SEC v. Alanar, Inc., et al., Civil Action No. 1:05-cv-01102 (S.D. Ind.) (Chief Judge David F. Hamilton)

Former Pastor Sentenced to 54 Years in Prison for Role in Massive Investment Fraud

On December 8, 2010, Gibson County, Indiana Judge Deana Martin sentenced Vaughn A. Reeves, Sr. to 54 years in prison for his role in a massive affinity fraud investment scheme that raised more than $120 million from investors in church bonds. On October 21, 2010, a Gibson County jury convicted Reeves — a former pastor and the CEO of Alanar, Inc. — on nine felony counts of aiding, inducing, and causing securities fraud. The SEC filed a civil action against Vaughn Reeves and others in July 2005 based on related conduct.

The State of Indiana alleged that Vaughn 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 and his sons. According to the State of Indiana, the Reeves' scheme involved approximately 300 separate bond issuances that raised at least $120 million from investors. The State of Indiana alleged that the Reeves' scheme was an affinity fraud in that Alanar's marketing strategy was devised to appeal to the Christian faith of potential investors. The State further alleged that the Reeves misused funds from certain bond issuances to conceal from investors the true rate of default on Alanar's bonds and that the Reeves personally received more than $6 million in ill-gotten gains. The State charged each of the Reeves with ten 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. Additional information regarding the criminal prosecution of the Reeves can be found at:

In July 2005, the SEC filed a civil action against the Reeves and others alleging, among other things, that the Reeves 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 Reeves' 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 United States District Court for the Southern District of Indiana issued an Order of Permanent Injunction against the Reeves and various entities they controlled which, among other things, permanently enjoined the Reeves from violating the antifraud provisions of the federal securities laws, froze their assets, and appointed an independent monitor over the Reeves' entities. In December 2005, the Court appointed a receiver over the Reeves' 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 Reeves which, among other things, required them to collectively pay more than $7.88 million in disgorgement, prejudgment interest and civil penalties. For additional information regarding the SEC's case, see LR-19314 (July 27, 2005) and LR-20629 (June 25, 2008).

Last modified: 12/13/2010