A judge has removed the Maricopa County Attorney's Office from prosecuting a financial planner who is accused in a scheme to defraud a Tempe church and about 30 investors of more than $5 million over more than a decade.
The case will be sent to another county or the Arizona Attorney General's Office for prosecution.
Maricopa County Superior Court Judge Sylvia Arellano has ruled that documents obtained while investigators searched in the home of James J. Buchanan, 44, of Dewey on May 1 included a folder that was marked "attorney-client privileges."
The judge ruled "those documents should not have been confiscated and taken by the sheriff's office," said Barnett Lotstein, county attorney spokesman.
As a result, both the Maricopa County sheriff and county attorney's offices "would be disqualified from continuing the case because the sheriff office had seen the documents and the assistant county attorney (Annielaurie Van Wie) had seen the cover page," he said.
Buchanan was indicted by a grand jury May 12. Investigators say Buchanan was a financial planner for Linsco Private Ledger when he gained the trust of members of his own congregation, Christ Life Church, 1137 E. Warner Road, Tempe. They say he invited church members to invest money with him with the assurance of strong financial returns.
Buchanan was entrusted to manage funds raised in a three-year campaign for a family center on the campus. About $1 million was received, court documents show.
Andy Bormeth of Mesa said he and his wife, who aren't members of the church, invested $660,000 with Buchanan in early 2006. "He was my wife's financial adviser at the time, and since I was from Chicago, I thought it would be good to have a financial adviser that I could get a hold of here, so I accepted him as my guy," Bormeth said. "These were investments that I cashed in and gave him to invest in what they called a debenture with energy and clean coal technology."
He said he learned Buchanan had accumulated enough funds to have 12 million shares in the technology. "The home office was in Florida," he said.
Now Bormeth has been making countless telephone calls to find out "if the money might still be out there."
Court documents accuse Buchanan of setting up a Ponzi scheme in which he took money from one group of investors to pay off others, while he enjoyed a rich lifestyle of expensive cars, vacations and a $1.2 million home.
Stoltmann Law Firm in Chicago, which specializes in helping victims of fraud recover money, posted online the findings of its own investigation of Buchanan and Linsco Private Ledger. It said, "Buchanan brazenly engaged in what is called 'affinity fraud,'" in which a scam "preys on members of identifiable groups, such as religious, ethnic, elderly or professional groups" and a perpetrator often becomes a member of the group, gaining trust and convincing unwitting people that certain investments will bring strongreturns.
Their findings fault Buchanan's company for failing to supervise him.
"The fraud did not unravel until March 2008 when one victim reported to the Maricopa County sheriff that she had been defrauded of approximately $200,000 after Buchanan repeatedly begged her to keep silent," the Stoltmann report said. The report advised victims that "the only way to recover these losses" would be through the Financial Industry Regulatory Authority, a major nongovernmental regulator of financial security firms in the U.S.
Lotstein said the mistakes made over privileged documents will only mean a delay in the case until a new jurisdiction takes it and "gets up to speed."