Former Pastor Blames Partner For Hedge Fund Collapse

Jan 11 2008 | 7:21am ET

A former Colorado pastor accused of defrauding his flock in a hedge fund scheme blamed his alleged partner, testifying that the fund’s collapse ruined his life.

On the stand, Douglas Scott said that Hamilton Bird, who prosecutors call the director of XL Capital Partners, was responsible for the fund’s ruin, as he selected the fund’s investments and gave the sales presentations. XL Capital allegedly overcharged investors to the tune of $3 million. Regulators shut down the fund in 2004 after it garnered some $24 million in assets.

Scott faces a dozen years in prison should he be convicted of securities fraud and theft. Prosecutors say he lured members of his River of Life Church to XL, which he allegedly knew was a scam. But he told the court he is not to blame for their losses.

“Every single person I loved and respected was in that fund, and they were devastated,” he testified. He also claimed that all of the fees he was paid by XL for his recruitment efforts were reinvested in the fund.

But while he testified that he was ignorant of XL’s problems until the firm was taken to court, he acknowledged that he was aware it was under investigation, and that a lawyer for the firm had advised it to stop accepting new money. He said he did not inform existing or potential investors of the impending trouble because he thought it was Bird’s job.

Scott’s case is expected to go to the jury today. Bird is set to go to trial in March.

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