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Indiana church financier gets 54 years for Ponzi scheme

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A judge sentenced a southern Indiana church financier to 54 years in prison Tuesday for pocketing millions of dollars that investors believed would be used to build churches.

Former pastor Vaughn Reeves, 66, had little reaction as officers escorted him from the courthouse in Sullivan, about 80 miles southwest of Indianapolis, said his attorney, who promised to challenge the conviction and the sentence. Reeves was convicted on nine counts of securities fraud in October.

"There's going to be an appeal on a lot of grounds," attorney Dale Webster said after the hearing.

Investigators said Reeves and his three sons used their now-defunct company, Alanar, and sales pitches that included prayers and Bible passages to dupe about 11,000 investors into buying bonds worth $120 million secured by mortgages on construction projects at about 150 churches.

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.

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

"What they did in their company hurt a lot of people," said Jack Newman, 73, of Terre Haute, a retired vice president of marketing who said he invested about $26,000 with Alanar and so far has recovered just 20 cents on the dollar. "Justice needed to be served."

One of the victims who testified at Tuesday's sentencing hearing said he wasn't able to buy health insurance after investing $600,000 in church bonds from Alanar, Sullivan County Prosecutor Bob Hunley said. As a result, Steve Duncan testified that he went blind after developing an eye condition that would have been preventable.

Reeves' sons are scheduled to go on trial in March.

Special Judge Dena Martin sentenced their father to consecutive six-year terms for each of the nine fraud counts, which alleged that he victimized about 2,900 investors who lost a total of $13.1 million, Hunley said.

Among aggravating factors, Martin found Reeves targeted people over age 65 and used religion to influence them, Hunley said.

"We're very happy with the judge's decision," Hunley said.

The judge gave Reeves credit for cooperating with investigators after he turned himself in.

Alanar used a modified Ponzi scheme in which it diverted investors' money from their building projects to speculative investments and to interest payments on other bonds, according to the Indiana Secretary of State's Office, whose Securities Division assisted prosecutors in the case.

Alanar encouraged church members to sell the bonds to fellow congregants using sales pitches that included prayers and Bible passages.

"Never sell the facts, sell warm stewardship and the Lord," Alanar training materials said, according to the Securities Division.

Martin ordered public defenders to handle Reeves' appeal. Webster, Reeves' current public defender, said the new attorneys haven't been selected yet.

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  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.

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