It's been more than two months since federal regulators shut down the Cornerstone Prodigy Group, and Christa Sexton still doesn't know when, or if, she'll get her money back.

Like more than 3,000 people, Sexton, of Lago Vista, had a big chunk of her modest life savings invested with the Fort Worth company. But the Securities and Exchange Commission closed Cornerstone in November, calling it an illegal Ponzi scheme, or pyramid scheme.

Mike Quilling, the receiver appointed by a federal judge to liquidate Cornerstone and pay back investors, has not said how much he expects to be able to pay out. But he said he hopes to be able to make payments by midyear.

In court documents and a recent letter to Cornerstone investors, Quilling said he has rounded up more than $6 million in cash and other assets. But he has not determined how much money investors entrusted to the company.

For many Cornerstone investors, the episode may prove a painful lesson in chasing too-easy profits. Still, a solid contingent of the Cornerstone faithful say they agree with Cornerstone founder Gary Reeder, who argues that they are all victims of a government conspiracy.

Reeder, a Weatherford native, told people that he had developed a revolutionary, risk-free method to generate wealth. Friends told friends about the spectacular returns that Cornerstone was paying: as much as 10 percent a month. New money poured in; the SEC estimates $16.5 million last year.

But on Nov. 24, the day before Thanksgiving, the SEC filed a civil lawsuit and obtained a court order allowing it to shut Cornerstone down.

The agency had begun its investigation only days earlier, acting on tips from a concerned investor and a Cornerstone employee. SEC officials quickly decided that Cornerstone was a Ponzi scheme: Old investors were being paid with money from new investors. In such schemes, the pyramid eventually collapses when not enough new money comes in to pay the earlier investors.

"There is no business that generates these profits," said Hal Degenhardt, director of the SEC's Fort Worth office. He says that Cornerstone was one of the largest illegal investment schemes the SEC has uncovered in Texas in years.

"That sort of enterprise can't be allowed to go on," he added.

The SEC also discovered that Reeder has previously been convicted of six felonies, which he had not disclosed to most of the investors.

Reeder and his wife, Sandra, who together ran Cornerstone, say they have done nothing wrong. No criminal charges have been filed against them for Cornerstone, although the U.S. attorney's office is reportedly conducting an investigation.

Last week, SEC lawyers had what Degenhardt called "preliminary discussions" with Reeder about a possible settlement of the civil suit. Another meeting is planned Tuesday.

Reeder has offered his own proposed settlement, posting it on his Web site. He asks that his and his wife's home, which the SEC seized, be returned, along with money and other "personal property."

Degenhardt said that those conditions will not be part of any settlement.

"The house is not on the table," he said, "and, as for Mr. Reeder receiving any money from Cornerstone, I think not."

In the weeks immediately after the SEC seized Conerstone, investors inundated the agency - and the Star-Telegram - with letters, e-mails and telephone calls protesting the action. "What could be wrong?" they invariably asked, saying that Cornerstone had never missed a payment to them.

But Degenhardt says that, when the SEC acted, it was a matter of time, perhaps weeks, before checks would have started bouncing.

Reeder, through recorded phone messages and on the Web site, has told investors - he calls them clients, saying they were told they weren't making investments - that they are the victims of an illegal action by a corrupt government agency.

Some believe him.

"I think there should be more people like him in this world," says Calvin Spencer of Centralia, Wash. He and his wife, Yvonne, have $125,000 invested in Cornerstone. "I think the government saw he had a [ criminal] record and went after him."

Joe Skaff, a New Jersey insurance agent, considers himself a shrewd investor. He says he investigated Cornerstone thoroughly before investing.

"If this was a Ponzi scheme, it was the most incredible, professional and elaborate Ponzi scheme of all time," Skaff says.

But since Cornerstone was shut down, other clients have become more critical of Reeder. Sexton, the Lago Vista investor, has gone from supporter to critic. She's one of a handful who leave critical messages on Reeder's Web site, debating his latest missives and his defenders.

"If only I had known he was an ex-convict, I would never have invested a penny with him," says Sexton, 60. A few months before the SEC's action, Sexton had invested $25,000 with Cornerstone and received about $6,500 in payments.

The SEC had never heard of Gary Reeder when it began looking into Cornerstone. But upon checking state records, they found that, from 1973 to 1991, he had six felony convictions in Texas, ranging from theft to forgery to burglary, plus a misdemeanor assault conviction.

More to the point, Cornerstone financial records that have been filed in court show that, of the $15.5 million in income the company had received through Oct. 31, all but about $250,000 was money paid in by investors.

Cornerstone clients were told that the sales of various products were generating the fat "profit-sharing" payments. But those sales amounted to less than $50,000, according to the records.

A subsidiary that Reeder formed to sell customized Corvettes had income of $75,000. A play that Reeder wrote and spent at least $268,000 producing, according to the documents, was the company's biggest revenue producer, generating $111,000 in ticket sales.

The SEC and Quilling have also alleged that the Reeders used investor money for personal expenses. The regulators allege that the Reeders used funds from a Cornerstone account to buy a southwest Fort Worth home for $330,000, and that Cornerstone funds were paying for cars, credit card bills and other expenses for Sandra Reeder's daughter, who lives in Oregon.

That's the SEC's description.

Ask Gary Reeder about the allegations and he shakes his head sadly, saying that they're trumped up. In a series of interviews, he has maintained that the government agency is simply intent on protecting the interests of the rich and the powerful.

"They don't want people doing what we're doing," he says angrily, pounding the arm of his chair with a fist for emphasis. "They don't want the people to be financially independent."

Invoking, as he often does, religious allusions, Reeder says Cornerstone was the linchpin of a new "righteous" way of doing business that he had developed.

Unlike the standard capitalist system, Reeder says that everyone benefits in his system and no one is hurt - as God intended.

When pressed for details, Reeder offers vague descriptions of how his business works, using terms like "value-added economics" and "dollar dynamics." He said he has written an unpublished book about it.

It would take him hours, he says, to teach the basic theory to economics professors.

When pressed for examples, he says he can sell a gold coin worth $300 for $10,000, then turn around and distribute the money back to customers and clients in the form of rebates.

Similarly, he said people were lining up to pay $160,000 or more for Corvette sports cars, which would sell for $50,000 when new, because he would equip them with cell phones, fax machines and computers. He would then pay buyers monthly cash rebates from the sales price.

Why would anyone pay far more for a coin or car than they were worth?

"There's no law that says I have to sell a product for a certain amount," Reeder says.

In interviews with more than a dozen Cornerstone clients, none said they understood what Reeder was talking about. They were lured by the prospect of lucrative, short-term profits.

"It's like buying a lottery ticket," said Steve Craig, a rural Michigan resident with more than $10,000 tied up in Cornerstone. "Somebody's going to win. You think it might be you."

Reeder says that Cornerstone clients were told that they were not making an investment but were buying products. He said they received small quantities of those products, such as coin sets, cosmetics or gasoline additives. Reeder says they were also told that their money would be used to buy inventories of products that would be sold by other companies affiliated with Cornerstone.

Sexton disputes that with an expletive.

"I haven't seen a product," she said. "I wasn't offered a product. It was never discussed."

Other Cornerstone investors who were interviewed say they did receive some products.

For an initial $7,500 investment, Cliff O'Hern of Cedar Ridge, Colo., received a small, imitation walnut box containing three newly minted coins and a gold-embossed ring that Reeder says he designed himself.

Given the prices of the gold, silver and platinum, Quilling, the receiver, estimates that the coins and ring might be worth about $500.

"When I saw that, I began to wonder [about Cornerstone] myself," O'Hern says. But like many others, when the promised checks arrived on time, he invested more. He still has about $30,000 tied up in Cornerstone.

Reeder's message seems to have appealed in large part to people who distrust government, big business and established financial institutions. His frequent use of religious allusions and Biblical citations appealed to those with strong Christian beliefs. The Spencers are among many Cornerstone investors who say they invested in part because they believe that Reeder is a devout Christian.

Some investors, including the Spencers and Skaff, say they tried to investigate Cornerstone, calling the Better Business Bureau and the Texas Attorney General's office. They were told there were no complaints. Other investors they talked to were getting checks regularly, they said, so they assumed that Cornerstone was legitimate.

But the SEC and FBI only heard about Cornerstone in November. The first alert came from a concerned investor. Then the bookkeeper, Ruth Ann Martin of Tolar, came forward, voiced her suspicions and provided the financial records she had prepared.

"The whole setup, everything was just money going from one investor to another," Martin said in an interview.

Several times, Martin says, she went to Reeder and told him there wasn't enough money coming in from business ventures to continue paying the amounts of money owed to investors.

Reeder denies the allegations. He says Martin is just another of a long line of people out to get him.

"I understand Ruth is our enemy, and she may have been from the outset," he says.

Martin replies: "The one thing he can't do is admit he's wrong."

Reeder had prepared his own financial statement before the SEC took over. It shows Cornerstone bringing in millions of dollars of revenues from the sale of gold coins, beauty products and auto supplies.

"Those are as accurate as you can get without an audit," Reeder says of the figures he prepared.

Quilling, who is doing the counting for the government, says he hopes to know soon how much money each investor is owed and how much will be available for refunds.

Bob Cox, (817) 548-5534 rcox@star-telegram.com

PHOTO(S): Jeffery Washington