Article
Kiosk fraud case continues as black churches win partial victory
A Detroit court may soon decide whether two kiosk salesmen were con men as they offered African American churches a deal that proved too good to be true.
August 24, 2010
The success of kiosks as an information device and their presence virtually everywhere in America has been a boon for the self-service industry and for consumers.
Unfortunately success often breeds questionable, even criminal behavior, where shysters prey on those who have come to accept kiosks as something as common as televisions.
Last week, the city of Washington, D.C., reached a settlement with a kiosk leasing firm that agreed to stop seeking payments for kiosks from five African American churches that had gotten involved with a deal that proved too good to be true.
The settlement may be the first in a suit that the city filed last year against three equipment leasing firms and two kiosk salesmen and their companies, all alleged to be involved in a complicated, convoluted deal combining kiosks, con men and black churches.
The con appears to have stretched from coast to coast with churches hit in California and Michigan, along with the nation's capital.
Last October, Michigan charged the two salesmen, Michael J. Morris and Willie T. Perkins, with 10 counts of racketeering, conspiracy and fraud for allegedly taking $660,000 from 21 churches in the state. Reports at the time said Morris and Perkins had targeted more than 160 churches in 14 states and the District of Columbia.
According to press accounts, Morris and Perkins began about a decade ago to visit African American churches around the country as executives of Urban Interfaith Network and Television Broadcasting Online (TVBO), companies based either in Washington or suburban Maryland. Morris and Perkins lived in suburban Maryland.
Michigan attorney general Mike Cox reported that Morris and Perkins offered the churches free kiosks that would be placed onsite to provide outreach, education and Internet services to parishioners. In return, the kiosks would carry advertising from a national sponsor that sought to reach the parishioners.
As an added inducement, Morris and Perkins told some churches that they would earn revenue of their own from the sponsor's advertising.
The two men told church leaders a contract was just a formality but insisted that it be signed. Many leaders put their name to ink on the contract, unknowingly agreeing to pay the full price for the kiosk, according to Michigan's court filing.
Morris and Perkins turned around and contacted equipment leasing firms and asked for loans to buy kiosks, using the church contracts as collateral. Once they got the loans, valued at as much as $27,000 per kiosk, the duo used some of the money to get barebones equipment for the churches and made initial monthly leasing payments to the equipment providers.
In Washington the duo worked a similar modus operandi.
"The churches either did not get the equipment, or if they did, it wasn't working, and if it was, the sponsorship deals never materialized," said the city's attorney general, Peter Nickles.
Meanwhile, the equipment leasing firms believed they would be seeing monthly checks from the churches for the kiosks; and at the churches there was usually little money to pay a lease fee, and there was no sponsor for the kiosk advertising.
Perkins and Morris played the middle for years, making an occasional lease payment and installing a kiosk or two, Michigan charged.
As the deals continued, the leasing firms billed the churches for the kiosks, and through some contracts had the right to access the churches' finances.
"The firm could draw down from the bank account of the church. They charged the lease payments. In one case the firm took $60,000," said Nickles.
The scheme could only last so long before the churches contacted authorities. Michigan arraigned Perkins and Morris last October and plans to begin its case against them in Detroit's 3rd Circuit Court at the end of September, a spokesperson for AG Cox said.
Perkins's and Morris's attorneys, LaRene & Kriger of Detroit, did not return calls.
The extent of the equipment leasing firms' involvement is not clear.
But the behavior of some of them drew the attention of Nickles and California attorney general Edmund G. Brown Jr. The two prosecutors contend in separate investigations that some of the lessors too aggressively went after the churches even after learning of the alleged scam, continuing to enforce the terms of the leases, filing lawsuits against churches to collect payment, interest and late fees.
In April 2009, Nickles charged equipment lessors Balboa Capital Corp. of Irvine, Calif., Chesapeake Industrial Leasing of Baltimore and United Leasing Associates of Brookfield, Wis., with defrauding the churches.
Balboa last week settled with Washington. It agreed to stop collecting on leases with several of the churches and to pay two churches a total of $4,000. Balboa wrote in legal filings it was "not complicit in the alleged scheme" and agreed to the settlement to avoid litigation costs. Balboa did not return calls for comment.
Nickles said he continues to aggressively pursue the other two lessors. The cases go on, and the churches have worthless equipment gathering dust.
The Forestville New Redeemer Baptist Church in suburban Maryland lost thousands. After the settlement was announced, the church's leader The Rev. Nathaniel Thomas told The Washington Post, "This is a partial victory for justice and fairness."
(Photo by Davidsonscott15.)
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