A former leader of a Winston-Salem church is facing criminal charges over allegations that he misappropriated more than $260,000 from the church and took about $170,000 in retirement money from four people, including his parents.
Kenneth Ray Sullivan Jr., 35, of the 1400 block of Hartman Road in Lexington, was indicted Monday on two felony counts of obtaining property by false pretenses and one count of securities fraud. Sullivan appeared in Forsyth Superior Court for a bond hearing Tuesday.
Judge William A. Wood of Forsyth Superior Court set his bond at $3 million, and Sullivan is currently in the Forsyth County Jail. He is next scheduled to appear in court on Nov. 18. He told Wood that he would hire his own attorney.
Wood ordered Sullivan to stay away from the church, his parents and two other people he is accused of defrauding.
Shannon O'Toole, an agent with the N.C. Secretary of State's securities division, testified in court Tuesday that members of Grace Presbyterian Church on Carver School Road came to the Forsyth County District Attorney's Office in December 2018. They wanted to talk to prosecutors and O'Toole about financial irregularities.
During that meeting, members told O'Toole that individual church members had been approached about joining an investment club. The investigation began after that meeting with O'Toole.
The church discovered the irregularities in September 2018 after the church got a notice that it was in default on its mortgage, said Andrew Fitzgerald, an attorney representing Grace Presbyterian in a lawsuit against Sullivan that was filed in Forsyth Superior Court. Fitzgerald said the church also found out that other bills had not been paid.
He said members of the church's band were told there was no money to pay them.
"The pastor had not been paid for some time," he said. "The church wasn't paying anybody."
According to the lawsuit, Sullivan had been the church's clerk of session and had been entrusted with the church's finances. Fitzgerald said Sullivan's position was equivalent to that of a treasurer.
The lawsuit also said that Sullivan bragged about his newfound wealth on social media. According to exhibits with the lawsuit, Sullivan posted a picture of $50 bills and $100 bills on his lap. In the caption, he says "Run it up its payday." Another picture is, he posted, a Mercedes-Benz E Class, along with the comment, "Those who haven't pissed me off who Tryin to get the first ride."
O'Toole said the investigation has so far uncovered more than $300,000 in questionable payments from the church's accounts to Sullivan. Some transactions were through checks while others were from electronic transfers.
When interviewed, Sullivan tried to explain some of the questionable payments by saying that he was paying himself back for expenses, O'Toole said in court.
"He admitted that he commingled funds and said it was a bad error in judgment ... He said it had a bad appearance," O'Toole said.
Fitzgerald said Sullivan would write checks that required an endorsement from him and another person on the church's board. Sullivan would forge the other endorsement, Fitzgerald said. He also fraudulently opened bank accounts in the church's name and deposited money from the church into them, according to Fitzgerald. At one point, one of the banks contacted the church and asked about an account in the church's name. Church officials told the bank that the church didn't have an account at the bank, Fitzgerald said.
Sullivan used the money for personal expenses, such as car payments for him and his girlfriend, cellphone bills, pawn-shop loans, student loans and to eat out, O'Toole said.
While O'Toole said investigators uncovered more than $300,000 in questionable payments, indictments said Sullivan is accused of fraudulently taking a total of $268,478 from the church. He is alleged to have committed these crimes from 2008 to 2019, the indictments said.
Separately, Sullivan is accused of creating a series of "buy orders," or letters to remove funds from the Individual Retirement Accounts of four people, including his parents, Cynthia and Kenneth Ray Sullivan Sr., the indictments said. One of the other four people is also a family relative, Sherri Sullivan.
Sullivan claimed to use the retirement funds so that the people could purchase shares in one of his companies, Prodigy Capital Management, even though the company had no physical assets, the indictments allege. Sullivan's actions resulted in the removal of $171,906 from the retirement accounts of four people, according to indictments.
Then indictments allege that he reported fake account values to the investors or in communication with American IRA to cover up what he had done.
The lawsuit is against not only Sullivan but also four different companies Sullivan owned and operated - KSR Partners LLC, Prodigy Capital Management, the Prodigy Foundation and the Sullivan Agency.
The only one that is active is the Prodigy Foundation, according to records from the N.C. Secretary of State. KSR Partners and Prodigy Capital Management have been dissolved for failure to file annual reports. The Sullivan Agency has been suspended.
The lawsuit alleges that the money Sullivan is accused of misappropriating from the church went to those companies.
Forsyth County District Attorney Jim O'Neill sought a bond of $4 million to $5 million.
"We have a responsibility to protect those who cannot protect themselves," O'Neill said in court Tuesday. "The church thought they were paying off their mortgage. Instead, they couldn't pay their light bills."
Wood added, "Besides that, I'm concerned that money is still out there and he could use that money to flee."
[email protected]@mhewlettWSJJournal reporter Scott Sexton contributed to this report.