Thousands of devout investors who lost savings after an Indiana brokerage persuaded them they were helping to build churches will get the last of their share of the money that's being repaid by the end of the year, the official overseeing the payback said Monday.
Receiver Michael Rusnak said he hopes to finish distributing funds to investors who lost money in the Alanar scam by the end of the year. But most may get back as little as 50 percent.
About $60 million had been repaid to investors through the end of January, and a few more million dollars may be distributed. But Rusnik said the exact amount is up to the federal court in Indianapolis that appointed him.
"We're hoping to make a final distribution this year," Rusnik said. "Ultimately, what they get is what we collect."
The complex case has dragged on since 2005, when the government froze the assets of the brokerage based in Sullivan, a city of around 4,000 people about 80 miles southwest of Indianapolis, and began the lengthy process of finding investors and paying them back.
Seventy-year-old former pastor and Alanar founder Vaughn Reeves Sr. was eventually convicted of securities fraud and sentenced to 54 years in prison. Authorities said Reeves and his three sons duped investors into sinking money into bonds secured by church construction projects, then spent millions of dollars on themselves. Two of the sons have completed their time in prison; the third drew no prison sentence but was ordered to pay back nearly $500,000.
The group used prayers and Bible passages to convince about 11,000 investors to buy bonds worth $120 million secured by mortgages on construction projects at about 150 churches in 35 states, according to court documents. Instead, Reeves and his sons diverted money from new investments to pay off previous investors, pocketing $6 million and buying two airplanes, sports cars and vacations, investigators said.
The financial fallout left churches and nonprofits that had sold the Alanar bonds holding the bag from which the investors were repaid. Some of the more well-off churches were able to pay back all the money they owed, Rusnik said. The government worked out financial arrangements with others. A few churches were foreclosed on, though Rusnik said that was a last resort.
About $19 million has been distributed to investors in the larger projects, and about $42 million to people who sank their money into projects at what tended to be smaller churches. There were far many more small investors than big ones.
"They just didn't have the financial sophistication, they just didn't have the resources, they just didn't have the finances to pay their shareholders back," Rusnik said of the smaller churches.
As a result, some of the investors will get back about 87 percent of their investment; others will get only half.
"Basically, more money in, more money out," Rusnik said.
Rusnik's receivership still is looking for Alanar investors who haven't been found or who received their checks but have not yet cashed them in. If the investors who are still owed money aren't found, odds are the money will go the state's unclaimed property fund, he said.
"There are some sizable checks," he said.