Miracle Cars scam
Encyclopedia
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.
, rooming with co-worker and friend James Nichols. Gomez had first told Nichols about his rich "adoptive" father, John Bowers, a food company tycoon living in Texas. 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. A year after meeting, the two roommates decided to save money by moving in to the Carson
home of Nichols' parents, longtime members of the Christ Christian Home Missionary Baptist Church of nearby Compton
.
Soon after, calls started coming into the Nichols house from men claiming to be Bowers' attorneys, stating the Bowers had died and keeping "executor" Nichols informed of the complicated legal affairs associated with liquidating the estate of his room mate's father. Three years later, just before Christmas
1997, 23-year-old Robert Gomez stepped into the "discipleship pulpit" of Christ Christian Home Missionary Baptist Church. He introduced himself as the adopted son of deceased tycoon John Bowers, who had left an estate valued at $411 million. He also announced that Bowers had been a devout Christian
who had left instructions that his estate should sell a relatively insignificant portion of his estate - a fleet of 16 low-mileage company cars - to fellow believers. The cars would be sold to these good Christians for the low $1,000 to $1,100 estimated as the tax liability to the estate once probate
cleared. However, they could not actually be delivered until the Bowers estate cleared, and the Vehicle identification number
s could not be released due to a gag order
imposed by the probate judge.
Later that day, church members flocked to Nichols' mother, Rose, with the money orders and cashiers cheques required by the estate's lawyers. 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. Gomez and Nichols soon claimed that the fleet of company cars was much larger than the original 16 vehicles, and before long the proceeds reached $1 million. News of the miracle cars spread by word of mouth through the Christian community, and Rose was overwhelmed by the number of people coming forward. Nichols and Gomez designated several "team captains" to handle sales, but 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 Toyota dealership in Gardena
to fabricate letters stating that the cars were being stored in secure lots across the Los Angeles area.
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.
, 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.
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. Nichols drew the stiffer sentence because Laughrey found he'd perjured
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. Checks started going out in the mail in March 2008; victims received six percent of their total loss.
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, (ISBN 0786714433) a book chronicling the scam and trial.
In 2009, a documentary on the scam as part of the series American Greed
aired on CNBC.
Advance fee fraud
An advance-fee fraud is a confidence trick in which the target is persuaded to advance sums of money in the hope of realizing a significantly larger gain...
that ran from 1997 to 2002. It was one of the largest advance fee frauds in world history, as well as the largest automobile
Automobile
An automobile, autocar, motor car or car is a wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor...
fraud in American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
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
Robert Gomez was a 19 year old working as a security guard in Los AngelesLos Ángeles
Los Ángeles is the capital of the province of Biobío, in the commune of the same name, in Region VIII , in the center-south of Chile. It is located between the Laja and Biobío rivers. The population is 123,445 inhabitants...
, rooming with co-worker and friend James Nichols. Gomez had first told Nichols about his rich "adoptive" father, John Bowers, a food company tycoon living in Texas. Nichols actually claimed to have met Bowers at a country club in Long Beach
Long Beach, California
Long Beach is a city situated in Los Angeles County in Southern California, on the Pacific coast of the United States. The city is the 36th-largest city in the nation and the seventh-largest in California. As of 2010, its population was 462,257...
. Later, Nichols agreed to serve as the executor
Executor
An executor, in the broadest sense, is one who carries something out .-Overview:...
of the Bowers estate. A year after meeting, the two roommates decided to save money by moving in to the Carson
Carson, California
Carson is a city in Los Angeles County, California. As of the 2010 census, Carson had a total population of 91,714. Located south of downtown Los Angeles and approximately 14 miles away from the Los Angeles International Airport, it is known as a suburb of the city....
home of Nichols' parents, longtime members of the Christ Christian Home Missionary Baptist Church of nearby Compton
Compton, California
Compton is a city in southern Los Angeles County, California, United States, southeast of downtown Los Angeles. The city of Compton is one of the oldest cities in the county and on May 11, 1888, was the eighth city to incorporate. The city is considered part of the South side by residents of Los...
.
Soon after, calls started coming into the Nichols house from men claiming to be Bowers' attorneys, stating the Bowers had died and keeping "executor" Nichols informed of the complicated legal affairs associated with liquidating the estate of his room mate's father. Three years later, just before Christmas
Christmas
Christmas or Christmas Day is an annual holiday generally celebrated on December 25 by billions of people around the world. It is a Christian feast that commemorates the birth of Jesus Christ, liturgically closing the Advent season and initiating the season of Christmastide, which lasts twelve days...
1997, 23-year-old Robert Gomez stepped into the "discipleship pulpit" of Christ Christian Home Missionary Baptist Church. He introduced himself as the adopted son of deceased tycoon John Bowers, who had left an estate valued at $411 million. He also announced that Bowers had been a devout Christian
Christian
A Christian is a person who adheres to Christianity, an Abrahamic, monotheistic religion based on the life and teachings of Jesus of Nazareth as recorded in the Canonical gospels and the letters of the New Testament...
who had left instructions that his estate should sell a relatively insignificant portion of his estate - a fleet of 16 low-mileage company cars - to fellow believers. The cars would be sold to these good Christians for the low $1,000 to $1,100 estimated as the tax liability to the estate once probate
Probate
Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A probate court decides the validity of a testator's will...
cleared. However, they could not actually be delivered until the Bowers estate cleared, and the Vehicle identification number
Vehicle identification number
A Vehicle Identification Number, commonly abbreviated to VIN, is a unique serial number used by the automotive industry to identify individual motor vehicles. VINs were first used in 1954...
s could not be released due to a gag order
Gag order
A gag order is an order, sometimes a legal order by a court or government, other times a private order by an employer or other institution, restricting information or comment from being made public.Gag orders are often used against participants involved in a lawsuit or criminal trial...
imposed by the probate judge.
Later that day, church members flocked to Nichols' mother, Rose, with the money orders and cashiers cheques required by the estate's lawyers. 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. Gomez and Nichols soon claimed that the fleet of company cars was much larger than the original 16 vehicles, and before long the proceeds reached $1 million. News of the miracle cars spread by word of mouth through the Christian community, and Rose was overwhelmed by the number of people coming forward. Nichols and Gomez designated several "team captains" to handle sales, but 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
Memphis, Tennessee
Memphis is a city in the southwestern corner of the U.S. state of Tennessee, and the county seat of Shelby County. The city is located on the 4th Chickasaw Bluff, south of the confluence of the Wolf and Mississippi rivers....
. She'd heard about the Miracle Cars through her nondenominational charismatic
Charismatic movement
The term charismatic movement is used in varying senses to describe 20th century developments in various Christian denominations. It describes an ongoing international, cross-denominational/non-denominational Christian movement in which individual, historically mainstream congregations adopt...
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
Higginsville, Missouri
Higginsville is a city in Lafayette County, Missouri. The population was 4,682 at the 2000 census.-Geography:Higginsville is located at ....
; 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
Neil Smith (football player)
Neil Smith is a former American football defensive end in the National Football League. He played for the Kansas City Chiefs from 1988 to 1996, the Denver Broncos from 1997 to 1999, and the San Diego Chargers in 2000...
and Ricky Siglar
Ricky Siglar
Ricky Allan Siglar was an American football offensive tackle who played for four different teams in the NFL. He played college football at San Jose State University and junior college football at Arizona Western College.-References:...
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 Toyota dealership in Gardena
Gardena, California
Gardena is a city in Los Angeles County, California, United States. The population was 58,829 at the 2010 census, up from 57,746 at the 2000 census.-Geography:Gardena is located at ....
to fabricate letters stating that the cars were being stored in secure lots across the Los Angeles area.
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
Pai gow poker
Pai Gow poker is an Americanized version of Pai Gow . The games of Pai Gow poker and Super Pan-9 were created by Sam Torosian and Fred Wolf.The game is played with a standard 52-card deck, plus a single joker...
, and often gambled with Larry Flynt
Larry Flynt
Larry Claxton Flynt, Jr. is an American publisher and the president of Larry Flynt Publications . In 2003, Arena magazine listed him as the number one on the "50 Powerful People in Porn" list....
. 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
Las Vegas, Nevada
Las Vegas is the most populous city in the U.S. state of Nevada and is also the county seat of Clark County, Nevada. Las Vegas is an internationally renowned major resort city for gambling, shopping, and fine dining. The city bills itself as The Entertainment Capital of the World, and is famous...
. It never got off the ground.
Exposed
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 GravesTodd Graves
This article is about the U.S. Attorney. For the entrepreneur/restaurateur, see Todd Graves .Todd Graves was United States Attorney for the Western District of Missouri. He took his oath of office on September 17, 2001, initially as an interim United States attorney appointed by the U.S...
, the U.S. Attorney for Missouri's Western District
United States District Court for the Western District of Missouri
The United States District Court for the Western District of Missouri is the federal judicial district encompassing 66 counties in the western half of the State of Missouri...
. 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
Kansas City, Missouri
Kansas City, Missouri is the largest city in the U.S. state of Missouri and is the anchor city of the Kansas City Metropolitan Area, the second largest metropolitan area in Missouri. It encompasses in parts of Jackson, Clay, Cass, and Platte counties...
grand jury
Grand jury
A grand jury is a type of jury that determines whether a criminal indictment will issue. Currently, only the United States retains grand juries, although some other common law jurisdictions formerly employed them, and most other jurisdictions employ some other type of preliminary hearing...
indicted
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
Gomez, Nichols and Baker on 23 counts each for interstate fraud and money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
. 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 evasionTax evasion
Tax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...
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
Lakewood, California
Lakewood is a city in Los Angeles County, California, United States. The population was 80,048 at the 2010 census. It is bordered by Long Beach on the west and south, Bellflower on the north, Cerritos on the northeast, Cypress on the east, and Hawaiian Gardens on the southeast. Major thoroughfares...
, 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. Nichols drew the stiffer sentence because Laughrey found he'd perjured
Perjury
Perjury, also known as forswearing, is the willful act of swearing a false oath or affirmation to tell the truth, whether spoken or in writing, concerning matters material to a judicial proceeding. That is, the witness falsely promises to tell the truth about matters which affect the outcome of the...
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
United States Court of Appeals for the Eighth Circuit
The United States Court of Appeals for the Eighth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Eastern District of Arkansas* Western District of Arkansas...
.
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. Checks started going out in the mail in March 2008; victims received six percent of their total loss.
John Phillips III wrote two articles on the scam for Car and Driver
Car and Driver
Car and Driver is an American automotive enthusiast magazine. Its total circulation is 1.31 million. It is owned by Hearst Magazines, who purchased prior owner Hachette Filipacchi Media U.S. in 2011...
, based on several interviews and letters from people involved in the case. In 2006, he wrote God Wants You to Roll, (ISBN 0786714433) a book chronicling the scam and trial.
In 2009, a documentary on the scam as part of the series American Greed
American Greed
-Season 2:Episode #7 The Martin Frankel CaseFinancier Martin Frankel, a con-man who vanished with $200 million dollars. A story of money laundering, prostitution, bizarre sex and drug abuse.Episode #8 When Greed and Giving Collide...
aired on CNBC.