Miracle cars scam

The miracle cars scam was an advance fee fraud that ran from 1997 to 2002. It was one of the largest advance fee frauds in world history, as well as the largest automobile fraud in American history. In its run of just over four years, over 4,000 people bought 7,000 cars that did not actually exist, losing over $21 million.

The scam

Just before Christmas 1997, 23-year-old Robert Gomez stepped into the "discipleship pulpit" of Christ Christian Home Missionary Baptist Church in Compton, California; a suburb of Los Angeles. He introduced himself as the adopted son of recently deceased food tycoon John Bowers, who had left an estate valued at $411 million. Gomez announced that Bowers, a devout Christian, had instructed his estate to sell 16 cars valued at $1,000 to $1,100--the price of taxes and licensing--to his fellow believers. However, they could not actually be delivered until the Bowers estate cleared probate court, and the Vehicle identification numbers could not be released due to a gag order imposed by the probate judge.

At the time, Gomez was working as a security guard in Los Angeles and lived with a friend, James Nichols, whose family had been longtime members of the church. Gomez first told Nichols about Bowers when they met four years before, and they'd been receiving calls from men claiming to be Bowers' attorneys off and on since Nichols moved back in with his parents in Carson, another Los Angeles suburb, three years earlier. Nichols actually claimed to have met Bowers at a country club in Long Beach. Later, Nichols agreed to serve as the executor of the Bowers estate.

Later that day, church members flocked to Nichols' mother, Rose, with checkbooks in hand. One of them called the cars "miracle cars" since Bowers had intended them to be miracles for people who had led dreary lives. The name stuck. Almost overnight, Rose Nichols sold $30,000 worth of cars to relatives and church members. Before long, the proceeds reached $1 million. Rose was overwhelmed, so Nichols and Gomez designated several "team captains" to handle sales. It wasn't long before they were overwhelmed as well.

Later in 1998, Rose Nichols received a call from Gwen Baker, who worked for Primerica Financial Services in Memphis, Tennessee. She'd heard about the Miracle Cars through her nondenominational charismatic church in Memphis--but was not only interested in buying one of them, but helping to sell them. She flew to Los Angeles to meet Nichols and Gomez, who immediately hired her as a "National Finder"--a professional sales manager who could also set up a central office for operations. Baker quit her job at Primerica, and opened an office in Memphis. She worked primarily through pastors of other churches in the Southeast who told their flocks about the cars. By early 2000, two other "National Finders" had joined up--Corinne Conway, an ordained minister in Higginsville, Missouri; and Kim Krawizcki, a former mortgage professional in Philadelphia.

The sales figures were staggering. For example, Conway made $992,000 worth of finder's fees in 2000 alone. A professional car finder in the Los Angeles area bought $120,000 in one day. Former NFL players Neil Smith and Ricky Siglar bought a total of $700,000 worth of cars. The promised delivery date got pushed back numerous times, but the Miracle Cars team readily distributed refunds to those who wanted out. When that didn't work, Gomez used his friendship with the finance manager of a Los Angeles-area Toyota dealership to fabricate letters stating that the cars were being stored in secure lots across the Los Angeles area.

Exposed

As it turned out, there was no John Bowers and no estate or probate case. Most importantly, there were no cars. The money was actually being used primarily to finance Gomez' ambitions of becoming a professional gambler. He once won $1 million playing pai gow poker, and often gambled with Larry Flynt. Nichols and Gomez ended their partnership in September 2001 and Nichols used some of the proceeds from the scam to open a custom car parts business in Las Vegas. It never got off the ground.

Higginsville police chief Cindy Schroer heard about the large number of Miracle Cars being sold in her town, and was very suspicious. Eventually, at the end of 2000, she wrote an incident report and sent it to Missouri's attorney general. The report eventually wound up in the office of Todd Graves, the U.S. Attorney for Missouri's Western District. In turn, he turned the case over to one of his assistants, Dan Stewart. An investigation was immediately launched, headed by U.S. Postal Inspector Steve Hamilton and IRS fraud expert Gary Marshall.

Over the next two years, Hamilton and Marshall painstakingly followed the money trail. Initially thinking that the "National Finders" were the ringleaders, they contacted all three of them. Krawizcki panicked, and agreed to cooperate with the government in return for not being prosecuted. The FBI tapped her phone, monitoring her conversations with Baker and Conway, who continued to sell cars even after being warned that the scheme may have been illegal. Eventually, Hamilton and Marshall discovered that Gomez, Nichols, Baker and Conway had fleeced their customers of $21.1 million, $8.6 million of which went toward refunds.

On May 8, 2002, a Kansas City grand jury indicted Gomez, Nichols and Baker on 23 counts each for interstate fraud and money laundering. Gomez was arrested on June 10, 2002 at a casino owned by Flynt. Nichols surrendered to authorities on July 20 at his attorney's office. Baker and Conway later self-surrendered to the FBI, and Conway was later added to the indictment.

Endgame

On May 2, 2003, Conway pleaded guilty to felony tax evasion before U.S. District Court Judge Nanette K. Laughrey; she hadn't paid taxes on the finder's fees earned in 2000. In return, she agreed to testify against Nichols and Gomez. She was sentenced to 14 months in federal prison and ordered to pay $4.9 million in restitution.

On May 15, Baker pleaded guilty to two counts of interstate fraud before Laughrey in return for her testimony against Nichols and Gomez. She was sentenced to five years in prison and ordered to pay $12.5 million in restitution.

Gomez and Nichols pleaded not guilty and took their chances with a trial in Kansas City, even though they risked spending the rest of their lives in prison if convicted (the charges carried a maximum sentence of 230 years in prison).

During the trial, witness after witness testified about how they had been duped. Car dealer Randy Lamb lost $218,000 in the scam, and told the court that his losses nearly bankrupted him and kept his mother from retiring as planned. Greg Ross, a car salesman in San Juan Capistrano, who lost $120,000, testified that he demanded to speak with the manager of the bank servicing the Bowers estate. A few days later, a man named Bob Burrows, a loan officer with First Bank and Trust in Lakewood, California, called him, and he disclosed enough details about the account to make Ross feel somewhat better. But Ross couldn't get in touch with Burrows when he had more questions, and got suspicious when Baker called him wondering why he was checking up on them; finally, Burrows called back, but while the "Bob Burrows" Ross spoke with a few days earlier had an unmistakable African-American accent, this Burrows had a New England accent. Nichols took the stand in his own defense, portraying himself as Gomez' victim.

On June 5, 2003, both men were found guilty of all 46 counts - 23 each of interstate fraud and money laundering. Gomez was sentenced to 21 years and 10 months in federal prison, and Nichols was sentenced to 24 years and four months - 21 years and 10 months plus an additional 30 months for perjuring himself on seven occasions during his testimony. Both were also ordered to pay $12.5 million in restitution, and Gomez was fined $8.7 million - an amount presumed missing.

It was never established who was mainly responsible for the scam. The sentences were upheld on appeal to the 8th Circuit Court of Appeals.

On March 15, 2007, Laughrey approved a final restitution plan. Under this plan, 2,300 people who didn't get refunds will be compensated on a pro rata basis. It is not known whether the missing $8.7 million was ever recovered.

John Phillips III wrote two articles on the scam for Car and Driver, based on several interviews and letters from people involved in the case. In 2006, he wrote God Wants You to Roll, a book chronicling the scam and trial.

In 2009, a documentary on the scam as part of the series American Greed aired on CNBC.

References

• "The Miracle Cars", from October 2003 issue of Car and Driver
• Phillips' December 2002 column on scam
• FAQ on case from office of U.S. Attorney for the Western District of Missouri
• Miracle Cars Fraud at Snopes.com