Ind. church financier convicted of Ponzi scheme

AP News
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Posted: Oct 21, 2010 8:24 PM
Ind. church financier convicted of Ponzi scheme

A former southern Indiana pastor was found guilty Thursday of pocketing millions of dollars that investors believed would be spent to build or expand churches.

Jurors deliberated about four hours before convicting Vaughn Reeves, 66, on nine counts of securities fraud, the Tribune-Star of Terre Haute reported. Each count is punishable by two to eight years in prison. Reeves faces sentencing Nov. 19.

"I think justice was done," Karen Lamb, 55, of Terre Haute, told The Associated Press. Lamb and her husband lost more than $50,000 after investing in church bonds from Reeves' now-defunct company, Alanar.

Prosecutors say the case is a prime example of affinity fraud, in which scammers prey on people who share a common interest, such as religious affiliation, ethnicity or even age.

Authorities say Reeves and his three sons duped about 11,000 investors into buying bonds worth $120 million secured by mortgages on construction projects at about 150 churches. The men diverted money from new investments to pay off previous investors, pocketing $6 million and buying two airplanes, sports cars and vacations, according to court records.

"I'm just so glad for the investors, because the investors wanted their day in court and I feel like they got that today," Sullivan County Prosecutor Bob Hunley told the AP.

Reeves denied wrongdoing in defense testimony Wednesday, the Tribune-Star reported. He said he and his sons diverted investors' money into online stock trading to help churches avoid default, and denied taking money for personal use.

"It was meant to be a blessing to help the weaker churches get back on their feet," Reeves said in court.

His attorney, Dale Webster, said Reeves would appeal.

Reeves' sons are scheduled to go on trial early next year.

Investigators say Reeves and his sons assembled teams of church members to sell bonds to other church members, urging them to fulfill their "Christian responsibility" by supporting church construction projects during the early part of the decade. The teams were given training materials that instructed them to open sales calls with a prayer and to quote scripture.

"Never sell the facts, sell warm stewardship and the Lord," urged materials quoted in court documents.

About eight churches that issued Alanar bonds currently face foreclosure proceedings and likely will lose their buildings, according to Bradley Skolnik, the Indianapolis attorney who has served as Alanar's court-appointed receiver since 2005.

Skolnik told the AP that he still is working to return money to investors like the Lambs, who have been repaid about $6,000. Most of that money comes from churches that are in default, he said. He said he expects to make another $10 million distribution within two months.

Reeves will be sentenced in Sullivan, where the charges originally were filed. The case was moved to Princeton due to pretrial publicity. He could have faced up to 20 years under a new state law enhancing the penalty for affinity fraud, but he was charged before the law was enacted.