Man guilty in Ponzi scheme

Published 11:10 pm Friday, April 13, 2012

A Suffolk man and a Norfolk man were convicted Friday by a federal jury following an eight-day trial stemming from a Ponzi scheme involving local pastors, according to the U.S. Attorney General’s office.

Christopher C. Rice, 29, of Suffolk, and Samuel B. Jacobs, 59, of Hampton, were convicted of a variety of charges stemming from a federal investigation by the FBI and the criminal investigations division of the IRS.

Both men were indicted in December 2010, with additional charges added last January, for their roles in a mail fraud scheme, for unlawfully using proceeds derived from the mail fraud scheme and for uttering forged securities. Jacobs was also indicted for money laundering.

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“Mr. Jacobs and Mr. Rice ripped off hundreds of thousands from local church members who trusted them,” U.S. Attorney Neil H. MacBride said in a written statement following U.S. District Judge Mark S. Davis’ acceptance of the verdict.

“They lied and manipulated investors to they could pay off debts and live large on others’ hard-earned savings.”

According to court records and evidence presented in the trial, Jacobs who was the owner, and Rice, who was an employee, began Alliance Financial Services Corporation, a television station broadcasting primarily religious programming, in 2005. They solicited investors to deposit or invest money with Alliance that would be used for various loan and investment purposes.

The investors were mostly local pastors and their congregations, with whom Jacobs had relationships through the broadcast stations. In three years, Alliance took in more than $750,000.

These funds were never invested, but were used for without investors’ knowledge for the benefit of the broadcasting station, to repay prior investors, and for their personal use. The personal expenses included the payment of old debts and other business expenses and the purchase of a 36-foot boat.

Defendants repaid initial investors with new investor money to keep the scheme afloat for nearly three years. The case was initiated following complaints by victims to the State Corporation Commission.

Rice was convicted of seven counts of engaging in transactions using proceeds from the mail fraud, along with one count of forgery.

Jacobs was convicted of numerous counts of mail fraud, money laundering, engaging in transactions using proceeds from the mail fraud, and forgery.

Rice faces a maximum penalty of 10 years on each count of engaging in transactions using proceeds from the mail fraud and 10 years on the forgery count.

Jacobs faces a maximum penalty of 20 years on each mail fraud count, 10 years on engaging transactions using proceeds from the mail fraud, 20 years for each money laundering count and 10 years for each forgery count.

Both men will be sentenced Sept. 6. Jacobs was taken into custody following the verdict, Rice remains free on bond.