Former pastor wants out of prison in Indiana securities fraud case
Tribune-Star (Terre Haute, IN)
Oct. 28—A former Sullivan County pastor serving 54 years in prison on securities fraud after leading a massive Ponzi scheme is seeking to have his conviction and prison sentence set aside.
In December 2010, former pastor and Alanar Founder Vaughn Reeves Sr. was sentenced on nine counts of securities fraud. Each count carries a sentence of six years, with the sentences to be served consecutively. Alanar was billed as a faith-based church financing entity.
In 2011, Reeves conviction was reaffirmed by the Indiana Court of Appeals.
In July 2012, Reeves filed a two-part motion for post conviction relief, claiming his trial counsel was ineffective and failed to conduct a professional investigation of his case.
Reeves, 78, is not eligible for release until Aug. 25, 2035.
On Thursday, his petition was heard in Sullivan County before Greene County Superior Court Judge Dena Martin, who is serving as special judge in the case.
John Tompkins, Indianapolis attorney for Reeves, called five witnesses to the stand, including Reeves.
After hearing the witnesses, Martin gave both the prosecution and defense until Nov. 29 to file written findings and conclusions, saying she would rule after reviewing the filings.
Martin oversaw Reeves trial and sentencing in 2010 in Sullivan County.
In the hearing's opening, special prosecutor Stan Levco said it is "not the burden of the state to prove anything in this case," adding the burden is on the defense to prove that the trial attorney was ineffective enough to rescind Reeves Sr.'s prison sentence. Levco said 2,904 people lost their retirement because of Reeve's incompetency.
Defense attorney John Tompkins said Vaughn's trial attorney never hired a forensic accounting investigator and never brought in other witnesses to testify on his Reeves Sr.'s character. He argued that had trial counsel done so, the likelihood of Reeve Sr.'s conviction, or at least his 54-year prison sentence, would have been different.
While on the stand, Reeves read a statement he had prepared.
"We're here today because of my business failure," Reeves Sr. said. "I have no one to blame but myself. The greatest lesson I have learned from my time spent in prison is that good intentions don't matter in the context of bad actions.
"During the trial and sentencing I was focusing on my good intentions. The reason I sit here today as a convicted felon is because of my actions. When I caused funds to be transferred from one account to another I made the wrong decision," he said.
"My actions where crimes even though my intentions were good. I was wrong," he said.
"... If I am fortunate enough to be released I promise my best efforts to help make these injured investors whole.
"I do accept responsibility for my actions that have caused harm to these people. The reason I believe I can succeed is that I have been successful in at least six business ventures. I had one failure," he said.
Prior to his statement, Tompkins questioned Reeves on the number of visits from his court-appointed attorney had prior to trial.
Reeves said "probably six to eight visits" over his 18 months spent in the county jail. He said the visits may each have lasted 30 minutes. Tompkins asked if Reeves had discussions on how Alanar worked.
"I don't think he [his attorney] fully understood the business we were in," Reeves said. He said his attorney did not ask to explain financial documents or transfers of funds. and the attorney did not interview everyone in a witness list he provided, Reeves said.
Gabe Brown, a lawyer in the Indiana Secretary of State's securities division, said a deposition in the case states Reeves said he talked to his attorney about a Securities Exchange Commission investigation.
Gabe questioned Reeves, asking if he committed securities fraud. Reeves said he accepts the jury's verdict, but said "my intentions were good but they were in error."
Reeves and his three sons [Chip, Josh and Chris Reeves] where charged with duping investors in a Ponzi scheme and then spending millions on themselves.
Two of the sons have completed time in prison. The third son was ordered to pay back nearly $500,000 without prison time.
Vaughn Reeves Jr., called Chip, said he pleaded guilty and served time for security fraud. He said he helped start Alanar Inc in 1989 with his father.
The company between 1898 and 1998 issued 32 bonds at about $35 million. He said bond failures ranged from 3 to 5%, which was at or above brokerage standards.
Attorney Brown asked if moving money from one account to another was a way of concealing defaults?
"Didn't that allow Alanar to keep selling new bonds?" Brown said, asking if the company could sell bonds if investors knew many bonds were failing.
While Brown called it a scheme, Tompkins argued the bonds were real, unlike fake accounts in most Ponzi schemes.
Kenneth Stalcup, senior Director at Indianapolis-bases Houlihan Valuation Advisors, said it appears that Alanar may have been covered by The Securities Investor Protection Corp., which could have covered loss of investors. However, on cross examination Stalcup said he could not confirm if any coverage applied in this case.
Prosecutor Levco told the court the coverage would only apply to the bond holder and Alanar Inc. was not the bond holder in the cases.
Alanar made money off of sales commissions by selling bonds, targeted for new church construction, expansion or other building needs.
Stalcup said Alanar had a cash balance of about $186 million with about 400 bond holders, but that was reduced to a deficit of about $11.7 million in a final financial report (a figure that had been about $13 million at the trial).
Tompkins argues that shows the company was paying bond holders. Thompksin said 44 bond holders were paid in full by April, 2010, with just over $19M paid.
James A. Kilmek, who served as Alanar's securities attorney, said he was not asked to testify in the trial. He said the company's financial and compliance documents were in order.
Attorney Brown argued that just because a company is in regulatory compliance does not mean its officers cannot commit securities fraud.
Sullivan County resident Jerry Hawkins said he considered Vaughn his best friend. He helped attract Vaughn to a Sullivan County church in 1978. He said he trusted Vaughn with his life. Hawkins said he invested in a bond and "lost money like everyone else. I felt it was just a circumstance" of investing money, he said.
In closing, Levco said the biggest witness not present is defense attorney Dale Webster.
Levco said under state law that when the defending attorney is absent, it is a "rebuttal presumption" that Webster would object to statements of ineffective representation.
"There is a legal presumption that the attorney would contradict" the statements, Levco said.
Levco noted that Reeves' attorney did get one of 10 charges filed dismissed, which shows he did receive effective representation, adding his level of defense does not come "close to the level of incompetence. The fact that the jury found Reeves not guilty on one charge shows some competence," Levco said.
Levco said Reeves "earned every bit" of his sentence, with a case that involves just over 2,900 victims and is incomparable to other fraud cases in the state.
Howard Greninger can be reached at 812-231-4204 or [email protected]. Follow on Twitter @TribStarHoward.
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