local broadcasting station owner charged with investment scheme targeting local churches
NEWPORT NEWS, Va. – Samuel B. Jacobs, 57, of Hampton, Va., and Christopher C. Rice, 28, of Suffolk, Va., were arrested today to face charges that they defrauded more than 80 investors – many of whom were members of local church congregations – of nearly $550,000.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, made the announcement today after Jacobs and Rice made their initial appearance in the United States District Court in Norfolk.
Jacobs and Rice were charged in a 20-count indictment on Dec. 14, 2010, of conspiring to commit mail fraud, mail fraud, money laundering, and engaging in monetary transactions in property derived from illegal activity. Each count carries a maximum penalty of 20 years in prison except the illegal monetary transactions counts, which carry a maximum of 10 years.
According to the indictment, in 1997, Jacobs established JBS, Inc., a corporation that owned and operated low-power television stations that broadcast throughout the Tidewater area. Jacobs served as the president of JBS, and he hired Rice in 2003. JBS often broadcasted local religious programming, and its clients included a number of local churches that both advertised on JBS stations and provided programming from their weekly services.
JBS struggled to make a profit in its years of operation, and Jacobs and JBS incurred large personal and business debts. JBS also incurred a federal tax lien for unremitted payroll taxes in or around 2000, which transferred over to Jacobs in or around 2005. In or about June 2000, Jacobs filed for bankruptcy.
About five years later, Jacobs approached several local Tidewater area pastors, many of whom were clients of JBS, about creating an investment company, with the eventual goal of establishing a bank or credit union. In December 2005, Jacob, together with a group of pastors, formed Alliance Financial Services Company, Inc. The pastors became members of the board of directors of Alliance, with Jacobs as the president and Rice as the secretary.
Jacobs encouraged the pastors to invest additional personal and church funds in Alliance and to solicit investments from their congregations. Jacobs promised the pastors that Alliance investors would receive interest rates greater than those paid by a bank or credit union. The offered interest rates varied with the size of the investment. Jacobs offered a number of explanations as to how Alliance would make money, including that Alliance would loan its funds out to others at an interest rate higher than that paid to the Alliance clients, similar to the manner in which a bank operates. At no time prior did Jacobs inform either the Alliance board of directors or individuals providing funding that their funds would be provided to JBS.
Shortly after its formation, Alliance began accepting investor deposits and continued to do so until in or about October 2008. Approximately 80 to 100 individuals invested funds; in total, approximately $752,000 was invested with Alliance. The majority of the invested funds were deposited into a bank account opened by Alliance in or about February 2006 at TowneBank. Rice served as the sole signature authority on the account.
The indictment alleges that from in or about February 2006 through August 2008, approximately $548,550 was transferred from Alliance’s TowneBank account to a bank account of JBS maintained at TowneBank, via checks and bank transfers. Each check provided from the Alliance account was signed by Rice on behalf of Alliance. The indictment further alleges that 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, including payments to Rice, payments to a company that owned Jacobs’ house, payments towards the various debts held by Jacobs or JBS, and more than $30,000 in payments for a Trojan Tricabin boat, purchased in 2006.
In addition to the transfer of funds from Alliance to JBS and the personal use of Alliance funds, the indictment alleges that Jacobs and Rice also used deposits from recent investors to make interest payments to existing investors.
This case was investigated by the Criminal Investigation Division of the Internal Revenue Service and the FBI. Assistant United States Attorney Brian J. Samuels is prosecuting the case on behalf of the United States.
Criminal indictments are only charges and not evidence of guilt. A defendant is presumed to be innocent until and unless proven guilty.A copy of this press release may be found on the website of the United States Attorney's Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.