Attorney General Candidate and Ted Cruz-BFF State Sen. Ken Paxton, one of four legislators who fell victim to a Ponzi scheme targeted at Christian Conservatives
Four Texas legislators have filed suit against a McKinney man named Archer Bonnema, claiming that he scammed them into investing in a fraudulent energy trading company.
Bonnema, “a chiseler who once claimed to have found Noah's Ark,” targeted his scheme toward Christian conservatives.
Now, Wayne Christian, Phil King, Ken Paxton and Bill Zedler are suing Bonnema. Two are currently running for statewide office–State Sen. Ken Paxton (R-McKinney) is the favorite in the runoff for Attorney General, while former State Rep. Wayne Christian (R-Center) is ahead going into the runoff for Railroad Commissioner.
The scheme began in 2008 when Bonnema and Beaumont businessman Danny Bannister bought an energy trading company called Pirin Electric. Bonnema took control of the company and began to seek out investors, specifically targeting Christian conservatives.
Archer Bonnema chose to target Christian conservatives because of his close ties with the North Texas religious conservative community. According to the Dallas Morning News, Bonnema “often distribut[ed]video accounts of a 2006 expedition to Iran…that he participated in. Bonnema said they discovered Noah's Ark, though experts have disputed the claim.”
When soliciting investments from the legislators, Bonnema reportedly played up his Christian credentials to get into their good graces. As Rep. Bill Zedler (R-Arlington) told the Dallas Morning News, Bonnema's house was decked out in Bible verses, which made him feel more comfortable. Said Zedler, “On the ceiling there was a dome and around the dome there was a Bible verse. To me, he used that as a way to get us to try to put our guard down.”
Zedler also believes he may have received a copy of Bonnema's DVD of the reported expedition to find Noah's Ark.
For Ken Paxton, there was reason beyond Bible verses to invest in Bonnema's company. Archer Bonnema donated a total of $11,000 to Ken Paxton's campaign prior to Paxton's investment.
By 2009, all four Republican legislators had invested in Pirin Electric. Paxton, Christian, Zedler, and Rep. Phil King (R-Weatherford). Bonnema promised to “make trades on the electric market using [the investors']money, even though he was not a licensed broker, court documents say.” He would be able to do that thanks to deregulation of the electrical industry, which had previously been championed by Republicans in the Legislature.
Paxton invested a total of $100,000, as did Christian. Zedler invested about $85,000, while King invested about $46,000. Wayne Christian said he used money from his retirement account to invest in the scheme.
The company quickly deteriorated. As the Dallas Morning News explained:
The plaintiffs said in their lawsuit that the investment seemed to evolve into a pyramid, with Bonnema seeking to bring in new investors and use their money to pay returns to initial investors and himself. Even as the company failed, he and Bannister were taking money out. And without new cash to spread around, the scheme quickly fell apart.
Each of the legislators who invested only got a few thousand of their initial investment back. Once they figured out that the investment had gone wrong, they tried to get more of their money back. Investors won a lawsuit filed in Parker County, which ordered Bonnema to pay $100,000 to recover the investments. He has already made a payment of $50,000, and is supposed to pay another $10,000 per year for 5 years.
Since Bonnema is filing for bankruptcy in federal court, it's unlikely that the plaintiffs will recover much more of their money.
For their part, Phil King and Ken Paxton still believe that Bonnema's company had the potential to be a good one. Wayne Christian says he should have researched more, especially given that Archer Bonnema “has been sued many times by angry investors or business partners.”
All of the legislators maintain that their choice to invest in a Ponzi scheme has nothing to do with their public life. Others are saying that this casts doubt on their judgment. As Andrew Wheat of Texans for Public Justice told the Dallas Morning News, “I wouldn't want these guys running the state. It looks like they found Noah's Ark and it sunk.”