Church Bond Problems Can Be Prime Examples of Affinity Fraud


Investments aren’t always what they appear to be. On the surface, church bonds may appear like a safe and appealing investment. That is the way they are pitched by promoters and investment advisers. Investors are often motivated by appeals to support the church mission, and encouraged by quotations from scripture (“Give, and it will be given to you'”).

Church bonds have also long been associated with affinity fraud. Affinity fraud occurs when a fraudster exploits a common bond, such as church membership or religious beliefs, to get the victim to drop his or her guard. But the Bible warns: “Beware of false prophets, which come to you in sheep’s clothing, but inwardly they are ravening wolves.” It is still good advice.

Some church bond promoters have even gone to jail. Just last year, the fourth and final defendant was convicted for his participation in a multi-million dollar fraudulent scheme involving church bonds in Indiana. The perpetrators were a father and his three sons. The father, Vaughn Reeves, was a former pastor. They raised more than $120 million from church bond investors. The proceeds, investors were told, would be used for construction projects by churches. In fact, the money was used for other purposes than what the investors were told, including personal enrichment of the fraudsters. The father was sentenced to 54 years in prison. The oldest son received 24 years, the next oldest received 12 years, and the youngest received 6 years. In all, the state of Indiana obtained 39 felony convictions on the four Reeves defendants.

While justice may be done, and some satisfaction obtained thereby, victims are rarely made whole in criminal proceedings. However, church bonds are often sold through securities brokerage firms. Those firms are subject to the jurisdiction of the Financial Industry Regulatory Authority (FINRA) and its arbitration process. FINRA arbitrations and civil court proceedings are the ways that most deceived church bond investors get compensated.

Investors who have lost money in church bond investments should consult with attorneys experienced in representing investors in such matters. This should be done as soon as possible, as the laws of each state or forum establish time limits within which legal claims must be asserted. Claims not brought within the applicable time limits are generally disallowed.

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.