What are the lessons that investors can learn from the CMI and Alanar cases? First, never invest in anything pitched by even a subtle appeal to your faith. Make that your Eleventh Commandment.

Cornerstone Ministries Investments, Inc. (CMI) was incorporated in 1996 to make loans to churches seeking to build or expand their facilities. To generate the cash that it intended to loan to those churches, CMI sold bonds to individual investors. Thousands of people bought CMI bonds.

In February 2008, CMI filed a petition seeking Chapter 11 bankruptcy protection, and the Court appointed me to investigate several questions, including whether CMI’s business was “characterized by self-dealing” on the part of the officers and directors.

My investigation revealed that many — perhaps most — CMI bondholders believed that CMI bonds were safe because the company loaned to churches and because of the religious background of the company’s officers and directors. In that way, the CMI case was similar to another recent church bond case.

“Never sell the facts,” Vaughn Reeves instructed the salespeople who sold bonds issued by Alanar, Inc. (an Indiana company very similar to CMI). “Instead,” he told them, “sell warm stewardship and the Lord.” Like CMI, Alanar actually did loan money to churches.

But a taste for expensive living by Reeves soon left not enough money to make scheduled interest payments. At that point, Reeves turned Alanar into a Ponzi scheme, taking money from one bond offering to pay the obligations of another.

The misconduct at CMI was of a different kind. While most investors believed that CMI was primarily in the business of loaning money to churches, by the end of the 1990s it had shifted almost exclusively to investing in for-profit ventures like senior living communities and residential housing projects.

My investigation revealed that several corporate officers and directors had undisclosed investments in those for-profit ventures and that CMI was, therefore, funding those private investments. If investors had known that information, they might have seen the attractive interest rate on CMI bonds in a different light.

Neither Alanar nor CMI was a fraudulent enterprise from its inception; they started out with the best of intentions. Both inside and outside of church, many fraudulent enterprises start out legitimate and morph into a fraud through something every believer knows about: temptation. A close look at the nature of that temptation can help you protect your assets.

The temptation that led to the misconduct in the Alanar and CMI cases, and which will lead hundreds of otherwise honest financial advisers into a fraud this year, is not some rare breed of temptation. It is the ordinary, every day desire to cover up our mistakes or to buy something we can’t quite afford or maintain a certain image in the community.

And who among us has not fought with and sometimes surrendered to those temptations? Immersed, as we are, in a world that pushes and pulls us toward things that are of no value from the eternal perspective, we are all bound to slip up. Just like you and me, church-going, Bible-believing financial advisors are tempted and sometimes surrender to those quite ordinary temptations.

But it isn’t just our misunderstanding of the mundane root causes of investment fraud that keeps Christians at risk. It’s our forgetfulness about what the Gospel teaches. We are too prone to believe that moral behavior is at the center of our faith. While we use the word “grace” freely, we kid ourselves that we don’t really need it. That translates into a belief that the financial adviser with the sparkling reputation and the seemingly sin-free life doesn’t need it either. He’s one of the good people, we think. And financial disaster follows like winter follows autumn.

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Pat Huddleston is a former SEC Enforcement Branch Chief and the author of The Vigilant Investor. As a court-appointed Receiver in SEC fraud cases and as a Chapter 11 Examiner, he has seen misconduct ranging from honest enterprises gone wrong to multi-national hedge fund frauds. He appears frequently as an expert guest on radio and television and has been quoted by the Wall Street Journal, the New York Times, the Washington Post, and Kiplinger’s Personal Finance, among other publications. Professor Bernard Malkiel, author of the best-selling A Random Walk Down Wall Street, calls Pat “the investors’ perfect teacher.”