USU and Church must return millions in fraudulent donations

[JAHS]

I don't think this has been discussed yet.

USU sued after receiving almost a decade of fraud donations

JACEE CALDWELL on July 28, 2021 at 5:28 pm
Utah State University and The Church of Jesus Christ of Latter-day Saints have been asked to give back almost a decade of donations from a fake coin business owner. 

In November 2018, Gaylen Rust, who had scammed hundreds of people to invest in his fake coin business, Rust Rare Coin, was exposed for running a Ponzi scheme that became one of the biggest in Utah history. 

This trick, which went on for many years, had his investors convinced that their money was going towards purchases of valuable metals that would be sold for a profit. 

And with all of this illegal money coming in, Rust had the means to purchase companies such as HUGESound Post Production and R Legacy Entertainment. 

However, Rust donated $2.4 million to the church and, according to USU spokesperson, Amanda DeRito, $544,806 to the university.

The Salt Lake Tribune reported that Rust also had an interest in arts and music. He owned a music store, a recording label and even a charity that supported art programs in Utah schools known as Legacy Music Alliance.

And because Rust had a huge interest in the arts, DeRito said the contribution money was used as it was intended and put towards remodeling the Newel and Jean Daines Concert Hall back in 2017.

The donations given to USU actually came from the Legacy Music Alliance, starting in 2009 and ended up being the biggest donation ever given from the charity.

Some people like Tristin Soule, a sophomore at USU, just hope the money the university has to return won’t come at the cost of the students. 

“[The students] are the last people that did anything wrong. I feel like if you put it at the expense of the students then it’s just causing more damage to more people,” Soule said.

As for the church, they have already agreed to pay back the $2.4 million dollars that Rust gave through tithing and other generous donations. 

Spokesman Sam Penrod told the Salt Lake Tribune that “the Church was not aware these donations were the result of ill-gotten gains and is returning the donations as agreed upon with the court-appointed trustee.”

However, it can sometimes be close to impossible for organizations to detect when contributions are illegitimate. Especially in this case when the donor has made several donations over time. 

Wayne Klein, the conflict’s receiver for the case, compared it to running a fundraiser. The person putting on the fundraiser isn’t going to question every person who attempts to make a donation, especially if they need it. If a person were to do that, all their investors would feel like they were being treated like a crook and they wouldn’t raise any money. 

“The fact of the matter is that the university, or any recipient of donations, doesn’t really have the ability to figure that out. They just have to hope that not many people are running frauds.” 

And the university and the church aren’t the only ones that Rust fooled. Along with hundreds of people who invested in his fake company, he also had an impact on individuals who gave him everything. 

Deseret News reported on one of those individuals who took a direct hit: Chance Thomas, who started the company HUGEsound and sold it to Rust.

Not only did Thomas see his business crumble after the news of Rust’s fraud, but he also lost music copyrights, distribution deals and soundtrack agreements to the courts. 

However, after an almost two-year battle, Thomas was finally able to retrieve some of his soundtracks and start his own online music gallery. 

Similarly to Thomas, Klein stated that it is very unrealistic for victims of fraud to expect to get back everything they lost. However, he said getting the $544,806 from USU would be a big help.

Klein said these victims are already only going to get a percentage back of what they put in. In these cases, the investors should only expect to get around 20-40% back. 

Both Klein and DeRito are working towards the best possible outcome for all parties. 

His hope is that USU will agree to a plan that will allow him to eventually get all of the money back and finally return it to where it belongs.
----------------------------------------

I wonder how many more of these kinds of donations have been made with fraudulent gains?
 

 

[Kenngo1969]

$2.4 million is chump change to the Church of Jesus Christ of Latter-day Saints, and I'm sure the Church would want those who have been defrauded, insofar as possible, to recoup their losses.  The only thing I would really be concerned about is whether, if a non-profit accepts a donation in good faith, the return of such a donation sets any kind of undesirable precedent.

[JAHS]

1 minute ago, Kenngo1969 said:

$2.4 million is chump change to the Church of Jesus Christ of Latter-day Saints, and I'm sure the Church would want those who have been defrauded, insofar as possible, to recoup their losses.  The only thing I would really be concerned about is whether, if a non-profit accepts a donation in good faith, the return of such a donation sets any kind of undesirable precedent.

Yes. My concern as well.

[The Nehor]

3 minutes ago, Kenngo1969 said:

$2.4 million is chump change to the Church of Jesus Christ of Latter-day Saints, and I'm sure the Church would want those who have been defrauded, insofar as possible, to recoup their losses.  The only thing I would really be concerned about is whether, if a non-profit accepts a donation in good faith, the return of such a donation sets any kind of undesirable precedent.

Church has done similar things before and so have other charities and non-profits. I doubt it. Generally the law favors the people who were robbed over the charity the robber donated to. Last time I read up on it (several years ago) there were a lot of provisos and exceptions around it but this seems like a simple case.

[katherine the great]

48 minutes ago, JAHS said:

---------------------------

I wonder how many more of these kinds of donations have been made with fraudulent gains?

ALOT! Maybe not to the church and USU but in general. It’s a part of a con‘s MO to donate large amounts to local institutions to raise their own status in the community.

[katherine the great]

41 minutes ago, Kenngo1969 said:

The only thing I would really be concerned about is whether, if a non-profit accepts a donation in good faith, the return of such a donation sets any kind of undesirable precedent.

Only if they get caught. 

[sunstoned]

1 hour ago, Kenngo1969 said:

$2.4 million is chump change to the Church of Jesus Christ of Latter-day Saints, and I'm sure the Church would want those who have been defrauded, insofar as possible, to recoup their losses.  The only thing I would really be concerned about is whether, if a non-profit accepts a donation in good faith, the return of such a donation sets any kind of undesirable precedent.

Yes, 2.4 million is chump change for an corporation that has over 120 Billion is stocks and vast holdings in land and other businesses.  

[JustAnAustralian]

2 hours ago, Kenngo1969 said:

The only thing I would really be concerned about is whether, if a non-profit accepts a donation in good faith, the return of such a donation sets any kind of undesirable precedent.

No need to worry about precedent, they legally have to return it. 

Quote

According to state and federal law, any money that was collected through illegal means, and then donated, must be returned. https://www.sltrib.com/news/education/2021/07/22/how-lds-church-utah-state/

 

[JustAnAustralian]

1 hour ago, sunstoned said:

Yes, 2.4 million is chump change for an corporation that has over 120 Billion is stocks and vast holdings in land and other businesses.  

They could have a trillion dollars and I wouldn't care.

[Kenngo1969]

@JustAnAustralian

Quote

According to state and federal law, any money that was collected through illegal means, and then donated, must be returned. https://www.sltrib.com/news/education/2021/07/22/how-lds-church-utah-state/

I can think of reasons why those statutes would be hard to enforce evenhandedly and nonselectively, and I probably wouldn't have too tough of a time coming up with examples.

[JustAnAustralian]

2 minutes ago, Kenngo1969 said:

I can think of reasons why those statutes would be hard to enforce evenhandedly and nonselectively, and I probably wouldn't have too tough of a time coming up with examples.

I'm sure we all probably could, but in this case the money is there, and able to be returned in a lump sum rather than over many years as might be the case with smaller organisations.

[The Nehor]

5 hours ago, Kenngo1969 said:

@JustAnAustralian

I can think of reasons why those statutes would be hard to enforce evenhandedly and nonselectively, and I probably wouldn't have too tough of a time coming up with examples.

If it were very easy to shield stolen money in charities I can think of lot of ways it could be used for money laundering and a tool to shield ill-gotten gains from seizure.

[Amulek]

10 hours ago, JAHS said:

In November 2018, Gaylen Rust, who had scammed hundreds of people to invest in his fake coin business, Rust Rare Coin, was exposed for running a Ponzi scheme that became one of the biggest in Utah history. 

I'm sad to hear about this. I have actually purchased stuff from Rust Rare Coin before - they really did have a good coin shop.

Hopefully those who were defrauded will be able to recover some of what was lost.

 

[Duncan]

Something nutty to me is this Rust fella figured into the whole Mark Hofmann dealio. Why wouldn't he think he wouldn't get caught like Hofmann? 

[Teancum]

7 hours ago, JustAnAustralian said:

They could have a trillion dollars and I wouldn't care.

Of course you wouldn't. Most true believers wouldn't.  So what?

[JustAnAustralian]

15 minutes ago, Teancum said:

Of course you wouldn't. Most true believers wouldn't.  So what?

So if someone is going to post off topic passive aggressive jabs at the church, I see no reason not to counter them in off topic ways.

[Teancum]

2 hours ago, JustAnAustralian said:

So if someone is going to post off topic passive aggressive jabs at the church, I see no reason not to counter them in off topic ways.

The comment was directly related to a comment that said the 2.4 million was chump change to the Church.  Noting that since the church has a lot of assets in response to that comment is not off topic.

[Bernard Gui]

16 hours ago, sunstoned said:

Yes, 2.4 million is chump change for an corporation that has over 120 Billion is stocks and vast holdings in land and other businesses.  

Hurrah! It’s wonderful that the Church is financially independent.

[JAHS]

11 minutes ago, Bernard Gui said:

Hurrah! It’s wonderful that the Church is financially independent.

Yes. It learned it's lesson from Lorenzo Snow's time in 1900 when the church was millions in debt. They don't want that to ever happen again, regardless of what happens in the world.

[CV75]

20 hours ago, sunstoned said:

Yes, 2.4 million is chump change for an corporation that has over 120 Billion is stocks and vast holdings in land and other businesses.  

The donation wasn't made for the benefit of the Church (her financial holdings have nothing to do with it) so much as for the covenant joy and blessings of of giving, and so is really an issue between the giver an the Lord 

[Calm]

7 minutes ago, CV75 said:

The donation….for the covenant joy and blessings of of giving, and so is really an issue between the giver an the Lord 

The donation from the guy committing fraud?  Or do you mean speaking in generally, such donations are for the purpose of…. even is misused by a giver for another purpose at times?

Edited July 31, 2021 by Calm

[Calm]

4 hours ago, JAHS said:

Yes. It learned it's lesson from Lorenzo Snow's time in 1900 when the church was millions in debt. They don't want that to ever happen again, regardless of what happens in the world.

Wasn’t there a big building push in Europe, especially England in late 50s and early 60s that caused some debt.  The name of the man behind it is somewhere in the middle of my brain and I can’t pull it out.  My memory is that they changed to ensuring a building was paid for before building to prevent future issues…but don’t trust me tonight, maybe it will lead others to confirm or disprove though.

Added:  I kept going to Moyers and I knew it wasn’t that, but was closer than I thought:

https://en.wikipedia.org/wiki/Henry_D._Moyle
 

Quote

Moyle spearheaded much of the church's building program in the early 1960s. He believed that the Church Office Building, the headquarters of the LDS Church, should have been twice its size. He was also convinced that by building larger meetinghouses, the church would attract more converts. Moyle convinced McKay not to publish an account of church spending as was customary in order to hide the extent of the budget deficit caused by spending on buildings.[5] By 1962, the deficit had reach $32 million. His optimistic building programs placed a considerable financial strain upon the church and McKay eventually relieved Moyle from many of his administrative responsibilities.[6]

 

Edited July 31, 2021 by Calm

[CV75]

9 minutes ago, Calm said:

The donation from the guy committing fraud?  Or do you mean speaking in generally, such donations are for the purpose of…. even is misused by a giver for another purpose at times?

Both in general and for the donation from the guy donating fraudulently. I was also being kind of snarky.

[JAHS]

Fraud and ponzi schemes are unfortunately not new in Utah and have involved bishops and stake presidents. And there was probably a lot of tithing that was paid on the ill-gotten gains:

LDS Church being sued for tithing paid by suspected fraudster

Former LDS stake president pleads guilty to scamming $1.5M from church members

Affinity fraud continues to plague Utahns and Mormons

Former LDS bishop pleads guilty to felony fraud charges

Wife Of Fraudster Gives Advice On How Investors Were Duped And How To Prevent Fraud

Ex-LDS bishop charged with investment fraud with singles ward members

Kaysville man accused of $1.5M scam against fellow LDS Church members has heart attack, trial put off

[Robert F. Smith]

On 7/29/2021 at 8:42 PM, JAHS said:

I don't think this has been discussed yet.

USU sued after receiving almost a decade of fraud donations

JACEE CALDWELL on July 28, 2021 at 5:28 pm
Utah State University and The Church of Jesus Christ of Latter-day Saints have been asked to give back almost a decade of donations from a fake coin business owner. 

In November 2018, Gaylen Rust, who had scammed hundreds of people to invest in his fake coin business, Rust Rare Coin, was exposed for running a Ponzi scheme that became one of the biggest in Utah history. 

This trick, which went on for many years, had his investors convinced that their money was going towards purchases of valuable metals that would be sold for a profit. 

And with all of this illegal money coming in, Rust had the means to purchase companies such as HUGESound Post Production and R Legacy Entertainment. 

However, Rust donated $2.4 million to the church and, according to USU spokesperson, Amanda DeRito, $544,806 to the university.

The Salt Lake Tribune reported that Rust also had an interest in arts and music. He owned a music store, a recording label and even a charity that supported art programs in Utah schools known as Legacy Music Alliance.

And because Rust had a huge interest in the arts, DeRito said the contribution money was used as it was intended and put towards remodeling the Newel and Jean Daines Concert Hall back in 2017.

The donations given to USU actually came from the Legacy Music Alliance, starting in 2009 and ended up being the biggest donation ever given from the charity.

Some people like Tristin Soule, a sophomore at USU, just hope the money the university has to return won’t come at the cost of the students. 

“[The students] are the last people that did anything wrong. I feel like if you put it at the expense of the students then it’s just causing more damage to more people,” Soule said.

As for the church, they have already agreed to pay back the $2.4 million dollars that Rust gave through tithing and other generous donations. 

Spokesman Sam Penrod told the Salt Lake Tribune that “the Church was not aware these donations were the result of ill-gotten gains and is returning the donations as agreed upon with the court-appointed trustee.”

However, it can sometimes be close to impossible for organizations to detect when contributions are illegitimate. Especially in this case when the donor has made several donations over time. 

Wayne Klein, the conflict’s receiver for the case, compared it to running a fundraiser. The person putting on the fundraiser isn’t going to question every person who attempts to make a donation, especially if they need it. If a person were to do that, all their investors would feel like they were being treated like a crook and they wouldn’t raise any money. 

“The fact of the matter is that the university, or any recipient of donations, doesn’t really have the ability to figure that out. They just have to hope that not many people are running frauds.” 

And the university and the church aren’t the only ones that Rust fooled. Along with hundreds of people who invested in his fake company, he also had an impact on individuals who gave him everything. 

Deseret News reported on one of those individuals who took a direct hit: Chance Thomas, who started the company HUGEsound and sold it to Rust.

Not only did Thomas see his business crumble after the news of Rust’s fraud, but he also lost music copyrights, distribution deals and soundtrack agreements to the courts. 

However, after an almost two-year battle, Thomas was finally able to retrieve some of his soundtracks and start his own online music gallery. 

Similarly to Thomas, Klein stated that it is very unrealistic for victims of fraud to expect to get back everything they lost. However, he said getting the $544,806 from USU would be a big help.

Klein said these victims are already only going to get a percentage back of what they put in. In these cases, the investors should only expect to get around 20-40% back. 

Both Klein and DeRito are working towards the best possible outcome for all parties. 

His hope is that USU will agree to a plan that will allow him to eventually get all of the money back and finally return it to where it belongs.
----------------------------------------

I wonder how many more of these kinds of donations have been made with fraudulent gains?

I once sold some rare coins to Rust and he gave me a fair price.

However, fraud is quite normal in today's world.  Anytime money is to be made, someone will find a way to game the system.  This includes such things as exorbitant estimates on the value of art contributed -- one recalls the scandal some years ago in which people gifting art works to BYU vastly overestimated the value for tax purposes.