Suffolk man charged with investor fraud

Published 11:46 pm Friday, December 17, 2010

Pastors, congregations were bilked

A Suffolk man was arrested Friday on federal charges that he helped another man defraud more than 80 investors of nearly $550,000.

Prosecutors say the alleged scam helped pay for a boat, house payments and other debts for at least one of the men and payoffs to the other.

Christopher C. Rice, 28, of Suffolk, and Samuel B. Jacobs, 57, of Hampton, were charged Tuesday in a 20-count indictment of conspiring to commit mail fraud, mail fraud, money laundering and engaging in monetary transactions in property derived from illegal activity, according to Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia.

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According to the indictment, Rice served as the secretary of the board of directors of Alliance Financial Services Co. Inc., an investment company started by Jacobs — his boss and owner of JBS Inc., a corporation that owned and operated low-power television stations broadcasting mostly religious programming throughout Tidewater and other parts of the country.

Alliance had been set up by Jacobs in 2005 as an investment company that might eventually become a bank or credit union, the indictment states, adding that Jacobs approached a group of pastors from the area and made them members of the company’s board of directors.

Soon, prosecutors allege, he encouraged those pastors “to invest additional personal and church funds in Alliance and to solicit investments from their congregations,” promising them higher interest rates than they would get at a bank or a credit union.

By October 2008, according to the indictment, between 80 and 100 people had invested about $752,000 with Alliance. The majority of those funds were deposited into a bank account for which Rice was the sole signature authority.

Between February 2006, when that account was created, and August 2008, $548,550 was subsequently transferred to an account that JBS, the broadcasting company, held with the same bank, and each check was signed by Rice on behalf of Alliance, the indictment alleges, adding that the investors were never told their money would wind up in the JBS account.

Furthermore, the indictment states, “contrary to representations made to the investors, Jacobs and Rice used the funds from Alliance that were transferred to the JBS account for various personal and business purposes of JBS unrelated to the business of Alliance.” Those uses allegedly included payments to Rice, payments to a company that owned Jacobs’ house, $30,000 in payments for a Trojan Tricabin boat and payments toward various debts held by Jacobs or JBS.

Also, prosecutors say, Jacobs and Rice used deposits from recent investors to make interest payments to existing investors.

The men had their initial appearance in court on Friday. Each count, except for those involving illegal monetary transactions, carries a possible 20-year penalty. The illegal monetary transactions counts carry penalties of up to 10 years in prison.