A former Indiana pastor has been sentenced to 54 years in prison for his role in a massive fraudulent investment scheme that raised more than $120 million from investors in church bonds.

Gibson County, Ind., Judge Deana Martin sentenced Vaughn A. Reeves, Sr. on December 8 to 54 years in prison for his role in the scheme. A Gibson County jury convicted Reeves — a former pastor and the CEO of Alanar Inc. — in October on nine felony counts of aiding, inducing, and causing securities fraud. The SEC filed a civil action against Reeves and others in July 2005 based on related conduct.

Prosecutors alleged that Reeves and his sons, Christopher, Joshua, and Vaughn Reeves, Jr., violated state securities laws by misusing money raised from purchasers of church bonds sold through Alanar Inc., an entity controlled by Vaughn Reeves, Sr. and his sons. According to prosecutors, the scheme involved approximately 300 separate bond issuances that raised at least $120 million from investors.

Prosecutors alleged that the scheme was an affinity fraud in that Alanar’s marketing strategy was devised to appeal to the Christian faith of potential investors. The state accused the Reeves family of misusing funds from certain bond issuances to conceal from investors the true rate of default on Alanar’s bonds and that they personally received more than $6 million in ill-gotten gains. The state charged each of the Reeveses with 10 separate felony counts of violating the Indiana Securities Act. Christopher Reeves, Joshua Reeves, and Vaughn Reeves, Jr. are scheduled to go to trial in 2011.

In July 2005, the SEC filed a civil action against them and others alleging, among other things, that they violated the antifraud provisions of the federal securities laws by misusing investor funds and improperly diverting investor funds to themselves and entities they controlled. The SEC further alleged that the scheme raised more than $120 million from investors in church bonds, including $50 million from investors in related bond funds.

On July 26, 2005, the U.S. District Court for the Southern District of Indiana ordered a permanent injunction against the Reeveses and various entities they controlled which, among other things, permanently enjoined them from violating the antifraud provisions of the federal securities laws, froze their assets, and appointed an independent monitor over their entities. In December 2005, the court appointed a receiver over the entities. The court subsequently approved a plan that provides for a distribution of funds to harmed investors through the court-appointed receiver.

On May 19, 2008, the court entered final judgments against the Reeveses which, among other things, required them to collectively pay more than $7.88 million in disgorgement, prejudgment interest and civil penalties.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access