Sunday, May 07, 2000
Ex-minister, selling a dream draws investors, investigators
Grand visions, millions raised, but few results
By Cliff Peale
The Cincinnati Enquirer
Delmar Gerald Lach, an ex-minister turned entrepreneur, has spent 30 years selling his dream of transforming Cincinnati into “the great city.”
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Delmar Gerald Lach
(Enquirer photo)
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In the vision, there's a high-tech monorail system running through the region, an outer-belt highway with small towns at every exit and a 110-story tower at the University of Cincinnati for senior citizens.
“That's what I've been dreaming of!” said Mr. Lach, with the fervor of a true believer. “The city of Jerusalem! I'm not dreaming it, I'm doing it.”
He's not alone in the quest. In the last four years, he's convinced more than 800 people, most from the Tristate, to invest about $2.3 million to make it happen.
But today, some of his followers are beginning to have doubts.
More than two-thirds of the money — about $1.7 million — is gone. Financial records obtained by The Enquirer show about $805,000 has been spent on consultants and architects, $97,000 on travel and at least $87,000 on payments to Mr. Lach, his wife and his three children. The records reviewed by The Enquirer do not account for the remaining $679,000.
Yet the dream appears no closer to reality. There is no evidence that any of the needed tracts of land have been purchased. Nor is there a record that investors have received the financial payments or dividends they expected by now.
Today, Mr. Lach is under investigation by the Ohio Division of Securities and police in Clermont County's Union Township.
The investigation is focusing on whether Mr. Lach sold unregistered securities, said Union Township police detective John Lucas. State law requires those selling stock to first register with financial regulators.
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Lach pitched projects to potential investors in 1997.
(Enquirer photo)
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“We intend to present the matter to a Clermont County grand jury sometime in the future,” said Daniel Breyer, assistant Clermont County prosecutor.
Officers raided Mr. Lach's Mount Washington home and Union Township office April 19 to gather information.
Mr. Lach called the raid “persecution.” His lawyer, Louis Sirkin, said Mr. Lach will fight to clear his name.
Some who trusted Mr. Lach have lost faith and gone to court. Three lawsuits are pending in Hamilton County Common Pleas Court.
Some investors find themselves in limbo.
“I'd like to think it's legitimate, but I'm beginning to wonder,” said Clermont County resident Bob Inlow, who invested about $2,750 in late 1997. “I hope to at least get my money back.”
Still others continue to believe.
“If this comes to fruition, it's going to be wonderful,” said Mildred Wenninger, 65, a former parishioner of Mr. Lach's. She and her husband Daniel spent $3,000 in early 1998 to get 30,000 shares of stock in a company controlled by Mr. Lach, Cincinnati Regional Initiative. While the couple has not seen any return on their investment, Mrs. Wenninger sounds willing to wait.
“Jerry has a lot of ideas and dreams,” she said. “He's just really forward-thinking, maybe a little beyond what some people are willing to wait for.”
More than 30 years ago, Mr. Lach was the Rev. Lach, pastor of Mount Moriah United Methodist Church in Withamsville.
“He was a spellbinder of a preacher,” said Stanley Wilfert, the church's unofficial historian.
But in 1966, Mr. Lach decided to leave the church to pursue another calling.
“Jerry said he was leaving to build the great city,” Mr. Wilfert said.
Mr. Lach started by forming CIP Corp. to develop real estate in fast-growing Clermont County. Church members became some of his first investors.
“Jerry was such a good salesman,” Mr. Wilfert said. “He could sell you the moon and tell you it was made of green cheese, and you'd have to get some.”
Mr. Wilfert said he invested about $800 in CIP and earned a return of about $2,000.
Mr. Lach has had some successes since leaving the pulpit. CIP owned property that now holds high-profile industrial development in Clermont County, including Clermont College.
In 1968, he received a national economic-development award. In 1995, Mr. Lach was named an Enquirer hometown hero for his efforts to help the working poor.
“Jerry did some great things in Clermont County,” said the Rev. Damon Lynch III, pastor of New Prospect Baptist Church in Over-the-Rhine, who worked with Mr. Lach several years ago.
“I think this (the current project) is an effort to relive the glory and make lightning strike again.”
But amid the successes were some dark times.
Mr. Lach left CIP and the company later filed for bankruptcy. Since then, he has gone through personal bankruptcy and at least one other company operated by Mr. Lach has encountered financial difficulty.
Over the years, some of his early believers have fallen away.
“I was an investor, and I've always felt that Jerry Lach ripped me off,” said Clint Warren of Clermont County. Mr. Warren said that in the mid-1970s, he lost at least $8,000 in Mr. Lach's Insight Inc. development company. Mr. Warren said he has given up on the investment.
“He goes from one project to the next one,” Mr. Warren added, “and all he does is take people's money.”
Marvin Smith, an Over-the-Rhine property owner who worked with Mr. Lach to build better housing for low-income residents, said their relationship ended in 1997.
“I followed that train for a couple of years,” Mr. Smith said.
“He (Mr. Lach) has great dreams, but nothing ever happened ... If somebody else took ideas he had and implemented them, it might work. But I think he's just a dreamer.”
Stock in a dream
Mr. Lach calls himself “bishop and overseer” of Storehouse Malachai 3:10 Inc., the company he calls a church that collects money for his projects. The name references an Old Testament verse that encourages tithing: “Bring the whole tithe into the storehouse, that there may be food in my house.”
According to Mr. Lach, Storehouse Malachai has several subsidiaries, including Golden Age Facilities Inc., which is working on a retirement home in Maysville, Ky., and Midwest Regional Authority, the key to his financing plans for the great city.
Midwest Regional Authority — a for-profit company that grew out of Cincinnati Regional Initiative — soon will offer stock to the public, Mr. Lach said. He expects the company to raise millions of dollars to finance the beltway, monorail and other projects.
He insists that Midwest Regional Authority has not yet sold stock, as alleged by investigators. Instead, he maintains that in return for donations, he has given contributors rights to own stock.
“These rights are not to be construed as "shares' or "stock,' and in no way should be represented as such,” said minutes of a company board meeting in July 1997.
But the lawsuits filed in Hamilton County allege that Mr. Lach has sold investors stock for a dream that will never happen.
“This guy has used money, religion, race and economic progress, all to take people in,” said attorney Joe Dehner, who has filed three civil lawsuits against Mr. Lach since early 1999.
“The big picture is, here's a guy who's been doing this for 30 years.”
In an interview March 13,Mr. Lach defended himself and attacked Mr. Dehner.
“(He says) I collected with a bad motive to feather the nest of my family,” Mr. Lach said. “My daughter's gone bankrupt. My (other) two children are facing bankruptcy. And I've taken nothing.”
Financial records submitted as part of a civil suit against Mr. Lach show that in the five-month period ending in November 1997, checks totaling $87,565 were written on the company account to either Mr. Lach, his wife or his three children.
Some of the checks were labeled “payment on note.” According to the company's records, each of the five Lach family members loaned the company $1.02 million in 1997.
According to Mr. Dehner, there is no evidence that any money was ever lent. He said that in a deposition, Mr. Lach explained that the loans represented “services” rendered.
In his interview with The Enquirer, Mr. Lach would not comment on the loans. Mr. Lach did confirm that he has collected close to $2 million since early 1997, when he began his last big push to transform Cincinnati. He said he had deposited the money into “a mutual fund,” but he would not provide details. He also did not answer questions about the $679,000 unaccounted for in the records.
“If you turn over the pope's audited financial statements, then I will put my financial statements on the table,” he said. “Is there anything that says the people of God cannot have a retirement fund?”
John Trautman, a Michigan resident listed as “assistant to the Bishop” on the company's Internet web site, said virtually all of the money has been spent forming and operating Cincinnati Regional Initiative or Midwest Regional Authority.
So far, Mr. Trautman said, Midwest Regional Authority has signed “purchase contracts” to buy about 1,700 acres of property around the region. When the company goes public, he said it will raise the money it needs — about $46 million — to close the deals.
The investigation
It was Mr. Lach's attempts to buy private property in Clermont County's Union Township that first drew the attention of local police.
On Jan. 27, Mr. Lach held an all-day rally at the Eastgate Holiday Inn and pitched the 110-story tower at UC, a retirement home in Maysville, Ky., and a Ramada hotel in Eastgate, according to an affidavit that accompanied the search warrant served April 19.
Mr. Lach also outlined a plan that promised investors a 150 percent commission for convincing others to put money into Storehouse Malachai 3:10.
Township Detective John Lucas was there, wearing a wire that recorded the event.
Later, on April 7, Detective Lucas, using an assumed name, met with Mr. Lach and bought 50,000 shares of Midwest Regional Authority stock for $5,000.
Mr. Lach told Detective Lucas that Midwest Regional would be listed publicly on Nasdaq “within two weeks,” according to the affidavit. That has yet to occur.
On April 18, Detective Lucas filed the affidavit that says, in part: “The affiant believes, based on his training and experience, that the 150 percent commission return that Gerald Lach has promised the affiant for bringing in other business is nothing more than a pyramid scheme contrary to (Ohio law).”
Mr. Lach's claims
In his interview with The Enquirer, given before the raid on his house and office, Mr. Lach was unable or unwilling to document most of his claims. He has since refused to answer further queries from the paper.
The Enquirer learned the following about his most recent claims:
• Mr. Lach has told investors he is about to build a 500-room Ramada Hotel in Eastgate, although he would not disclose the site.
Ramada spokeswoman Gwen Wright confirmed that the company had an agreement with Mr. Lach to franchise a 500-room hotel, but said it was too early to determine details or construction schedules.
• He has shown drawings of a 110-story “Mature Adult Living Center” at UC that he said could be built with all private money. Dale McGirr, vice president of finance at UC, said he has never heard of the project.
• He has said he plans to buy Titan Global Technologies, a closely held New Jersey company that has the technology for several futuristic rail systems, to bolster his monorail project.
John Sellers, a vice president at Titan, said, “We deal with people all over the world, and Mr. Lach is just another interested party.
“If they are (going to buy us),” he said, “we'd like to know about it.”
The sales pitch
Mr. Lach, now 76, has a sales pitch that still packs a punch. A video taken at an elaborate party for potential investors on Labor Day weekend in 1997 shows him in action.
About 75 investors had gathered at the posh Metropolitan Club in Covington. Mr. Lach stood at an easel, outlining profits with a magic marker. He was selling Cincinnati Regional Initiative Inc.
By contributing $1,000, Mr. Lach said, an investor would get rights for stock worth $30,000 once the company went public.
“There's still time ... you've got five minutes,” Mr. Lach said, glancing at his watch.
“You've got to make your own decision as to whether we're going to win or lose. I feel pretty confident tonight.”
At 3:10 a.m., the crowd stopped and, to the refrain of “We're public,” drank champagne to their new company.
The time was symbolic of Malachai 3:10.
“We were stupid. There's no doubt about that,” said Joann Winternheimer, who attended the event. She invested several thousand dollars and said she has yet to hear from Mr. Lach.
“We all toasted, and that was the end of it.”
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