FBI watching charity group that raised millions

By The Associated Press / August 21, 2000

A telemarketer who raised $10.5 million in the name of AIDS, disabled children, law enforcement and veterans - then pocketed nearly 90 percent of the money, has been the target of a task force for three years. The FBI-led criminal probe of Timothy J. Lyons so far hasn't found that he broke any laws and he's continued to raise $7 million since the telemarketing fraud investigation of Lyons and his church-founding friends began.

"Sooner or later those guys are going to get their comeuppance," sheriff's Sgt. Lloyd Downing, a task force leader, told the Orange County Register, which detailed the Lyons telemarketing operation in Sunday's editions.

No religious training

Police investigators believe Lyons' associates, who have no formal religious training, set up churches as fronts to avoid fund-raising reporting requirements that restrict most charities, the newspaper said.

The church founders haven't provided any evidence that money raised for the churches went to help an AIDS victim or police cause. Lyons has raised $10.7 million since 1993 and his cut was $9.5 million, state records show.

Most of the remaining 10.7 percent has gone to two churches and the church charities started by Lyons' friend Gabriel Sanchez, the Register said. At least one of the churches only has one member.

Last August, Lyons, 32, enlisted another friend who launched a third church and six similar charities, the newspaper said. The new church has two members.

Lyons, whose Costa Mesa-based operation solicits contributions nationwide, maintained in the past that much of his share goes to pay telemarketing costs and overhead.

He wouldn't comment on the investigation, saying, "I will be declining to answer any questions."

Federal protections given churches have stymied the county's Boiler Room Apprehension Task Force, formed to break up shady telemarketing rings. It includes the FBI, U.S. attorney's office, sheriff's department and district attorney's office.

"These cases are really, really, really tough," said Assistant U.S. Attorney Ellyn Lindsay, the lead prosecutor for the task force.

Little can be done

Because so little can be done, the task force turned to the American Association of Retired Persons, which mobilized 150 volunteers to call 8,000 Southern California residents in a "reverse sting operation" to alert potential donors about charities that rely on telemarketers.

Lyons raised $7.8 million in six years for Sanchez's charities and records show Lyons kept more than $7 million in fees and commissions. As a church leader, Sanchez doesn't have to say how the church spent its $757,419 share. Asked how much made it to charitable programs and services, Sanchez said without elaboration, "That's a complicated figure."

Mark A. Ferry, an old high school classmate of Lyons and Sanchez, set up another church and various charities. But he became disenchanted with the telemarketing.

"I think there is a lot of potential for good things," Ferry said. "I think the telemarketing end abuses it. It's a joke."

Ferry said he has no idea how much money was raised between January and June, when he officially left Mercy Ministries, turning it over to Steve De Latorre, a longtime Lyons and Sanchez associate.

"Everything we did was totally legal," Ferry said. Still, the task force keeps watching.

"God knows, what they're doing is very questionable," Downing said. "I know this case has taken a long time, but it's going to get done."