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Secretary of State

Securities Division > News Archive  > For Immediate Release: July 8, 2009 More Severe Penalties for Egregious Securities Violations Take Effect in Indiana

Contact: Jim Gavin
317-233-8655
Media@sos.in.gov

Changes could mean class B felony for those convicted of affinity fraud or fraud committed against seniors

(INDIANAPOLIS) - Indiana Secretary of State Todd Rokita today reminded Hoosiers about changes to Indiana securities laws, especially those regarding affinity fraud. Thousands of Hoosiers were allegedly targeted by an ex-pastor and his three sons in a multi-million dollar, faith-based affinity fraud through the use of a modified Ponzi scheme because of their religious beliefs. Last week, Secretary Rokita helped bring criminal charges against the men, all former executives of Alanar, Inc.

Changes to the Indiana Securities Act that took effect at the beginning of the month include elevating the felony level for affinity fraud and fraud against seniors from class C to class B. Affinity fraud occurs when the intended victim is targeted because of their religious affiliation. Fraud against seniors occurs when the intended victim is over the age of 60.

"Unfortunately, this is a type of crime we're seeing more and more of in Indiana," said Secretary Rokita. "The Alanar case serves as a good example of why you should never make an investment based solely on the reputation of the person or the testimony of others, but should also do additional homework using the resources of our office. The fact that we've had several significant cases of affinity fraud in Indiana in recent years is why we aggressively pushed for these stricter penalties. I would like to thank the members of the Indiana General Assembly who widely supported these initiatives."

In the Alanar case, ex-pastor Vaughan Reeves allegedly used his position in the community to gain the trust of his victims. According to court documents, Alanar management created training materials to distribute to church members, who were encouraged to sell bonds to their fellow church members. The materials relied heavily on the religious convictions of the victims. For example, the church members were trained to open the sales call with a prayer, quote Bible scripture during sales calls and to "never sell the facts, sell warm stewardship and the Lord."

Reeves and his sons are scheduled to appear in court for their initial hearing this morning today at 11:15 a.m. in Sullivan County Circuit Court.

To make sure a person selling an investment and the investment itself are licensed and registered with the Indiana Securities Division, call 1-800-223-8791 or use the searchable databases at www.IndianaInvestmentWatch.com.

Other changes to the Indiana Securities Act include a requirement for loan brokers and dealers to complete a compliance report within 45 days. Specific categories of loan brokers and dealers are exempt from the audit.

Changes to the Indiana Loan Broker Act now make every violation a class C felony and the offense is elevated to a class B felony if the violation occurs against someone over the age of 60. Violation of the federal Truth in Lending Act, Real Estate Settlement Procedures Act or Equal Credit Opportunity Act will now result in a violation of the Indiana Loan Broker Act. All exemptions have been removed from this statute.

Changes to the Indiana Continuing Care Act include different registration requirements for continuing care facilities. Registration is now required before a continuing care facility can open, or if a facility is operating and has continuing care agreements with a minimum of 25 percent of the people living there.

Click here for an audio clip of Secretary Rokita discussing the stronger securities laws.

Media Contact: Jim Gavin: 317.233-8655 or media@sos.in.gov.

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