Vaughn Reeves - Sullivan County Prosecutor

STATE OF INDIANA
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COUNTY OF SULLIVAN)
STATE OF INDIANA
SULLIVAN CIRCUIT COURT
CAUSE NO. 77C01-0906-FC- Of) I VI
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VAUGHN A. REEVES, SR.
AFFIDAVIT FOR PROBABLE CAUSE
STATE OF INDIANA,
COUNTY OF SULLIVAN, SS:
I, Stephanie Caraway, swear that the following information is true, and that I either have personal knowledge of
it, or learned it from another law enforcement officer.
BACKGROUND
Stephanie Caraway ("Caraway") is an attorney employed by Indiana Secretary of State Todd Rokita, Securities
Division, Prosecution Assistance Unit. Charles Williams (''\V'iUiams'')is an investigator, also employed in the
Prosecution Assistance Unit. \V'illiamsand Caraway have investigated violations of the Indiana Securities Act
involving the following corporate entities and individuals:
Corporate Entities
The operations for all of the following corporate entities were or are located in Sullivan, Indiana.
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Alanar, Inc. is the umbrella under which the entities listed below operated.
Churchmen's Capital Group ("CCG") served as a conduit for misappropriation of bondholder funds.
CCG also issued bonds underwritten by Alanar.
Churchmen's Investment Corporation ("CIC"), is the named owner of an online brokerage account
through E*Trade. Bondholder and church funds were deposited into and withdrawn from the brokerage
account.
Northstar Mortgage Funding, Inc. ("Northstar") existed in order to broker mortgages for Alanar's bond
issuers, which were largely churches.
The following entities served as paying agents for Alanar bonds:
o First Financial Services of Sullivan Co., Inc.
a The Liberty Group, Inc.
a Guardian Services, LLC
The Citadel Corporation issued bonds underwritten by Alanar.
AlC Aviation, Inc. leased computer equipment, cars and aircraft to Guardian and Alanar.
Corporate Officers (collectively, "the Reeves"):
• Vaughn A. Reeves, Sr.
o Father of Chip, Chris, and Josh Reeves (see below)
a Chief Executive Officer of Alanar
o Chief Executive Officer of Guardian
o Chief Executive Officer of First Financial
Pagelofll
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Chief Executive Officer of Liberty Group
25% owner of Cl.C
President and sole owner of AIC
Sole owner of Northstar Development
o Member of Board of Directors of Northstar Mortgage
Vaughn A. ("Chip") Reeves, Jr.
o Son of Vaughn A. Reeves, Sr. and brother of Chris and Josh Reeves
o Member of Board of Directors of Guardian
o Member of Board of Directors of First Financial
o Member of Board of Directors of Liberty Group
o 25% owner of ere
o Member of Board of Directors of Northstar Mortgage
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Jonathan Christopher ("Chris") Reeves
o Son of Vaughn A. Reeves, Sr. and brother of Chip and Josh Reeves
o Member of Board of Directors of Guardian
o Member of Board of Directors of First Financial
o Member of Board of Directors of Liberty Group
o President of CIe
o 25% owner of erc
o Member of Board of Directors of Northstar Mortgage
Joshua Craig ("J ash") Reeves
o Son of Vaughn A. Reeves, Sr. and brother of Chip and Chris Reeves
o Member of Board of Directors of Guardian
o Member of Board of Directors of First Financial
o Member of Board of Directors of Liberty Group
o 25% owner of crc
o Manager and sale agent of CCG
o Principal corporate officer of Citadel
o President of Northstar Mortgage
Alanar was incorporated in 1988 and moved its operations to Sullivan, Indiana (located in Sullivan County,
Indiana) in 1989. According to Alanat's own corporate literature, its purpose was to «assist churches and other
non-profit corporations in securing financing for building programs and the refinancing of existing mortgages."
On July 26, 2005, the United States Securities Exchange Commission ("SEC") obtained an injunction against
Alanar and CIC under case number 1:0S-cv-1102-DFH-TAB. The injunction ordered Alanar and all related
entities to cease operations. The United States District Court for the Southern District of Indiana (<<The
Court") appointed Bradley Skolnik as Receiver, and appointed the accounting firm of BGBC Partners
(<<BGBC")to assist Mr. Skolnik.
The Reeves maintained exclusive and complete control over Alanar and the related corporate entities at all
times pertinent to this investigation.
TERMINOLOGY
• Affinity Fraud: A scheme where a certain group of investors is targeted because of belonging to a
particular group, such as religious affiliation. The perpetrator often is or pretends to be a member of the
same group. The perpetrator exploits the investors' trust because of the group affiliation.
• Bond: A debt investment in which a bondholder loans money to an issuer. The issuer borrows the funds
for a defined period of time at a specified interest rate.
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Bond Service Agent Agreement: A contract that the issuer, indenture trustee and paying agent enter into
that outlines the terms of the bond.
Bondholder: The individual or entity investing funds in a bond.
Callable Bond: When a bond issuer pays the balance on the bond before the date specified in the bond
service agent agreement, the bond becomes "callable." The funds are then supposed to be paid to the
bondholders as specified in the indenture. When this occurs, the company responsible is said to "call the
bond."
Indenture: A contract between a bond issuer and a bondholder that specifies the maturity date, interest
tate, whether the bond is callable, purpose of the bond, and the amount of money that is to be repaid.
Issuer: The entity borrowing money under the terms of the bond service agreement. In the case of each
of the bond issues in this affidavit, the issuer is a church.
Maturity Date: The date on which the principal amount of a bond becomes due and is supposed to be
repaid to the investors.
Paying Agent: The entity that accepts payments from the issuer, puts them a into bond repayment
account, and then distributes the payments to the bondholders. The paying agent also accepts payments
from the bondholders, places them into a bond proceeds account, and distributes payments to the issuers.
Ponzi Scheme: A scam that typically promises high rates of return to entice people to invest. Previous
investors are paid interest with money brought in from newer investors,
Proceeds Account: An account into which funds invested by bondholders are deposited, Presumably,
there is a separate proceeds account for each bond issue.
Prospectus: A formal legal document that provides details about an investment. A prospectus should
contain all facts that an investor needs to know in order to make an informed decision.
SCOPE OF INVESTIGATION/STATUTE
OF LIMITATIONS
The scheme the Reeves carried out involved thousands of investors and many millions of dollars passing
through approximately 300 separate bond issues. The Reeves underwrote bonds that raised at least $120
million. Caraway and \Villiams focused their investigation on a select group of bond issues due to the
investigative resources available, and also for the sake of judicial economy.
All charges being brought in this case are class C felonies. Indiana law provides the following for class C
felonies: "[p[rosecution for an offense is barred unless it is commenced .. .within (5) five years after the
commission of the offense," Ind. Code §35-41-4-1(a)(1). However, this time period does not include any
period during which "the accused person conceals evidence of the offense, and evidence sufficient to charge
him with that offense is unknown to the prosecuting authority and could not have been discovered by that
authority by exercise of due diligence." Ind. Code §35-41-4-1(h)(2) (2007).
In all instances outlined in this Affidavit and in the Charging Information, the following facts are true:
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The bonds on which the charges are based did not mature until after July 2005.
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The SEC obtained its injunction in July 2005.
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Because of the Reeves' actions (see below), neither the bondholders nor the bond issuers could have
known before July 2005 that any fraudulent activity was being carded out by the Reeves,
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The Reeves' own actions concealed their fraudulent activities from bondholders and bond issuers, as
follows:
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The Reeves' continued "success" depended on underwriting large number of bonds. \'V'ithoutthe
continual influx of large amounts of money from churches and bondholders, their scheme of
shuffling money from account to account to hide defaults would have collapsed.
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To insure that funds would continue to pour in, it was crucial for the Reeves to not only attract new
bondholders and churches, but also to convince current bondholders to continue investing in
Alanar bonds. The Reeves had to continually deceive bondholders into believing that Alanar bonds
were sound investments. The Reeves accomplished this by covering up for defaulting churches and
their own ill-gotten gains by shuffling money from account to account using funds from other
investors and churches to make scheduled interest payments to investors.
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None of the bondholders on which the charges are based knew anything was aW1Ywith regard to
Alanar or their bonds until they learned of the SEC's injunction in July 2005.
The date on which the period of limitations begins to run is July 26, 2005, which is the date on which the
District Court ordered the injunction. The controlling period of limitations is 5 years. Therefore, this action
must be commenced no later than July 25,2010. This action is clearly being commenced before that date.
BUSINESS PRACTICES OF ALANAR
Alanar was in the business of issuing bonds, usually to churches. Often, the church would seek funding for a
new building or an addition to an existing one. Once the church and Alanar agreed on terms and Alanar issued
the necessaly paperwork, Alanar usually scheduled a kickoff night at the church in order to start selling bonds.
Sales representatives for Alanar and one of the Reeves were usually present at kickoffs. Alanar representatives
would make a sales presentation to the members of the church. The sales presentation appealed heavily to the
Christian faith of the potential investors, including reminding them of their "Christian responsibility" to
support the church by buying bonds.
Alanar personnel would also encourage the use of a team of church members to sell bonds to other church
members after the kickoff. Alanar created and distributed "training materials" for these teams. Nowhere in
the "training materials" is there any information regarding risks associated with the investments. The materials
promote the use of the following tactics and catch phrases, among others:
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Open the sales call with prayer.
Quote bible scripture during sales calls.
The church member who is selling to others "must buy a bond to set an example."
"Never sell the facts, sell warm stewardship and the Lord."
"A bond issue saves the church money."
"The best bonds are the ones that mature last."
THE SCHEME
The Reeves' scheme can be categorized as affinity fraud. Alanar's marketing strategy was devised to appeal to
the Christian faith of potential investors. The Reeves targeted the issuing church's own members as
salespeople for the other members. Many of the victims trusted the Reeves because they believed the Reeves
to be Christians. Also, many of the victims considered the fact that they were helping churches and investing
with a Christian company when they were deciding whether to invest.
The Reeves carried out this affinity fraud through use of a modified Ponzi scheme. In a classic Ponzi scheme,
money obtained from more recent investors is illegally used to pay those who have invested previously. In this
case, when payments to investors ~ecame due, the Reeves illegallyused money from both churches and
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bondholders to make those payments.
In order to aid the Court, the undersigned has attached Exhibit 1 and Exhibit 2 to this Affidavit and hereby
incorporates them by reference. These diagrams were composed by BGBC Partners and used to aid the
District Court during a hearing in the receivership action.
Exhibit 1 illustrates what should have occurred when Alanar offered a bond. Money from bondholders should
have gone into a bond proceeds account for that specific bond issue. Only money from bondholders for that
specific issue should have gone into or come out of that account. The money in the proceeds account should
then have been paid to the bond issuer (the church). The bond issuer should then have begun making
payments, according to the agreed-upon payment schedule. The bond issuer's payments should have gone into
a bond repayment account. The repayment account should have only contained money received from the
bond issuer for that specific bond issue. The money in the repayment account should have been withdrawn
only to make payments to bondholders for that specific bond issue, according to the indenture.
Exhibit 2 illustrates the complex scheme that the Reeves carried out in order to commingle and misappropriate
money from proceeds and repayment accounts.
THE REEVES' COORDINATED ACTIONS
Many former employees of Alanar and related entities, investors, and other individuals who had direct contact
with the Reeves were interviewed during this investigation, in addition to people with direct knowledge of the
Reeves' financial records. Much of the information that follows came from those individuals.
The Reeves regularly conducted closed-door "executive committee" meetings among Vaughn, Chip, Chris and
Josh. All important decisions about the company and the bond issues were made in these meetings. The
Reeves would often direct the transfer of funds among accounts and commingle bond funds shortly after
.conducting the executive committee meetings. According to one former employee, "Everyone knew they [the
Reeves] were moving money around. TIle question wasn't whether they were moving money around,
apparently the question was; <Canyou do that or not?'"
A review of records from a CCG checking account held at Harris Bank reveals patterns consistent with
systematic "raiding" of repayment and proceeds accounts. On several occasions, there were large deposits into
the account, which were comprised of many smaller checks from different bond issue accounts. \'{Iithin days
of when a deposit was made, checks would be issued to oth~r bond issue accounts that were short of funds and
had payments coming due. This account was not the only one held by CCG.
As an example, in November 2003, several large deposits were made into the Harris Bank account. These
deposits were comprised of smaller amounts from individual bond issue accounts. Shortly after each deposit,
checks were issued to accounts for other bond issues, using the money from the deposits. The undersigned has
attached Exhibit 3 to aid the court. Exhibit 3 is a spreadsheet detailing these transactions, and is incorporated
into this affidavit by reference.
When a church repaid its bond in full, rather than calling the bond and repaying bondholders, the Reeves often
only called and paid church members' bonds. The Reeves would then use the remaining money for other
things, including payments to bondholders from other bond issues. The Reeves would order employees to
continue making scheduled interest payments to the remaining bondholders, as if the bond had not been paid
off. By continuing to make scheduled payments, the Reeves concealed the fact that they had illegally
transferred funds out of the account.
As noted above, AIC Aviation, Inc. was an Alanar related entity. According to BGBC, $349,000 coming from
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CCG, First Financial, Liberty Group, and Churclunen's Income Bond Funds was deposited into AIC accounts.
On a 2003 AIC asset report generated for tax purposes, the following items are listed, among others: "1999
Porsche Boxter-Josh,"
"1999 Porsche Boxter-Chris,"
and "2000 Porsche-Chip."
Also listed were a Piper
aircraft, a Cessna aircraft (which is noted as being disposed during the year 2003), and a Mitsubishi MU-Z
aircraft. Vaughn Reeves was known to pilot these aircraft for personal use.
VAUGHN A. REEVES, SR.
Vaughn continually ordered the illegal transfer of money among bond issue accounts, which resulted in church
defaults being concealed from bondholders. One former employee stated that Vaughn would try to "borrow
them out of debt," but "that money was always coming from other bondholders."
Vaughn was known to
make public claims that no Alanar bond had ever gone into default.
Vaughn often knew when a church repaid its bond, and would instruct employees working in the repayment
department to transfer all but $500.00 of the repayment money into CCG's Harris Bank account for illegal
distribution to other accounts.
Vaughn would ask employees to calculate a payoff for a church, and then would increase the figure. He
directed employees to convey the higher figure to the church and tell them that it was the correct payoff. He
would also order employees to change or omit items on statements being sent to churches.
The majority of checks written from the CCG account were either signed by company employees at the behest
of one of the Reeves, or stamped with Judith Reeves' signature. However, some of the checks were personally
signed by Vaughn Reeves. All of the checks in the table below are dated January 9, 2004, except for check
2576, which is dated December 29,2003.
CHECKS SIGNED
CHECK NUMBER
2653
2664
2654
2665
2663
2651
2658
2661
2668
2666
2659
2657
2660
2656
25761
2652
BY VAUGHN REEVES, SR.
PAYABLE TO
Abundant Life
Christ Temple Baptist
Citadel
Disciples of Christ
Eastlake Baptist
Faith Temple
First Assembly of God
Freewill Pentecostal
Granite Springs and Sierra View Co.
New Crea cion
Rising Star
Southside Christian Center
Spoken Word
St. Luke Baptist
Trinity Family Repayment Account
Warren Missionary Baptist
AMOUNT
$9,000.00
$16,500.00
$3,750.00
$6,000.00
$16,100.00
$4,500.00
$23,300.00
$20,100.00
$174,736.93
$1,750.00
$12,525.00
$36,500.00
$19,700.00
$46,600.00
$8,000.00
$2,000.00
VAUGHN A. REEVES, JR. ("CHIP")
Chip controlled the E*Trade online brokerage account. Bondholder and church funds were deposited into this
account, contrary to the indentures and prospectuses for those bond issues, On two occasions, money was
clearly deposited into the E*Trade directly account from CCG's account at Harris Bank. It should be noted
1
The memo area ofthis check says "Note,"
Page 6 oj11
that the CCG account at Harris Bank contained a mix of money from bondholders and churches.
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Check number 2419 was made payable to "E*Trade" in the amount of $100,000.00. It cleared the bank on
September 8, 2003.
Check number 2946 was made payable to "Churchmen's Investment" in the amount of $86,500.00 and
cleared the bank on May 20, 2004. The back of the check bears an imprint from E*Trade, showing it to
have ultimately been deposited in the E*Trade account. .
In September 2004, Chip aided Chris in withdrawing approximately $80,000 from the CCG account for Chris'
personal use. In addition, the following checks were made payable to Chip from the Harris Bank CCG
account:
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Check number 1777, for $10,000, dated June 22,2001.
Check number 1788, for $15,000, dated June 29,2001.
Check number 1800, for $25,971.31, dated July 13, 2001.
JONATHAN CHRISTOPHER REEVES ("CHRIS")
In February 2004, Chris and Josh directed an employee working in the repayment department to transfer
money from certain repayment accounts into the Harris Bank CCG account. The purpose for the transfers
was to cover other bond issue accounts that were short and needed to make scheduled payments to
bondholders. Chris and Josh directed the employee to transfer certain amounts from each account after
consulting a spreadsheet listing repayment account balances.
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On or about December 6, 2004, Chris asked the same employee to calculate a payoff figure for Iglesia Cristiana
el Buen Samaritano ("Iglesia"). The correct payoff was approximately $4.3 million. Chris instructed the
employee on or about December 9, 2004, to draft a letter to the church stating that the amount of their bond
payoff was $3 million, in spite of the employee giving Chris' the correct payoff figure.
After Chris sent the letter, Northstar attempted to assist Iglesia with financing to payoff its bond. The church
ultimately obtained financing from Union Planters Bank.
In February 2005, the church paid the amount in the payoff letter sent at Chris' direction. Iglesia officials
believed that the church had paid the bond in full. On February 16, 2005, Northstar submitted a bill to the
repayment account for Iglesia for $296,660.52 for "consulting fees." The bill was paid out of the money from
Iglesia's bond repayment, which should have instead gone to bondholders.
The money was deposited into Northstar's bank account at First National Bank and Trust on February 18,
2005. Each of the Reeves received a check for $41,202.85 within days of the deposit. An Alanar internal
document states that "the final payoff was short and the funds have been invested to make up the difference
and to ensure timely payments." The only legal use for the repayment money was to repay bondholders.
One of Chris' duties was to review a report generated twice per month that listed which bond issues could not
make upcoming scheduled payments to bondholders. Chris was responsible for deciding on each bond issue
whether to "cover it" If Chris directed an employee to "cover it," it meant that the employee should remove
funds from other bond issues' repayment or proceeds accounts, transfer those funds to a CCG account, and
repay bondholders for the issue that was short of money.
In some instances, when churches paid off their bonds in full, Chris would direct employees to call only the
bonds belonging to church members, because as members they would find out that the bond had been repaid.
Chris would then direct the employee to transfer the remaining money to another account.
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\V'hen Chris and Chip withdrew $80,000 from CCG, as described above, Chris and his wife used the money to
go on a vacation to New York City, to go on a Disney cruise, and payoff personal credit card debt. This
money should have been used exclusively to repay bondholders.
In March or April of 2005, Chris withdrew $5,000.00 from CCG. Chris used this money as a down payment
for land on which he and Melissa planned to build a house. The house they planned to build cost
approximately $350,000. Chris planned to "borrow" money from CCG to pay for the house.
In 2003, Chris used approximately $17,000.00 in CCG money to build a pool at his residence. Once again, all
of the funds in the CCG account were either from repayment accounts or proceeds accounts and belonged to
bondholders and churches.
TIle following checks were written directly to Chris from the Harris Bank CCG account:
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Check number 2351, for $26,000, cleared the bank on 7/11/2003. TIle memo area states: "loan re:
Citadel=req, dtd 07112003."
Check number 3716, for $2,000, cleared the bank on 11/19/2004.
Check number 3098, made payable to Northstar Mortgage Funding for $12,000, cleared the bank on
7/15/2004. The memo area states: "Chris Reeves loan."
Check number 1755, for $20,000, dated June 7,2001.
Check number 1774, for $1,025, dated June 21, 2001.
Check number 1775, for $56,000, dated June 22, 2001.
JOSHUA REEVES
In February 2004, an employee asked Josh what to do about a proceeds account that lacked sufficient money to
make a scheduled payment to bondholders. Josh told the employee that from that point forward, whenever a
repayment account was short and a bondholder payment was due, she should remove money from any
repayment or proceeds accounts that had a sufficient balance and use the money to pay bondholders in issues
that were short of funds for repayment.
}osh ordered an employee on several occasions to write checks from the Harris Bank CCG account to Chip.
On one occasion.josh directed the employee to write ~ $50,000.00 check to Chip.
All of the following checks were issued and made payable to Josh from the Harris Bank CCG account, which
contained funds belonging to bondholders and bond issuers. It should be noted that checks 3328, 3550, 3900
and 3901 were not only made out to ''Josh Reeves," but they were personally signed by Josh as well:
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Check number 1986 for $1,500 cleared the bank on June 6, 2003
Check number 2348 for $1,000 cleared the bank on June 25, 2003 (memo area: "Northstar Mortgage
Funding, Inc. -incept. 06232003")
Check number 2780 for $3,000 cleared the bank on March 11, 2004 (memo area: "management fee")
Check number 2838 for $5,000 cleared the bank on April 1, 2004 (memo area: "for 1/1/04")
Check number 2839 for $5,000 cleared the bank on April 1, 2004 (memo area: "for 4/1/04")
Check number 3001 for $2,000 cleared the bank on June 10,2004
Check number 3328 for $10,000 cleared the bank on September 8, 2004
Check number 3550 for $2,000 cleared the bank on October 1, 2004
Check number 3812 for $500 cleared the bank on December 9, 2004
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Check number 3900 for $10,000 cleared the bank on December 23, 2004
Check number 3901 for $2,375 cleared the bank on December 23, 2004
Check number 4565 for $30 cleared the bank on April 20, 2005 (memo: "reimbursement")
The majority of checks written from the CCG account to various individuals, entities and churches were either
signed by company employees at the behest of one of the Reeves, or stamped with Judith Reeves' signature.
However, in addition to the 4 checks noted above, there were additional checks that Josh signed personally. It
should be noted that Northstar was managed by Josh, and thatJillian Reeves is Josh's wife.
CHECKS SIGNED BY JOSH REEVES
PAYABLE TO
CHECK
DATE
NUMBER
Cross Development
3165
8/4/1004
Deluxe
Business Checks and
3506
10/5/2004
Solutions
Northstar Mortgage Funding
3098
7/15/2004
Northstar Mortgage Funding
3099
7/15/2004
3202
8/12/2004
Northstar Mortgage Funding
3327
9/8/2004
Northstar Mortgage Funding
3524
10/13/2004
Northstar Mortgage Funding
3616
3648
3689
10/29/2004
11/10/2004
11/15/2004
Northstar Mortgage Funding
Northstar Mortgage Funding
Northstar Mortgage Funding
AMOUNT
$11,329.76
$102.94
MEMO
"invoice #BC5701"
$12,000.00 "Clu:is Reeves loan"
$2,499.99 "Jillian Reeves salary
6/16/04-7/31/04"
"Jillian
Reeves salary
$1,666.66
8/1/04-8/31/04"
$1,666.66 "Jillian Reeves salary
9/1/04-9/31/04"
$1,666.66 "Jillian Reeves salary
10/1/04-10/31/04"
$2,310.68
$3,600.00
$6,000.00
FORENSIC ACCOUNTANTS' FINDINGS
BGBC issued two reports to the Receiver with numerous exhibits outlining the results of their analysis. The
undersigned has spoken with Erika Gaffin and Howard Gross from BGBC regarding their findings. BGBCs
analysis revealed that the Reeves' ongoing course of business was based on misappropriating funds in
repayment and proceeds accounts, which concealed the hue rate of default from potential and current
investors. The Reeves also misappropriated money for their own personal use.
The Reeves set up a labyrinthine corporate structure in Alanar, its related entities, and hundreds of separate
repayment and proceeds accounts. The Reeves used this complex setup to illegally transfer millions of dollars
from account to account. In many instances, money from bonds purchased never reached the churches they
were intended to fund. In many other instances, church repayments never reached bondholders.
Alanar and its related entities used five different accounting systems for tracking financial activity. Each system
had its own database of information, and the databases were not integrated. Employees also maintained
manual accounting records according to company policy.
The Reeves opened an E*Trade internet brokerage account in the name of cre in July 2003. During the time
the erc account was open, the Reeves directed the transfer of approximately $9 million into the account.
$8 million of the $9 million came from churches. This $8 million should have been used to repay bondholders.
In most cases, the funds initially went into the repayment account, but were quickly transferred to the E*Trade
account. The account was closed in December 2005, but no account activity occurred after July 31,2005.
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As a result of their actions, the Reeves received more than $6 million in ill-gotten gains. Vaughn Reeves
received approximately $2,862,191. Chip Reeves received approximately $1,806,105. Chris Reeves received
approximately $905,930. Josh Reeves received approximately $429,405.
SELECTED
ALANAR BOND ISSUES
Bond Issues 2018 and 9939: Life \Vorship and Training Center
Bond issues 2018 and 9939 were intended to finance construction of a church and multipurpose facility for
Life Worship & Training Center in Detroit, Michigan, The Reeves fraudulently removed $2,725,000 from the
repayment account for issue 2018. They also "loaned" $1,325,000 to bond issue 9939's repayment account.
On February 8, 2005, $1,484,000 was wired into the CIC E*Trade account from Life Worship. On March 9,
2005, a check in the amount of $666,000, representing commingled funds from Life Worship and Training
Center and Victory Deliverance Center was deposited into the CIC E*Trade account.
Records from Harris bank reveal that many checks were written from either the proceeds account or the
repayment account for issue 2018 and 9939 and deposited into the CCG account. The checks from issue
number 2018 total $1,288,200 and the checks from issue 9939 total $187,000. These checks should never have
been written to CCG, and should never have been deposited into a commingled account with other funds.
Money removed from the repayment account of issue 2018 should never have been used in any way except for
the benefit of bondholders of issue number 2018. Money removed from the repayment account of issue 9939
should never have been used in any way except for the benefit of bondholders of issue number 9939.
Issues 2309 and 2316: Church of Christ, Griffin Road
Bond issues 2309 and 2316 were intended to pay for construction of a new church facility for Church of Christ,
Griffin Road in the state of Florida. On October 23, 2003, the Reeves directed the wire of $400,000 from
Church of Christ, Griffin Road's account into the eIe E*Trade account. The Reeves further directed the
removal of the following amounts:
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$1,192,000 from the proceeds account for issue 2309
$110,000 from the repayment account for issue 2309
$315,000 from the proceeds account for issue 2316
$9,000 from the repayment account for issue 2316
Records from Harris bank reveal that many checks were written from either the proceeds account or the
repayment account for issue 2309 and 2316 and deposited into the CCG account. The checks from issue
number 2309 total $547,300 and the checks from issue 2316 total $239,100, These checks should never have
been written to CCG, and should never have been deposited into a commingled account with other funds.
Money removed from the repayment account of issue 2309 should never have been used in any way except for
the benefit of bondholders of issue number 2309. Money removed from the repayment account of issue 2316
should never have been used in any way except for the benefit of bondholders of issue number 2316.
Bond Issues 2204, 9609 and 9703: Iglesia del Nazareno e1 Buen Samaritano/Iglesia
Cristiana el Buen
Samaritano (HIglesia~~)
Bond issues 2204, 9609 and 9703 were intended to pay for construction of a new church facility for Iglesia, On
February 18, 2005, the Reeves directed the wire of $2,400,000 from Iglesia's repayment account into the CIC
E*Trade account. At later dates, the Reeves further directed the following amounts to be wired from the E*
Trade account back into the Iglesia Samaritano account:
•
$810,000 on April 20, 2005
Page 10 of11
•
•
$238,000 on May 26, 2005
$200,000 on July 5, 2005
The Reeves raided the repayment account for issue 9703, removing $2,716,000. They also directed "loans" of
$830,000 to issue 9609's repayment account and $284,000 to issue 2204's repayment account.
Records from Harris bank reveal that many checks were written from either the proceeds account or the
repayment account for issue 9703 and deposited into the CCG account. One check was written from issue
9609 for $85,700. The checks from issue 9703 total $377,400. These checks should never have been written to
CCG, and should never have been deposited into a commingled account with other funds. Money removed
from the repayment account of issue 9703 should never have been used in any way except for the benefit of
bondholders of issue number 9703. Money removed from the repayment account of issue 9609 should never
have been used in any way except for the benefit of bondholders of issue number 9609.
Issues 9702 and 9934: Living Word Missions
Bond issues 9702 and 9934 were intended to finance construction for Living \Vord Missions. On July 23,
2004, the Reeves directed the deposit of $50,000 of Living Word Missions' funds into the E*Trade account.
On July 27,2004, The Reeves again directed that $2,350,000 of Living Word Missions' funds be deposited into
the E*Ttade account. The Reeves "loaned" $6,000 to the repayment account for issue 9934.
Records from Harris bank reveal that two checks were written from either the proceeds account or the
repayment account for issue 9934 and deposited into the CCG account. These two checks total $41,860.36.
These checks should never have been written to CCG, and should never have been deposited into a
commingled account with other funds. Money removed from the repayment account of issue 9934 should
never have been used in any way except for the benefit of bondholders of issue number 9934.
Issue 9930: St. Paul Community Centre Limited Partnership
Bond issue 9930 was intended to pay for construction of a new community center for St. Paul Community
Centre Limited Partnership. The Reeves directed the removal of $2,168,000 from S1.Paul Conununity Centre's
repayment account. They later "loaned" $15,000 to the issue's proceeds account and "loaned" $865,000 to the
issue's repayment account. On November 8,2004, the Reeves directed the withdrawal of $15,000 from the
E*Trade account, to be deposited into one of St. Paul Community Centre's accounts.
FLIGHT RISK
All 4 of the Reeves defendants have moved away from the State of Indiana since July 2005. Josh lives in Iowa,
but has also lived in Ohio and Kentucky since July 2005. Chip lives in Ohio. Chris lives in Kentucky, but has
also lived in Ohio and northeast Indiana since July 2005, Vaughn lives in Kentucky, but has also has lived in
Ohio since July 2005. Vaughn has been known to pilot small aircraft in the past.
r the p
,.•..
n.•.•••••..
t'
alty f perjury as specified by Ind. Code §35-44-2-1, I swear that the representations
. t'
eu
(0 1'791. J cJ1
ate true.
~i l
Stepha
Caraway, Senior
orney
Prosecu n Assistance Unit
Indiana Secretary of State Todd Rokita
<s:~»
..
My,~?~$~f?f.1
th
;7
.fJI&1/~
:s.·~~.·.~~.g.:.;.-~
...•
):?,.n
..,.d.swor~ to before me this 29 day of June, 200~L.
Expires: 8-21-2015
------.-:.~41~
.... • . j' c\'~/
JO&ne DaVIS, Notary Public
., ~ ':' ,
.; ,
A resident of Sullivan Co., IN
,
< ••
r
Page 11 ofl!
'"
SEC v. Alanar, Inc., et al., Defendants, and Churchmen's Investment
Corporation, et al., Relief Defendants
ceo
CCG
,.
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otnor
CCG
ere
SEC v. Alanar, lnc., et al., Defendants, and Churchmen's Investment
Corporation, et al., Relief Defendants
-·Otllar
Mllatil~
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••
Uborty
EXHIBIT
3
This Exhibit shows a detailed analysis of certain transactions that took place in November 2003. This analysis is
provided as an example of the Reeves' usual course of business while they were in control of Alanar and its related
entities.
DEPOSITS:
November 5, 2003: $790,573 was deposited into the CCG account.
The deposit was comprised as follows:
AMOUNT
OF
CHECK
CHECK
NUMBER
BOND
ISSUE
NUMBER
PAYABLE
1021
1058
1339
1281
1800
220
1401
1470
1209
2171
4078
1103
1097
4393
10
Fairhaven United Methodist Church
First Financial Services Special Account
Jerusalem Temple Apostolic Faith Assembly
Full Gospel Tabernacle of Plant City
New City Gospel Fellowship
First Church of the Nazarene
Tikvat Israel Messianic Congregation
Cornerstone Community Church
Calvary Tabernacle dba First United Pentecostal Church
Warren Missionary Baptist Church
Trinity Missionary Baptist Church of Pontiac, Michigan
Bright Angel Church of Christ
Bethel Baptist Church
Crossroads Baptist Church
nla
50
140
145
160
155
220
175
9712
345
9715
9726
9818
November
TO
6, 2003: $273,874.11 was deposited into the CCG account.
The deposit was comprised as follows:
CHECK
NUMBER
BOND
ISSUE
NUMBER
PAYABLE
None
None
None
None
None
None
None
None
250
300
9631
80
9723
595
9522
9625
2206
2309
2114
2314
2124
Bright Light Bond Proceeds (memo area: "adv to CCG")
Christ Temple Bond Proceeds (memo: "exp to close acct")
Faith AOG Bond Proceeds (memo area: "adv to CCG")
Lake Gibson Bond Proceeds (memo area: "adv (partial repay)")
Copperas Cove Bond Proceeds (memo area: "adv to CCG")
Colonial Bapt (sic) Bond Proceeds (memo area: "adv to CCG")
Christian Academy Bond Proceeds (memo area: "adv to CCG")
True Love MB (sic) (memo area: "adv to CCG")
Disciples of Christ Baptist Church (memo: "partial repay adv")
Church of Christ Griffin Road, Inc.
Tall Pines Center, Inc.
The New Community Church Baptist
New Hope \V'orship Center (memo area: "2124 adv to CCG")
listed
listed
listed
listed
listed
listed
listed
listed
1064
1012
1051
1010
1044
November
$32,900
$73,000
$900
$29,500
$415,000
$2,000
$3,270
$40,000
$103
$60,600
$19,500
$13,900
$20,000
$79,900
TO
AMOUNT
OF
CHECK
$4,000,00
$790.70.00
$2200.00
$175.00
$235.00
$11,400.00
$20,527.41
$1046.00
$15,000.00
$141,500.00
$20,000.00
$14,000.00
$43,000.00
12,2003: $386,237.12 was deposited into the CCG account. The deposit was comprised as follows:
Pagelof5
None listed
BOND
ISSUE
NUMBER
2318
8327
5935
9922
720
CHECK
NUMBER
November
CHECK
NUMBER
1527
1750
1170
3856
1861
2816
1577
1559
1252
1272
1055
1319
1507
1537
1304
1225
2462
1757
1974
2266
1098
2218
2172
1096
3558
1217
1101
1127
1091
PAYABLE
TO
Faith Harbor Church Proceed Acct (memo area: "partial repay
adv")
Abundant Life Ministries
Good Shepherd Church, Inc.
AMOUNT
OF
CHECK
$361,795.00
$23,786.70
$655.42
19, 2003: $1,970,000.00 was deposited into the CCG account. The deposit was comprised as follows:
BOND
ISSUE
NUMBER
2007
2011
2015
2018
2023
2026
2027
2029
205
2111
2112
2113
2118
2121
2124
2201
500
535
605
9617
9632
9711
9712
9713
9933
9729
9730
9814
9827
PAYABLE
TO
New Testament Baptist Church
Christ Temple Baptist Church of Michigan
Faith Christian Life Center Ministries
Life Worship and Training Center
Nazarene Missionary Baptist Church
Christian Tabernacle Missionary Baptist Church
Churchmen's Capital Group, Inc.
Hoosier Harvest Church Incorporated
New Life Christian Center
Freewill Pentecostal Church of Christ
The Church of the Nazarene, Inc. of Zephyrhills (sic), FL
New St. Mark Missionary Baptist Church of Detroit
Tall Pines Family Development Center, Inc.
St. Stephen's Missionary Baptist Church
New Hope Worship Center
Tall Pines Family Development Center, Inc.
South Bend Pentecostal Church of God in Christ, Inc.
Christian Bible Temple
St. Samuel Cathedral Church of God In Christ
True Victory Deliverance Tabernacle
Victory Deliverance Center, Inc.
St. Luke Missionary Baptist Church of Rockford
Warren Missionary Baptist Church
First Assembly Church of Plainview, Inc.
Faith Temple Church of God in Christ at Evanston
Berean Bible Church of Indianapolis Incorporated
Iglesia Cristiana "El Buen Samaritano," Inc.
Rising Star Baptist Church
Jubilee Outreach, Inc.
AMOUNT
OF
CHECK
$10,000
$10,000
$40,000
$100,000
$90,000
$350,000
$40,000
$40,000
$10,000
$20,000
$20,000
$30,000
$10,000
$80,000
$30,000
$20,000
$30,000
$10,000
$10,000
$20,000
$20,000
$40,000
$800,000
$10,000
$80,000
$10,000
$20,000
$10,000
$10,000
November
24, 2003: $169,650 was deposited into the CCG account. The deposit was a single check for
$169,650 listed on the deposit slip as coming from issue number 2214, "\Vord Christian," with the notation "part
repay."
November
25, 2003: $603,000 was deposited into the CCG account. The deposit was comprised as follows:
Page 2 0/5
CHECK
NUMBER
2
None
None
None
None
1126
1005
1003
1012
1304
1050
1168
1012
1226
1089
1090
listed
listed
listed
listed
BOND
ISSUE
NUMBER
7
5
9
4
10
9941
2328
2319
2315
9937
2236
2232
2224
2219
2215
2211
PAYABLE TO
Churchmen's Income 7, ILC
Churchmen's Growth 5, ILC
Churchmen's Growth 9, ILC
Churchmen's Income 4, ILC
Churchmen's Growth 10, ILC
Horizon Church, Incorporated
Potomac Valley Assembly of God
Granite Springs Church
Pilgrim Baptist Church
Pilgrim Baptist Church
Trinity Family Worship Center
East Lake Baptist Church
Churchmen's Capital Group, Inc.
St. Paul Church of Friendly, ILC
Ebenezer Deliverance Temple, Inc.
Athey Creek Christian Fellowship
AMOUNT
OF
CHECK
$60,000
$30,000
$35,000
$25,000
$100,000
$25,000
$70,000
$15,000
$20,000
$40,000
$10,000
$125,000
$15,000
$10,000
$10,000
$13,000
Also on November 25, 2003, a second deposit of $470,750 was made into the CCG account. The deposit was
comprised as follows:
CHECK
NUMBER
1
1
None
None
None
None
listed
listed
listed
listed
BOND
ISSUE
NUMBER
7
7
1
104
10
4
PAYABLE TO
Churclunen's
Churchmen's
Churchmen's
Churchmen's
Churchmen's
Churchmen's
Income
Growth
Income
Income
Growth
Growth
7, LLC
7, ILC
1, LLC
104, LLC
10, LLC
4, ILC
AMOUNT
OF
CHECK
$80,250
$82,000
$68,500
$78,750
$75,000
$86,250
The total amount of the deposited listed in the tables above is $4,664,084.23. During approximately the same
time period, the following checks were written from the same CCG account. It should be noted once again that
there was no legal putpose for any of these funds to have passed through Churchmen's Capital Group in the first
place. It should also be noted that these transactions only represent less than one month of activity in the CCG
account.
CHECKS \VRITTEN (WITHDRAWALS):
BOND
ISSUE
CHECK
DATE PAYABLE TO
NUMBER
NUMBER
Abundant Life Ministries
9922
11/5/2003
2473
Abundant
Life Ministries
9922
11/5/2003
2472
9922
11/5/2003 Abundant Life Ministries
2471
Abundant Life Ministries
9922
11/5/2003
2470
Abundant Life Ministries
9922
11/5/2003
2469
Abundant Life Ministries
11/5/2003
635
2468
AMOUNT
OF CHECK
$482,988.89
$42,276.40
$4,750.00
$25,000.00
$58,768.26
$19,100.15
Page 3015
NUMBER
BOND
ISSUE
NUMBER
2486
2485
2484
2483
2482
2481
2119
730
2105
2001
9924
105
11/6/2003
11/6/2003
11/6/2003
11/6/2003
11/6/2003
11/6/2003
Alexander Temple
First Black Creek
Shabach Repayment Account
Faith Promlse--Repayment Account
Faith Promlse--Repayment Account
Church of the New Covenant Repymt. Acct.
2480
411
11/6/2003
Southlake
2479
2478
2477
2476
2475
2474
410
9728
9728
9728
9728
9922
11/6/2003
11/6/2003
11/6/2003
11/6/2003
11/6/2003
11/6/2003
Southlake
Abundant
Abundant
Abundant
Abundant
Abundant
2487
2488
2159
2158
2157
2494
None listed
9728
None listed
None listed
None listed
9922
11/7/2003
11/11/2003
11/12/2003
11/12/2003
11/12/2003
11/13/2003
Alanar
Abundant Life "Ministries
First Cumberland Presbyterian Church
Louis Panyko and Carol Panvko TT\\fROS
FNB & Co Tr Fbo Louis Panvko IRA
Abundant Life Ministries
$3,149.47
$253,973.83
$500.21
$50.00
$262.50
$560,000.00
2493
2492
2214
None listed
11/13/2003
11/13/2003
Word Christian Center dba Jubilee Center
Reeves Family Limited Partnership
$269,000.00
$109.23
2491
2489
2205
9922
11/13/2003
11/13/2003
Pine Valley Repayment Account
Abundant Life Ministries
11/14/2003
Mac Reeves
CHECK
2495
None listed
DATE PAYABLE TO
AMOUNT
OF CHECK
$600.00
$1,350.00
$12,842.06
$5,000.00
$27,635.68
$13,900,00
$2,500,00
Life Ministries
Life Ministries
Life Ministries
Life Ministries
Life Ministries
$4,615.72
$12,778,95
$15,706.91
$3,695.69
$1,847.83
$282,101.26
$2,100.00
$1,000,00
$800,00
2496
2319
11/18/2003
Granite Springs Church
$142,944.18
3502
9821
11/19/2003
Christian Tabernacle Miss. Bapt, Church
$211,875.42
2504
9922
11/19/2003
Abundant Life Ministries
$501,043.00
2503
9821
11/19/2003
Christian Tabernacle Miss. Bapt, Church
2501
9922
11/19/2003
Abundant Life Ministries
$245,083.00
2498
9922
11/19/2003
Abundant Life Ministries
$299,783.00
2497
9922
11/19/2003
Abundant Life Ministries
$32,285.00
2505
2508
9922
None listed
11/20/2003
11/21/2003
Abundant Life Ministries
Granite Springs Church & Sierra View Co,
$500,000.00
$126)59.44
2507
None listed
11/21/2003
New Citv=Repavment Account
$163,950.63
11/21/2003
Abundant Life Ministries
$562,178.00
2506
9922
$6,717.09
Page 4 015
CHECK
NUMBER
2510
2509
TOTAL
BOND
ISSUE
NUMBER
9922
2322
.AM:OUNT
DATE
11/25/2003
11/25/2003
PAYABLE TO
OF CHECK
Abundant Life Ministries
Episcopal Church and Nisbet-Northstar
$515,000.00
$187,061.00
$5,602,682.80
Page 5 of5