Young CEO's success story unravels in court cases

Editor's note: This story was originally published on July 8, 2012.

Ephren Taylor Jr. was a computer whiz kid from Overland Park who retired at age 19 after starting a dot-com company valued at several million dollars. Not content to sit idle, he went back to work and became the youngest African-American CEO of a public company.

That was the story the 2000 Blue Valley North High School grad told, anyway, and he told it often.

Told it in his three books, on his website and to wide-eyed news media that swallowed whole Taylor's teenage millionaire tale.

"Very young and very rich" is how, in January 2007, Donny Deutsch of "The Big Idea" show on CNBC introduced Taylor, then just 24.

Five years later, the Securities and Exchange Commission has accused him of "a Ponzi scheme to swindle more than $11 million, primarily from African-American churchgoers, " in a lawsuit filed in April. Law enforcement agencies are investigating, although no criminal charges have been filed to date, said David Peavler at the SEC.

In addition, a class-action lawsuit has been filed against him, and at least two other lawsuits have won judgments against Taylor.

Taylor hasn't filed a response to the SEC suit; his attorney is asking for more time. Taylor also declined through that attorney to comment when contacted by The Star recently. His whereabouts are unknown to the SEC.

In fact, the last time he gave a public statement apparently was in 2011.

"Sometimes people will participate in a game they don't have a stomach for, and when it goes south, they put the blame on those that led the game, " Taylor told The Associated Press in response to fraud allegations.

Left untold, as he's about to turn 30, is Taylor's version of how a kid from the Kansas City suburbs won national acclaim and then was accused of bilking hundreds of people in 43 states out of so much money.

But his alleged victims are clear about how he earned their confidence. It was not just his salesmanship.

His resume - and his upbringing as the son of a minister - helped Taylor build his sales pitch to investors across the country.

He'd make you rich just like him, and you'd do it in a socially responsible way.

Reap double-digit returns on your money by investing in a company that would build affordable housing in Kansas City's Vine Street district.

Raise funds for church mission work while making a killing investing in oil wells, dry cleaning businesses and even gambling machines.

Taylor called it "socially conscious investing."

It was a back-story that was both inspiring and convincing.

"He sold himself as an African-American success story, " said Kevin Berger, a Kansas City attorney for three local investors who have a $266,000 judgment against him. "Rags to riches. 'I'm good, made it to the big time through my hard work and enterprise and faith-filled community outreach.' "

Enough of his resume was factual that the rest was believable. For as a kid growing up in south Overland Park, Taylor did seem like someone on his way to legitimate success.

Myth-making

Fact: At age 12, Taylor started his first business, Flame Software. Refusing to buy him yet another video game from the store, his mother challenged her oldest son to make his own.

So young Ephren taught himself computer programming and invented a 3-D video game that he sold to middle-school classmates at $10 a pop.

Fact: He went on to design websites for cash, having had an entrepreneurial bent from early on.

"Whether it was pencils, erasers, drawings, I was selling it on the playground, " Taylor told Deutsch on CNBC.

Also, while a student at Blue Valley North, Taylor did attend the Ewing Marion Kauffman Foundation's program for young entrepreneurs and did win national honors from the Future Business Leaders of America.

However, some say he embellished his accomplishments from there on.

"I don't think he ever was (a teenage millionaire), " said Cathy Lerman, the Florida lawyer who filed a North Carolina lawsuit that was recently refiled in California, seeking class-action status.

In April 2007, Forbes magazine reported that, in partnership with a high school friend, "Taylor crossed into seven-figure territory at age 16" by building "a job-posting website for high school and college kids called GoFerretGo.com."

That set him on the path to managing "tens of millions of dollars" in his mid-20s, Taylor said some months later on "The Montel Williams Show."

And so it went. Each TV interview and feature in the press solidified the impression that Taylor was the real deal. In 2008, he was even invited to speak at the Black Caucus Young Leaders Summit at the Democratic National Convention.

But the teenage millionaire story was not what it seemed. While it was true that, in high school, Taylor and a friend came up with a website that paired job-seeking teens with employers. No one, it appears, got rich from GoFerretGo.com.

"Good for them for having the energy and the ambition and imagination to come up with the idea, " recalled Alan Staples, one of several investors who jointly put up $150,000 initially in early 2001. But the company "never got traction, " and by 2002 GoFerretGo was gone, he said.

"The investors weren't willing to put more money into it, " Staples said. "The irony of it is, it really had the potential to be something along the lines of Facebook."

Another source in a position to know, because he would have been a beneficiary from the company, concurs.

"We never got any money for ourselves, " said the source, a principal in the firm who asked not to be named for fear that his reputation would be tarnished.

Yet Taylor later boasted that GoFerretGo was worth several million dollars and let others draw conclusions.

"He made a million dollars before he graduated from high school, " ABC's 20/20 said in a feature on Taylor and other "teen tycoons" in 2007

Following high school, Taylor attended Baker University briefly. He started several businesses, records at the Kansas and Missouri secretary of state offices show, and was named one of two Young Entrepreneurs of the Year by the Kansas Department of Commerce in 2002.

COC Ventures LLC was one of the first ventures. COC stood for Church of Christ. Taylor's father, Ephren Sr., was and still is a pastor at the Johnson County Church of Christ in Shawnee, and his son would at times, according to lawsuits, claim to also be a minister.

The elder Taylor could not be reached for comment and has not been accused of any involvement in his son's activities.

Ephren Jr.'s church affiliation convinced early investors to entrust him with their money, they say. His pitch then bore a striking similarity to the one at the heart of today's fraud allegations. COC, Taylor said, was "formed to assist other churches in their stewardship, donation and endowment programs, investing in local community properties to provide affordable housing and higher returns on investment."

In a Jackson County lawsuit, three Johnson County men accused Taylor of bilking them out of $225,000. Taylor allegedly claimed to be representing the church when he convinced them in 2003 that their money would go to buy and rehab houses in Kansas City's urban core. It also would "assist and support the ministry of the Johnson County Church of Christ" and that the returns on their investments might be as high 66 percent, their lawsuit said.

"I thought I should be monkey-stomped if I didn't put my toes in the water, " one of the three, Jeff Jenkins of Olathe, told The Star recently.

But neither he nor the others got a dime back, and they sued Taylor for fraud.

Taylor denied the allegations but later signed a court document in 2007 called a confession of judgment, in which he agreed to pay the men their money back.

He never has, they say.

Vine Street

Other claims began piling up. Eviction notices filed in 2004 kicked Taylor out of two residential properties he was buying in Jackson County.

In 2005, a California investor accused Taylor of fraud. Taylor responded that the investor himself was at fault, but a court imposed a $1.3 million judgment on Taylor.

Yet somehow Taylor convinced Bank of America that year to sell him a large chunk of real estate in the Vine Street Redevelopment District.

The bank had announced plans in 2001 to build 550 residential units near 18th and Vine, as well as 16,000 square feet of office space and 50,000 square feet of stores and entertainment space at a cost of $46 million.

But a change in national strategy had Bank of America pulling out within a couple of years. Property records show that for $300,000, a Taylor-run entity, Ephren Capital Corp., bought a large chunk of the land in 2005.

"The goal was to find a community group, a stakeholder group who would carry on the mission, " said former Bank of America community reinvestment officer Michael Browder.

But when responsibility for the sale shifted from local employees to out-of-state offices, standards broke down, he said.

"I don't think he was fully vetted, " Browder said of Taylor.

Bank of America declined to comment.

Unsure that Taylor had the resources to build the housing, the Black Economic Union, which controlled redevelopment rights for the area, attempted to delay the sale. Taylor got the land anyway, and the BEU's fears were realized when the properties sat idle for years after Taylor gave up the properties to satisfy a corporate debt.

"It has not been a good thing for our plans, " BEU President Chester Thompson Jr. said. Because of title concerns, the group is now suing to gain control of the ground so it can revive a much larger plan, to which those 139 parcels, including the historic Vine Street castle, are critical.

"It's sort of situated right in the heart of it, " Thompson said of the land.

While Kansas City progress proved to be a victim in the real estate deal, the theme was key to Taylor's ascent.

"Once he made that investment in the Kansas City jazz district, " said Lerman, the attorney who brought one of the suits, "that's what catapulted him to a different level, because he made it sound like he had paid millions of dollars on that property and everybody thought he was a bigwig and high roller."

Stockholders of a failing Minnesota company did. By hooking up with Taylor, they thought they might be able to stay afloat. Which is how Taylor got control of City Capital Corp., making him "the youngest African-American CEO of any public company, " according to a news release he issued.

However, City Capital continued losing money, falling deeper in debt, the SEC lawsuit says.

According to documents the company filed with securities regulators, Taylor was listed as receiving $1 million a year in salary and bonuses for several years - the last filing was for 2009. He also awarded a management contract to one of his other companies, for which City Capital paid $1.2 million a year. And the filings show City Capital paying Taylor more than $1 million for the Vine Street properties.Image building

It was about this time that the Ponzi scheme began to gain momentum, say the SEC and Lerman's suit.

Taylor hired a PR man to write press releases that led to favorable appearances on TV and even National Public Radio. He and his flack co-wrote a book, "Creating Success from the Inside Out."

"Dream - and live - big dreams, " Taylor wrote.

All the while he was soliciting investors on his website, through radio ads and by embarking on "building wealth tours" where he made personal pitches in African-American churches.

Taylor and City Capital raised $7 million from 2008 to mid-2010 by convincing investors to turn over their retirement funds in exchange for promissory notes that bore interest rates of 12 percent to 20 percent, the SEC lawsuit alleges. The money supposedly was going to real estate development, oil exploration and other businesses.

"While some of the funds raised were used as promised, " the SEC complaint said, "the majority of the funds were spent on unrelated items, such as promotion for Taylor's book, consultants for Taylor's speaking engagements and public relations, studio time for his wife's music career, credit card bills, car payments and rent for Taylor's New York apartment."

His two-bedroom in Trump Place rented for more than $6,000 a month, according to real estate listings advertising that apartment - No. 2404 - before and after the period the Taylors gave it as their address.

Taylor claimed to be tight with rapper Snoop Dogg and listed himself as executive producer on the music video for his wife's hip-hop record, "Billionaire."

All the while, according to the SEC lawsuit, the businesses City Capital invested in "typically floundered - or outright failed."

The SEC demands restitution. It seeks fines and a ban on Taylor ever again serving as an officer of a public company.

Bill Lee of Raleigh, N.C., has sued Taylor, claiming to have lost most of his retirement fund.

Worried about having all of his money in stocks, in 2009 he invested $180,000 in two of Taylor's ventures. A gas station in Brookhaven, N.Y., and a Gladstone dry cleaning facility with satellite locations around the Kansas City area, according to the suit.

"It was going to be a 20 percent annual return on your investment, " Lee said in an interview. "I guess we knew things were going south six months into it when they weren't paying us any money."

Worse, the suit claims, Taylor asked to put Lee's name on a lease agreement for the dry cleaning equipment. That meant he was on the hook for another $45,000 he didn't have when the business failed in 2010.

"He appeared to be very spiritual, religious, and he sold to the religious community, which appealed to us, " Lee said. "It kind of makes you more upset because he was using the name of God to help him in this mess."

Lee is one of several plaintiffs named in the lawsuit that is seeking class-action status.

Taylor was a charismatic speaker who brought out the "amens" while preaching his success gospel from the pulpit. One such appearance at Atlanta's New Birth Missionary Baptist Church in 2009 yielded Taylor $1 million worth of investments from churchgoers, lawsuits allege.

Two years later, New Birth pastor Eddie Long went on YouTube, pleading with Taylor to return the money, all of which was feared lost.

"You're a great man, a great fellow, " Long told Taylor in the video. Surely, Taylor would pay the money back.

But he didn't, according to a lawsuit that parishioners filed against Taylor and Long.

By then, Taylor's enterprises were unraveling. After investments in his real estate and other business ventures began slowing to a trickle in 2010, he turned to selling sweepstakes machines - similar to slot machines. He promised to place the machines in locations that would bring the highest returns, then collect the money and send the profits back to investors, the SEC claimed.

But Virginia, Illinois and other states declared the machines illegal and shut them down. Even in states where the machines were allowed to operate, returns to investors never came close to meeting the promised results.

"In truth, City Capital's track record with sweepstakes machines was abysmal, " the SEC alleged, "and the operation stayed alive only by conning new investors into the scheme."

Still, it yielded Taylor and City Capital $4 million, according to the agency.

Return to KC

Last year, Taylor, his wife, MeShelle, moved out of their apartment on the 24th floor of Trump Place for one across the river in Brooklyn, lawsuits say. A couple of months later, they'd left there, too.

His current whereabouts are unknown, although The Star learned that Taylor was living in the Kansas City area as recently as March. Milton Thomas recalls running into him last winter at Target. The two were old friends from back when both were teenagers trying to make money on real estate deals.

Taylor said he could drum up business deals for Thomas' marketing and call center business, The Mogul Group, so they hooked up again, Thomas said. Working out of an office on the 17th floor of the Mark Twain Tower downtown, they were assisted by a staff of about a dozen interns supplied and paid for by the Full Employment Council of Kansas City.

"Ephren wasn't an employee of mine, " Thomas said, "he was an independent contractor."

Thomas claims Taylor never produced the business results he promised, and they parted ways when Thomas did a Google search and learned of the allegations against him.

But before their falling out, a pending Jackson County lawsuit contends, the pair "swindled" the law firm down the hall out of $5,000 by failing to provide promised marketing services for the firm and a related weight-loss clinic.

According to the complaint, filed just days after the SEC suit, Taylor "promoted himself as an experienced and highly successful provider of prospective client leads for law firms ... in the area of criminal defense law."

No good leads were ever delivered, the law firm's suit contends, and the men's claim that The Mogul Group had a computer program that could guarantee an ad's top placement on Craigslist was bogus.

"Plaintiffs were absolutely deceived, totally swindled and thoroughly duped by defendants, " the suit contends.

Thomas denies the allegation, while Taylor did not make himself available for comment.

But in a statement that he gave last fall, Taylor seemed humble.

"It is true that many people lost a lot of money, including myself, over the last few years in failed ventures, stocks, and market transactions, but this is part of investing, " he said. "In my case, and that of my former company, some of the negative effects of a situation with very complex economics impacted businesses, individuals and families despite our best intentions."

This story was originally published June 17, 2014 at 8:34 PM with the headline "Young CEO's success story unravels in court cases."