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Church scam investors may be repaid by end of 2014

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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.

 

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  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

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