Investment fraud, theft trial begins for ex-pastor

The defense attorney for a former Colorado Springs pastor accused of luring churchgoers to an investment company, then overcharging them more than $3 million in fees, told jurors Monday his client was not even a company official and should not have been charged.

Douglas Alan Scott’s trial on charges of securities fraud and theft began Monday in 4th Judicial District Judge J. Patrick Kelly’s courtroom. He could face up to 12 years in prison on each count if convicted.

Scott, 47, is the former pastor of the now-defunct River of Life Church.

Scott’s attorney, Terry Rector, told jurors all Scott did was find investors, he was not a broker or a sales representative for the XL Capital Partners Inc. and its hedge fund called the Vision Fund.

A Denver grand jury indicted Scott in 2006.

The fund collected nearly $24 million from 450 investors, including several churches and religious organizations based in Colorado Springs. Investigators found $7.5 million from the fund was allegedly used to buy a $4.1 million corporate jet, a personal home for a company official and undisclosed referral fees to those who helped recruit investors.

First Assistant Attorney General Jean Woodford told jurors Scott misled investors by not revealing how much of a referral fee he would be getting. He also signed a promissory note for more than $3 million to help buy the jet when he knew “the only assets (the company had) was money of investors.”

“Theft means he knowingly used the money of others, through deception, for the purchase and use of an airplane,” Woodford said during her opening statements.

Rector laid the blame for everything on Hamilton Alan Bird, 44, the head of XL.

“Alan Bird in the key,” Rector said. He “formed the division fund in 2002 for the purpose of trading other people’s money.”

Bird was in charge of making sure investors had all the information required by law, Rector said.

“The records are clear. Mr. Scott was merely a signer for the debt. He never received any assets,” Rector said. “There are eight others who received referral fees, but he’s the only one who’s here.”

Hedge funds use sophisticated investment strategies such as selling borrowed stock to make profits on price declines and buying subprime mortgages. The aggressive funds have grown in popularity nationally because of reported high returns.

Stephanie Bachoroski testified that she invested $4,000 in XL because she trusted Scott and he was her friend.

“It was all I had left in my savings. I told him (Scott) I cannot lose this money. He said, ‘I know’ and smiled confidently, assuring me it was a good investment.”

Asked if she still trusted him, Bachoroski said “Umm, not really.”

The men settled a civil lawsuit with state regulators by agreeing to pay $21.65 million and agreed to lifetime bans from the securities industry.

Bird’s trial on charges of three fraud counts and five theft counts is scheduled for Jan. 18. He has two businessrelated felony convictions.

The company’s accountant, David Edward Newton, pleaded guilty to securities fraud and was sentenced to 15 years probation and 200 hours of community service.

Scott and Bird remain free on $20,000 bail.