STATE OF INDIANA )SS - Sullivan County Prosecutor
Transcription
STATE OF INDIANA )SS - Sullivan County Prosecutor
STATE OF INDIANA COUNTY OF SULLIVAN STATE OF INDIANA ) SULLIVAN CIRCUIT COURT )SS: ) CAUSE NO. 77C01-0906-FC-Oe> o qt) IN VS. JONATHAN CHRISTOPHER REEVES A/K/ A CHRIS REEVES 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 (\'\lilliams") is an investigator, also employed in the Prosecution Assistance Unit. \,{/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. • • • • • • • 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 Bondholder and church funds were deposited into and withdrawn from the brokerage account.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 Alanat's bond issuers, which were largely churches. The following entities served as paying agents for Alanar bonds: a First Financial Services of Sullivan Co., Inc. a The Liberty Group, Inc. o Guardian Services, LLC The Citadel Corporation issued bonds underwritten by Alanar. AIC 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 a Chief Executive Officer of First Financial Page 10/11 • • • o Chief Executive Officer of Liberty Group o 25% owner of CIC o President and sole owner of AIC o 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 CIC o Member of Board of Directors of Northstar Mortgage 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 crc o 25% owner ofCIC o Member of Board of Directors of Northstar Mortgage Joshua Craig ("Josh") 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 CIC 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 Alanar's own cOlporate 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 1:05-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 (HBGBC") 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. Page 20/11 • • • • • • • • • • 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 tile 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 rate, 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 tile 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 tile 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 \X1illiamsfocused their investigation on a select group of bond issues due to the investigative resources available, and also for tile sake of judicial economy. All charges being brought in this case are class C felonies, Indiana law provides tile following for class C felonies: "[p[rosecution for an offense is batted unless it is commenced ... within (5) five yeats 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, tile following facts are true: • The bonds on which the charges are based did not mature until after July 2005. • The SEC obtained its injunction in July 2005. • 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 carried out by the Reeves. • The Reeves' own actions concealed their fraudulent activities from bondholders and bond issuers, as follows: Page 3 of!! o The Reeves' continued "success" depended on underwriting large number of bonds. \Vithout the 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. o 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. o None of the bondholders on which the charges are based knew anything was aWiYwith 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 tun 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 necessary 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: • • • • • • 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 TIle 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 became due, the Reeves illegallyused money from both churches and Page 4 0111 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 toone former employee, "Everyone knew they [the Reeves] were moving money around. The question wasn't whether they were moving money around, apparently the question was: 'Can you do that or not?'" A review of records from a CGG 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. \V'ithin days of when a deposit was made, checks would be issued to other 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 Page50]11 CCG, First Financial, Liberty Group, and Churchmen's Income Bond Funds was deposited into AIC accounts. On a 2003 AlC asset report generated for tax purposes, the following items are listed, among others: "1999 Porsche Baxter-Josh," "1999 Porsche Baxter-Chris," and "2000 Porsche-s-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 BY VAUGHN REEVES~ SR. PAYABLE TO CHECK NUMBER Abundant Life 2653 Christ Temple Baptist 2664 Citadel 2654 Disciples of Christ 2665 Eastlake Baptist 2663 Faith Temple 2651 First Assembly of God 2658 Freewill Pentecostal 2661 Granite Springs and Sierra View Co. 2668 New Creation 2666 Rising Star 2659 Southside Christian Center 2657 Spoken \Vord 2660 St. Luke Baptist 2656 1 Trinity Family Repayment Account 2576 \Varren Missionary Baptist 2652 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. (HCHlpn) 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 of this check says "Note," Page 6 ofl1 that the CCG account at Harris Bank contained a mix of money from bondholders and churches. • • 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: • • • 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. On or about December 6, 2004, Chris asked the same employee to calculate a payoff figure for Iglesia Cristiana el Buen Sarnaritano ("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 payoffletter 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 inoney to another account. Page 7 ofll \Vhen 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. The following checks were written directly to Chris from the Harris Bank CCG account: • • • • • • Check number 2351, for $26,000, cleared the bank on 7/11/2003. The 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. J ash 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 a $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: • • • • • • • • • 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 Page 8 0/11 • • • 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 that Jillian Reeves is Josh's wife. CHECKS SIGNED BY JOSH REEVES PAYABLE TO DATE CHECK NUMBER Cross Development 8/4/1004 3165 Deluxe Business Checks and 10/5/2004 3506 Solutions Northstar Mortgage Funding 7/15/2004 3098 Northstar Mortgage Funding 7/15/2004 3099 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 MEMO $11,329.76 $102.94 "invoice #BC5701" $12,000.00 "Chris Reeves loan" $2,499.99 "Jillian Reeves salary 6/16/04-7/31/04» $1,666.66 "Jillian Reeves salary 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. BGBC's analysis revealed that the Reeves' ongoing course of business was based on misappropriating funds in repayment and proceeds accounts, which concealed the true 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 CIC in July 2003. During the time the CIe 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. Page 9 ofll 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 Worship 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 CIC E*Trade account. The Reeves further directed the removal of the following amounts: • • • • $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 tile 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 el Buen Samaritano/Iglesia Cristiana el Buen Samaritano ("Iglesia") 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 ere 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 Page10 ofll • • $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 Word 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*Trade 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 St. Paul Community 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. f perjury as specified by Ind. Code §35-44-2-1, I swear that the representations d1~tbr.§,dpcument re true. Page 11 ojll SEC v. Alanar, Inc., et al., Defendants, and Churchmen's Investment Corporation, et aI., Relief Defendants CCG CCG Othor I'll1Dtod " '. ... I ~.----~~~~ ~_~)ct fQUltIIJ;! OllloT CCG ___ I.•• ~ .. _ SEC v. Alanar, Inc., et al., Defendants, and Churchmen's Investment Corporation, et aI., Relief Defendants CIC r9t1ltGd ~-.-/. . .ont1l.lll\li .. ~ _-----i.... ..... O::hll~, . ,·clnl~· r:'~'_;.' - . Ub~W·c 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: CHECK NUMBER 1021 1058 1339 1281 1800 220 1401 1470 1209 2171 4078 1103 '1097 4393 BOND ISSUE NUMBER 10 nla 50 140 145 160 155 220 175 9712 345 9715 9726 9818 PAYABLE TO 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 AMOUNT OF CHECK $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 November 6,2003: $273,874.11 was deposited into the CCG account. The deposit was comprised as follows: CHECK NUMBER None None None None None None None None 1064 1012 1051 1010 1044 listed listed listed listed listed listed listed listed BOND ISSUE NUMBER 250 300 9631 80 9723 595 9522 9625 2206 2309 2114 2314 2124 PAYABLE TO 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 \'\1orship Center (memo area: "2124 adv to CCG") 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 November 12, 2003: $386,237.12 was deposited into the CCG account. TIle deposit was comprised as follows: Page 1 0/5 CHECK NUMBER None listed BOND ISSUE NUMBER 2318 8327 5935 9922 720 PAYABLE TO Faith Harbor Church Proceed Acct (memo area: «partial repay adv") Abundant Life Ministries Good Shepherd Church, Inc. .AM:OUNT OF CHECK $361,795.00 $23,786.70 $655.42 November 19,2003: $1,970,000.00 was deposited into the CCG account. The deposit was comprised as follows: 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 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 Michi9;an 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 Watten 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 «EI Buen Samaritano," Inc. Rising Stat Baptist Church T ubilee Outreach, Inc. .AM:OUNT 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, ''Word 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, LLC Churchmen's Growth 5, LLC Churchmen's Growth 9, LLC Churchmen's Income 4, LLC Churchmen's Growth 10, LLC 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, LLC 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 Churchmen's Churchmen's Churchmen's Churchmen's Churchmen's Churchmen's Income Growth Income Income Growth Growth 7, LLC 7, LLC 1, LLC 104, llC 10, LLC 4, llC 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 purpose 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 WRITTEN (\VITHDRAW'ALS): BOND CHECK ISSUE NUMBER NUMBER DATE PAYABLE TO 9922 2473 11/5/2003 Abundant Life Ministries 2472 9922 11/5/2003 Abundant Life Ministries Abundant Life Ministries 2471 9922 11/5/2003 2470 9922 11/5/2003 Abundant Life Ministries 2469 9922 11/5/2003 Abundant Life Ministries 2468 635 11/5/2003 Abundant Life Ministries AMOUNT OF CHECK $482,988.89 $42,276.40 $4,750.00 $25,000.00 $58,768.26 $19,100.15 Page 3 015 CHECK NUMBER BOND ISSUE NUMBER AMOUNT DATE 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 PAYABLE TO Alexander Temple First Black Creek Shabach Repayment Account Faith Promise.-Repavment Account Faith Promise--Repayment Account Church of the New Covenant Repymt. Acct. 2480 411 11/6/2003 Southlake $2,500.00 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 $4,615.72 $12,778.95 $15,706.91 $3,695.69 $1,847.83 $282,101.26 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 Panyko ]T\WOS FNB & Co Tr Fho Louis Panyko 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 \Vord 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 2495 None listed Life Ministries Life Ministries Life Ministries Life Ministries Life Ministries OF CHECK $600.00 $1,350.00 $12,842.06 $5,000.00 $27,635.68 $13,900.00 $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 $126,359.44 2507 None listed 11/21/2003 Ne,~ City-Repayment Account $163,950.63 11/21/2003 Abundant Life Ministries $562,178.00 2506 9922 $6,717.09 Page 4 of5 CHECK NUMBER 2510 2509 TOTAL BOND ISSUE NUMBER DATE 9922 2322 11/25/2003 11/25/2003 PAYABLE TO Abundant Life Ministries Episcopal Church and Nisbet-Northstar AMOUNT OF CHECK $515,000.00 $187,061.00 $5,602,682.80 Page 5 015
Similar documents
Vaughn Reeves - Sullivan County Prosecutor
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
More informationstate of indiana ) )ss - Sullivan County Prosecutor
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 investigat...
More information