Nearly a decade after the government took over an Indiana brokerage firm whose leaders scammed more than 10,000 devout investors out of millions of dollars they believed would help build churches, officials are still trying to get their money back without forcing congregations out of their houses of worship.
A federal judge froze Alanar's assets in 2005 at the request of the Securities and Exchange Commission, and the brokerage based in Sullivan, a city of around 4,000 people about 80 miles southwest of Indianapolis, was placed in receivership.
Six years later, Vaughn Reeves Sr., was sentenced to 54 years in prison following his conviction on securities fraud charges. Reeves, a 69-year-old former pastor, is not eligible for release until 2035. His three sons also went to prison for taking part in the scheme.
The group used prayers and Bible passages to convince about 11,000 investors into buying bonds worth $120 million secured by mortgages on construction projects at about 150 churches in 35 states, according to court documents. But the religious project was actually a Ponzi scheme that gave Reeves and his sons millions of dollars to spend on themselves.
For eight years now, the court-appointed receiver has been trying to get the investors' money back. Much of that money comes from small, independent churches or related operations like daycares that took loans from Alanar because they couldn't get bank loans, Indianapolis attorney Michael Rusnak, the current court-appointed receiver, said Wednesday.
"If you can get an agreement, that's the way we like to do it if we can," said Rusnak, who was in Seattle to try to work out a financial arrangement with one of the churches, most of which are located in poor neighborhoods.
About 40 of the churches have managed to pay off the entire amount of their bond, he said, but most haven't, and if an arrangement can't be made, the receivership has to seize the property.
Rusnak said he wasn't certain how many churches had been foreclosed, but he said it was "few." Court records, including a report filed Wednesday in U.S. District Court in Indianapolis, don't include a total number.
"We talk about foreclosure ... that's a last resort," he said.
In some cases, congregations that couldn't pay off the bond have quietly abandoned their churches, sometimes walking away from property valued as high as $150,000, Rusnak said.
James Voyles, the Indianapolis attorney who represents what is left of Alanar, declined comment.
Rusnak said the case is approaching its end. About 44 percent of investors' money — in some cases, their life savings — has been recovered.