The $2.3-million, 103-foot powerboat Gregory Setser bought in June was just a starter. The self-styled Christian investor told his yacht broker that he was prepared to drop $12 million for a 140-footer with a helipad and $30 million to restore a 300-foot yacht once owned by the shah of Iran.
So when the broker, Lee Racicot, visited Setser's office near Ontario International Airport on Nov. 19, he expected to walk out with two solid offers.
But as he stepped out of the elevator on the eighth floor, Racicot saw that IPIC International Inc.'s front door, normally bolted, was propped ajar with a book. Beyond it, the usually immaculate offices were strewn with papers, and a swarm of strangers fell silent as Racicot asked, "Who are you?"
"We control the company now," said a man in a black suit. "We're FBI."
The feds were bringing down the curtain on what prosecutors and the Securities and Exchange Commission allege was an elaborate three-year scheme that fleeced evangelical Christians out of $160 million.
Using endorsements from Ralph E. Wilkerson, the former pastor of Melodyland Christian Center in Anaheim, and other prominent evangelists to lure victims, Setser touted can't-miss investments to ministries across the nation, according to authorities who arrested him and three members of his family Nov. 18.
"It appeared that Ralph Wilkerson was the lineman who opened up the hole that Greg Setser ran through," said David Middlebrook, an attorney with many evangelist clients who signed a statement, attached to an SEC lawsuit, describing his dealings with Setser. "I can't speak to what he knew or thought. I certainly would hope to believe he wouldn't have done it knowingly."
Wilkerson, 76, didn't return repeated calls.
IPIC is an abbreviation for International Product Investment Corp. In criminal charges and a civil lawsuit, federal prosecutors and regulators say Setser told his "partners" that God had blessed him with the ability to purchase or manufacture various goods -- paint, metal garden decor, toys, bottled water, real estate, condoms -- at low prices around the world.
The authorities say he claimed to have guaranteed buyers, often retailers like Costco Wholesale Inc., Mikasa Inc. and Pier 1 Imports Inc., already lined up, and wanted to share his good fortune with other Christians. The burly 6-footer told investors to expect returns of 25% to 50% in three to six months and bragged that only one deal in 10,000 failed, according to an indictment handed up by a federal grand jury in Dallas.
In reality, it was all a scam, the government says.
Allegations of Deceit
Setser, who claimed to be a former minister, had pleaded no contest to theft by check in Texas state court in 1993 and filed for bankruptcy protection later that year. The court dismissed his Chapter 13 petition four years later after he failed to make payments as agreed, according to the SEC. When he arrived in California touting IPIC three years ago, the agency says, he failed to mention those details about his past to investors.
Setser and his wife, Cynthia, both 47-year-old Rancho Cucamonga residents, are in jail pending a bail hearing set for Friday in federal court in Riverside. Their daughter-in-law, Charnelle Setser, 21, and Gregory Setser's sister, Deborah Setser, 38, both also from Rancho Cucamonga, were arrested on the same securities fraud and money laundering charges; they have been released on bail. A fifth defendant, T. Thomas Henschke, was arrested in Florida.
Setser's attorney, Philip K. Cohen of Los Angeles, declined to comment on details of the case beyond saying he was in discussions with federal prosecutors and SEC attorneys. Lawyers for the others didn't return phone calls.
Setser cut a noticeable swath as he promoted his investments, federal authorities said, calling them "joint ventures" to avoid having to register them as securities.
Employees of the building where IPIC rented space said Setser hired burly guards to protect himself and conducted "bug sweeps" of the offices for fear he was being secretly recorded. The building's manager, Michael Bates, said Setser sometimes arrived at work in a limousine followed by a "chase car" carrying his guards. IPIC officials were so worried about security that "we had to re-key the door to their suite," said Bates, who opened the door of the offices for federal investigators when they arrived.
IPIC supposedly had $700 million in annual sales, but a local operating division called Iron Garden Inc. appears unremarkable except for its location in a 100-year-old winery complex just north of the Ontario airport. Visible through the rusting metal windows of the small brick building recently were bowls of dusty-looking plastic fruit, a few painted walking sticks and several model sailing ships.
Across a lane, a small yard is filled with rusty metal gates, trellises, shelves and benches, apparently part of the garden decorations IPIC said it imported from North Africa.