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Time - Man of the Year
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Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso
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1992-09-22
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THE WEEK, Page 24BUSINESSGreed as Gospel
Did a brokerage firm prey on good faith to sell bad bonds?
In the late 1980s, when Wall Street was busy churning out
Armani-clad traders and chilling the champagne, a small Texas
brokerage house was in the midst of a holier mission. Peddling
investments in goodwill, AMI Securities sold more than $250
million in bonds on behalf of American churches between 1986 and
1989. But according to a Securities and Exchange Commission suit
filed against the firm last week, the bond offering was no
blessing to tens of thousands of unsuspecting investors.
Charging AMI with fraud, the SEC claims that purchasers
were duped into believing the bonds were risk-free. The SEC
alleges that AMI misrepresented the financial condition of the
churches involved, a number of which were so distressed that it
was unlikely they'd ever be able to return investments. The suit
also claims that AMI guaranteed customers that their money was
insured, when in fact the firm had only $2 million to cover more
than 100 times that amount in bond sales.
Unfortunately, many of those who participated in the AMI
offering were elderly churchgoers who had drawn funds from
retirement savings. Remarked SEC attorney Spencer Barasch:
"These people relied greatly on the expertise of AMI, and they
will suffer." But not if their dollars went to help fund the
Rev. Jerry Falwell's Old Time Gospel Hour, a television show
that accounted for $13 million in bonds issued via an AMI
subsidiary. Falwell, who has not been charged with any
wrongdoing, promised to return "100% of principal" to investors.