crossroads Christian Church in Corona, California, and donated part of his conspicuous wealth to its ministries.
In his business dealings, he underscored his faith by naming his investment firm JTL, or "Just the Lord.'' Pastors and churchgoers alike entrusted their money to him. By the time Harding was unmasked as a fraud, he and his partners had stolen more than $50 million from their clients, and Crossroads became yet another cautionary tale in what investigators say is a worsening problem plaguing America's churches.
Billions of dollars has been stolen in religion-related fraud in recent years, according to the North American Securities Administrators Association, a group of state officials who work to protect investors.
Between 1984 and 1989, about $450 million was stolen in religion-related scams, the association says. In its latest count - from 1998 to 2001 - the toll had risen to $2 billion. Rip-offs have only become more common since.
"The size and the scope of the fraud is getting larger,'' said Patricia Struck, president of the securities association and administrator of the Wisconsin Department of Financial Institutions, Division of Securities. "The scammers are getting smarter and the investors don't ask enough questions because of the feeling that they can be safe in church.''
Cases in recent years show just how vulnerable religious communities are.
Lambert Vander Tuig, a member of Saddleback Church in Lake Forest, California, ran a real estate scam that bilked investors out of $50 million, the Securities and Exchange Commission says. His salesmen presented themselves as faithful Christians and distributed copies of ``The Purpose Driven Life,'' by Saddleback pastor Rick Warren, according to the SEC. Warren and his church had no knowledge of Vander Tuig's activities, says the SEC.
At Daystar Assembly of God Church in Prattville, Alabama, a congregant persuaded church leaders and others to invest about $3 million in real estate a few years ago, promising some profits would go toward building a megachurch. The Daystar Assembly was swindled and lost its building.
And in a dramatically broader scam, leaders of Greater Ministries International, based in Tampa, Florida, defrauded thousands of people of half a billion dollars by promising to double money on investments that ministry officials said were blessed by God. Several of the con men were sentenced in 2001 to more than a decade each in prison.
"Many of these frauds are, on their face, very credible and legitimate appearing,'' said Randall Lee, director of the Pacific regional office of the SEC.
"You really have to dig below the surface to understand what's going on.''
Typically, a con artist will target the pastor first, by making a generous donation and appealing to the minister's desire to expand the church or its programs, according to Joseph Borg, director of the Alabama Securities Commission, who played a key role in breaking up the Greater Ministries scam.
If the pastor invests, churchgoers view it as a tacit endorsement. The con man, often promising double digit returns, will chip away at resistance among church members by suggesting they can donate part of their earnings to the congregation, Borg says.
"Most folks think 'I'm going to invest in some overseas deal or real estate deal and part of that money is going to the church and I get part. I don't feel like I'm guilty of greed,''' Borg says.
If a skeptical church member openly questions a deal, that person is often castigated for speaking against a fellow Christian.
Ole Anthony of the Trinity Foundation Inc. in Dallas, which investigates fraud and televangelism, partly blames the churches themselves for the problem. Anthony contends that the ``prosperity gospel'' - which teaches that the truly faithful are rewarded with wealth in this life - is creeping into mainstream churches.
Chuck Crites, a former member of Crossroads Church, learned firsthand how effective con artists can be.
The businessman was swindled out of $500,000 by Harding in a Ponzi scheme, which uses money from newer investors to pay off older ones.
Crites said Harding, who pleaded guilty last year to wire fraud and money laundering, boasted about helping fund a new Christian high school for Crossroads and hired a music pastor from the megachurch as a sales agent. "At one point he even told me how much money he had given to the church that year,'' Crites said.
Harding was nabbed with the help of Barry Minkow, who was himself convicted of fraud years ago. Minkow eventually became a pastor in San Diego and started the Fraud Discovery Institute, which is dedicated to investigating scams.
Crites is putting his money toward a new fraud-awareness kit for churches and other groups that Minkow is developing.
"It made me angry at how people are abusing the trust that exists in church communities,'' Crites said.
Investigators say all denominations are at risk, but the most susceptible communities are ones where members are deeply engaged in church activities, such as service programs and small group prayer, giving con artists plenty of chance to ingratiate themselves with congregants.
Often, perpetrators are so successful building an image as good Christians that churchgoers won't cooperate with law enforcement authorities even after the crime is revealed.
"Money has a way of blinding objectivity, even for we who are believers,'' Minkow says.
SECTIONS
News
Business
Life/Religion
A&E
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Health
editorials
Archives losing billions of dollars to fraudBy Rachel ZollTHE ASSOCiATED PRESS
NEW YORK - Randall W. Harding sang in the choir at Crossroads Christian Church in Corona, California, and donated part of his conspicuous wealth to its ministries.
In his business dealings, he underscored his faith by naming his investment firm JTL, or "Just the Lord.'' Pastors and churchgoers alike entrusted their money to him. By the time Harding was unmasked as a fraud, he and his partners had stolen more than $50 million from their clients, and Crossroads became yet another cautionary tale in what investigators say is a worsening problem plaguing America's churches.
Billions of dollars has been stolen in religion-related fraud in recent years, according to the North American Securities Administrators Association, a group of state officials who work to protect investors.
Between 1984 and 1989, about $450 million was stolen in religion-related scams, the association says. In its latest count - from 1998 to 2001 - the toll had risen to $2 billion. Rip-offs have only become more common since.
"The size and the scope of the fraud is getting larger,'' said Patricia Struck, president of the securities association and administrator of the Wisconsin Department of Financial Institutions, Division of Securities. "The scammers are getting smarter and the investors don't ask enough questions because of the feeling that they can be safe in church.''
Cases in recent years show just how vulnerable religious communities are.
Lambert Vander Tuig, a member of Saddleback Church in Lake Forest, California, ran a real estate scam that bilked investors out of $50 million, the Securities and Exchange Commission says. His salesmen presented themselves as faithful Christians and distributed copies of ``The Purpose Driven Life,'' by Saddleback pastor Rick Warren, according to the SEC. Warren and his church had no knowledge of Vander Tuig's activities, says the SEC.
At Daystar Assembly of God Church in Prattville, Alabama, a congregant persuaded church leaders and others to invest about $3 million in real estate a few years ago, promising some profits would go toward building a megachurch. The Daystar Assembly was swindled and lost its building.
And in a dramatically broader scam, leaders of Greater Ministries International, based in Tampa, Florida, defrauded thousands of people of half a billion dollars by promising to double money on investments that ministry officials said were blessed by God. Several of the con men were sentenced in 2001 to more than a decade each in prison.
"Many of these frauds are, on their face, very credible and legitimate appearing,'' said Randall Lee, director of the Pacific regional office of the SEC.
"You really have to dig below the surface to understand what's going on.''
Typically, a con artist will target the pastor first, by making a generous donation and appealing to the minister's desire to expand the church or its programs, according to Joseph Borg, director of the Alabama Securities Commission, who played a key role in breaking up the Greater Ministries scam.
If the pastor invests, churchgoers view it as a tacit endorsement. The con man, often promising double digit returns, will chip away at resistance among church members by suggesting they can donate part of their earnings to the congregation, Borg says.
"Most folks think 'I'm going to invest in some overseas deal or real estate deal and part of that money is going to the church and I get part. I don't feel like I'm guilty of greed,''' Borg says.
If a skeptical church member openly questions a deal, that person is often castigated for speaking against a fellow Christian.
Ole Anthony of the Trinity Foundation Inc. in Dallas, which investigates fraud and televangelism, partly blames the churches themselves for the problem. Anthony contends that the ``prosperity gospel'' - which teaches that the truly faithful are rewarded with wealth in this life - is creeping into mainstream churches.
Chuck Crites, a former member of Crossroads Church, learned firsthand how effective con artists can be.
The businessman was swindled out of $500,000 by Harding in a Ponzi scheme, which uses money from newer investors to pay off older ones.
Crites said Harding, who pleaded guilty last year to wire fraud and money laundering, boasted about helping fund a new Christian high school for Crossroads and hired a music pastor from the megachurch as a sales agent. "At one point he even told me how much money he had given to the church that year,'' Crites said.
Harding was nabbed with the help of Barry Minkow, who was himself convicted of fraud years ago. Minkow eventually became a pastor in San Diego and started the Fraud Discovery Institute, which is dedicated to investigating scams.
Crites is putting his money toward a new fraud-awareness kit for churches and other groups that Minkow is developing.
"It made me angry at how people are abusing the trust that exists in church communities,'' Crites said.
Investigators say all denominations are at risk, but the most susceptible communities are ones where members are deeply engaged in church activities, such as service programs and small group prayer, giving con artists plenty of chance to ingratiate themselves with congregants.
Often, perpetrators are so successful building an image as good Christians that churchgoers won't cooperate with law enforcement authorities even after the crime is revealed.
"Money has a way of blinding objectivity, even for we who are believers,'' Minkow says.
