A pastor at a Texas megachurch and a former broker from Louisiana could face decades in prison and a stiff SEC penalty for an alleged fraud that bilked investors out of millions of dollars.

The SEC and Department of Justice have brought civil and criminal charges against Kirbyjon Caldwell, pastor of the Windsor Village United Methodist Church in Houston, and Gregory Alan Smith, a financial advisor from Shreveport, Louisiana, alleging that the two led a scheme to defraud elderly investors.

Authorities charge that Caldwell and Smith scammed around 29 investors out of at least $3.49 million by promising extravagant returns on worthless bonds issued by the pre-revolutionary Chinese government in 1939. Some of the investors liquidated their annuities to purchase the bonds, the SEC claims, while the perpetrators of the fraud used the proceeds to make mortgage payments and purchase luxury cars.

Caldwell's attorney, Dan Cogdell, did not immediately respond to a request for comment, but at a news conference he declared his client "absolutely, 100% not guilty."

"These charges are false," Cogdell said. "At no time did he conspire to commit a crime with anyone. At no time did he make a false statement — or knowingly make a false statement. At no time did he try to cheat anyone."

Caldwell plans to turn himself in to federal authorities in Shreveport in the next week, Cogdell said. Then, after Caldwell posts bond, Cogdell plans to take the case to trial, where he anticipates a vigorous defense and predicts that his client will be vindicated.

"I plan on beating this case like a rented mule," he said.

In addition to heading up one of the largest Protestant churches in the country, Caldwell served as a spiritual advisor to Presidents George W. Bush and Barack Obama.

Kirbyjon Caldwell had served as a spiritual advisor to President Barack Obama.

Smith, the co-defendant, did not immediately respond to phone and email messages seeking comment on the case.

Authorities allege that Smith's role was to line up investors for the sale of the defunct Chinese bonds, which the SEC charges were "falsely represented" to investors as "safe, risk-free, worth tens, if not hundreds, of millions of dollars and could be sold to third parties."

"In reality, the bonds were mere collectible memorabilia with no investment value," the SEC says in its complaint.

The SEC is seeking a permanent injunction against Caldwell and Smith, as well as monetary penalties and disgorgement of the money they collected through the sale of the Chinese bonds. In the criminal case, Caldwell and Smith are facing a 13-count indictment on wire fraud and money laundering charges. The wire fraud charges carry potential sentences of up to 20 years, and the money laundering charges could result in an additional 10 years in prison. The defendants could also face a fine of up to $1 million, according to the Justice Department.

Litigation of the matter is likely to last about a year, Cogdell says.

FINRA barred Smith from the industry in 2010 for misappropriating clients' money and comingling his investors' funds with his own business account. In lining up investors for the Chinese bonds, a scheme which the SEC says took place from April 2013 through August 2014, Smith represented himself as an "investment advisor" and promised "exorbitant returns," in some cases assuring clients of a lightning-quick return on their initial investment.

Caldwell instructed the investors to send money either to a bank account his attorney controlled or to a limited liability company that Caldwell and his wife oversaw, according to the SEC's complaint. At that point, the funds were transferred to the personal accounts of Caldwell, Smith or a Mexican associate.

The SEC charges that Smith and Caldwell failed to tell their clients that the bonds had been in default since 1939, and that the current Chinese government does not acknowledge the debt.

Investors signed agreements affirming that they could get their money back in the event that Caldwell was unable to find a third-party buyer for the bonds.

The SEC's complaint alleges that Caldwell and Smith engaged in a series of stall tactics described as "lulling" emails, phone calls and text messages in which they provided a variety of excuses as to why they had been unable to resell the bonds, but reassured investors that the sales would still go forward.

"In some emails defendants promised that an alleged prospective buyer was interested in purchasing or redeeming the bonds, and that the deal would close within a short period of time," the SEC says in its complaint. "However, none of these deals ever transpired."

At the news conference, Cogdell declined to discuss details of the defense he plans to mount, but he stressed that Caldwell had returned hundreds of thousands of dollars to investors who got impatient with the delay in reselling the bonds and requested a refund.

The SEC says that "the great majority of investors" did not receive any of their principal investment back.

Caldwell maintains that the bonds are still a solid investment. He vowed at the news conference that he has evidence to support that claim, but did not provide details. Caldwell also said that he has invested several hundred thousand dollars of his own money in the bonds, and that he still expects them to pay off, though he acknowledges that no one has yet received a return on their investment.

"Just because it hasn't happened doesn't mean it won't happen," he said at the news conference.