By Lisa Trigg
SULLIVAN — A former Sullivan pastor and his sons now face 10 separate felony counts in violation of the Indiana Securities Act for an elaborate fraud that allegedly bilked millions from investors.
Charges against Vaughn Reeves and his sons, Chip, Chris and Josh, were filed Tuesday in Sullivan Circuit Court by Prosecutor Robert Hunley II. The case is the result of a collaborative investigation of Alanar Inc. that was supported by the Secretary of State’s Prosecution Assistance Unit and the Indiana State Police.
Each of the Reeveses could face up to eight years in prison on each class-C felony charge if convicted.
As Secretary of State Todd Rokita joined Hunley on Tuesday at the Sullivan County Courthouse to announce the filing of the charges, word came that one of the men, Chip Reeves, had been taken into custody by U.S. Marshals.
Applause erupted among some of the people in the courtroom who said they were victims of the alleged Ponzi scheme and had lost the money they invested in Alanar Inc.
Later Tuesday, Chip Reeves was taken to the Sullivan County Jail, where, according to a jail spokesperson, his bail was set at $1.5 million, no 10 percent allowed.
All four men moved out of Indiana when the company was put into receivership as, investigators say, the financial scheme fell apart.
“This case goes far beyond simple theft,” Rokita said. “The Reeveses allegedly targeted their victims through their faith, and then exploited their religious convictions in order to hide their elaborate Ponzi scheme from potential investors.”
Chip Reeves, 44, was last known to live in Milford, Ohio. His father, Vaughn Reeves, 65, was last known to live in Louisville, Ky. The most recent known address for Chris Reeves, 40, was Bardstown, Ky. Josh Reeves, 33, had lived in Bettendorf, Iowa.
Hunley said that U.S. Marshals have been looking for the men in anticipation of the charges.
According to court documents, the Reeveses allegedly committed affinity fraud by duping investors into buying bonds that raised at least $120 million. The stated purpose for the vast majority of the bonds was supposedly to finance church construction and expansion. However, the Reeveses allegedly shuffled this money among various accounts and stole approximately $6 million for themselves in the process, investigators say.
The Reeveses operated Alanar Inc. as the umbrella company for their scheme. The charges allege that the Reeveses violated securities laws by misapplying and misappropriating money from bond repayments made by churches issuing the bonds. The Reeveses also allegedly were misappropriating money from people purchasing bonds, often members of the same church that had issued a bond.
According to a news release from Rokita’s office, Alanar management created training materials to distribute to church members, who were encouraged to sell bonds to their fellow church members. The materials relied heavily on the religious convictions of the victims.
For example, the church members were trained to open the sales call with a prayer, quote Bible scripture during sales calls and to “never sell the facts, sell warm stewardship and the Lord,” the release stated.
“This is a day a long time in the making,” Hunley stated in the news release. “I’m glad to hold Vaughn Reeves and his sons accountable. People trusted their life savings to these men. Investors felt they were helping to build churches, not buy the Reeves[es] expensive homes, fancy cars, airplanes and swimming pools. The Sullivan County Prosecutor’s Office is committed to bringing these men to justice.”
The prosecutor noted that he received many inquiries from Sullivan area residents who had invested in Alanar, asking about criminal charges against the men. Due to the ongoing investigation, however, he said he was unable to give any information to the investors. It was a frustrating case, Rokita agreed, because, at one time, three federal agencies — the Securities and Exchange Commission, the Internal Revenue Service, and the Federal Bureau of Investigation — were investigating Alanar. It is the policy of his office not to duplicate an investigation of another agency, Rokita said, which would be a waste of public dollars.
“But it became clear they weren’t going to file charges,” he said, at Tuesday’s news conference, “so a year-and-a-half ago we teamed up to file local charges.”
The allegations suggest the Reeveses engaged in their scheme over the course of at least five years. By illegally moving money among bond accounts, investigators say, the Reeveses concealed the true rate of default on Alanar bonds from investors. According to the secretary of state’s news release, “Thousands of investors, mostly Hoosiers, have been financially devastated by the Reeves[es]’ alleged conduct.”
Referring to the Sullivan community, Rokita said, Tuesday, “I couldn’t believe the amount of folks that were hurt in such a small place.”
One of those investors, Bill Springer, attended Tuesday’s news conference. He said he had a “sneaking suspicion something was wrong with Alanar” when he called a church in Warren, Mich. That church had received money for a building project from Alanar but, as Springer discovered, the Michigan church already had paid off its bond issue.
Springer said he had entrusted the money of the local Oddfellows Lodge to Alanar. Determined to get it back, he sat in the company’s headquarters on Sullivan’s courthouse square until someone brought him a check for the lodge’s $45,000 investment.
Springer said he took the check directly to the bank, where it bounced. After threatening to take the bad check to the county prosecutor and the secretary of state, the bank finally cashed the check.
“I was one of the lucky ones,” he said. “I got the money back.”
Springer said when he talked to Vaughn Reeves about the investment, Reeves tried to sell him more bonds rather than issue the check.
“It was like pulling eye teeth to get the money,” Springer said.
The money has since been used to build a new youth center at the Sullivan lodge.
Rokita said the Reeveses were the kingpins behind the Ponzi scheme. Some of their former employees and associates have been cooperating in the investigation, but no charges are planned at this time against any of those people or the sales staff who made the presentations to investors, he said.
In an effort to keep the alleged victims informed of the status of the case, Rokita and Hunley each have set up Alanar information pages on the Internet.
For Rokita’s office, go to www.in.gov/sos/alanar.
For Hunley’s, go to www.sullivancountyprosecutor.com and click on the “Alanar Information” section.
Both Rokita and Hunley emphasized that the charges described are only accusations. The defendants are presumed innocent until and unless proven guilty. Rokita’s news release also offered more information “on how to avoid becoming a victim of investment fraud” at www.IndianaInvestmentWatch.com.
Lisa Trigg can be reached at (812) 231-4254 or firstname.lastname@example.org.