A former leader of a Winston-Salem church is facing criminal charges over allegations that he misappropriated more than $260,000 from the church and took about $170,000 in retirement money from four people, including his parents.
Kenneth Ray Sullivan Jr., 35, of the 1400 block of Hartman Road in Lexington, was indicted Monday on two felony counts of obtaining property by false pretenses and one count of securities fraud. Sullivan appeared in Forsyth Superior Court for a bond hearing Tuesday.
Judge William A. Wood of Forsyth Superior Court set his bond at $3 million, and Sullivan is currently in the Forsyth County Jail. He is next scheduled to appear in court on Nov. 18. He told Wood that he would hire his own attorney.
Wood ordered Sullivan to stay away from the church, his parents and two other people he is accused of defrauding.
Shannon O’Toole, an agent with the N.C. Secretary of State’s securities division, testified in court Tuesday that members of Grace Presbyterian Church on Carver School Road came to the Forsyth County District Attorney’s Office in December 2018. They wanted to talk to prosecutors and O’Toole about financial irregularities.
During that meeting, members told O’Toole that individual church members had been approached about joining an investment club. The investigation began after that meeting with O’Toole.
The church discovered the irregularities in September 2018 after the church got a notice that it was in default on its mortgage, said Andrew Fitzgerald, an attorney representing Grace Presbyterian in a lawsuit against Sullivan that was filed in Forsyth Superior Court. Fitzgerald said the church also found out that other bills had not been paid.
He said members of the church’s band were told there was no money to pay them.
“The pastor had not been paid for some time,” he said. “The church wasn’t paying anybody.”
According to the lawsuit, Sullivan had been the church’s clerk of session and had been entrusted with the church’s finances. Fitzgerald said Sullivan’s position was equivalent to that of a treasurer.
The lawsuit also said that Sullivan bragged about his newfound wealth on social media. According to exhibits with the lawsuit, Sullivan posted a picture of $50 bills and $100 bills on his lap. In the caption, he says “Run it up its payday.” Another picture is, he posted, a Mercedes-Benz E Class, along with the comment, “Those who haven’t pissed me off who Tryin to get the first ride.”
O’Toole said the investigation has so far uncovered more than $300,000 in questionable payments from the church’s accounts to Sullivan. Some transactions were through checks while others were from electronic transfers.
When interviewed, Sullivan tried to explain some of the questionable payments by saying that he was paying himself back for expenses, O’Toole said in court.
“He admitted that he commingled funds and said it was a bad error in judgment ... He said it had a bad appearance,” O’Toole said.
Fitzgerald said Sullivan would write checks that required an endorsement from him and another person on the church’s board. Sullivan would forge the other endorsement, Fitzgerald said. He also fraudulently opened bank accounts in the church’s name and deposited money from the church into them, according to Fitzgerald. At one point, one of the banks contacted the church and asked about an account in the church’s name. Church officials told the bank that the church didn’t have an account at the bank, Fitzgerald said.
Sullivan used the money for personal expenses, such as car payments for him and his girlfriend, cellphone bills, pawn-shop loans, student loans and to eat out, O’Toole said.
While O’Toole said investigators uncovered more than $300,000 in questionable payments, indictments said Sullivan is accused of fraudulently taking a total of $268,478 from the church. He is alleged to have committed these crimes from 2008 to 2019, the indictments said.
Separately, Sullivan is accused of creating a series of “buy orders,” or letters to remove funds from the Individual Retirement Accounts of four people, including his parents, Cynthia and Kenneth Ray Sullivan Sr., the indictments said. One of the other four people is also a family relative, Sherri Sullivan.
Sullivan claimed to use the retirement funds so that the people could purchase shares in one of his companies, Prodigy Capital Management, even though the company had no physical assets, the indictments allege. Sullivan’s actions resulted in the removal of $171,906 from the retirement accounts of four people, according to indictments.
Then indictments allege that he reported fake account values to the investors or in communication with American IRA to cover up what he had done.
The lawsuit is against not only Sullivan but also four different companies Sullivan owned and operated — KSR Partners LLC, Prodigy Capital Management, the Prodigy Foundation and the Sullivan Agency.
The only one that is active is the Prodigy Foundation, according to records from the N.C. Secretary of State. KSR Partners and Prodigy Capital Management have been dissolved for failure to file annual reports. The Sullivan Agency has been suspended.
The lawsuit alleges that the money Sullivan is accused of misappropriating from the church went to those companies.
Forsyth County District Attorney Jim O’Neill sought a bond of $4 million to $5 million.
“We have a responsibility to protect those who cannot protect themselves,” O’Neill said in court Tuesday. “The church thought they were paying off their mortgage. Instead, they couldn’t pay their light bills.”
Wood added, “Besides that, I’m concerned that money is still out there and he could use that money to flee.”
Marilyn Parker, a former Winston-Salem/Forsyth County Schools Board of Education member, was sworn in Tuesday night at the school board’s regular meeting to fill a vacant seat on the board.
Parker, a Republican representing District 2, said that it’s going to be a learning curve for her because she has been off the board for a while, but she is excited to be back.
“I’ve got a lot to learn about all the new things that are happening,” Parker said after the meeting. “It’s good to be in committee meetings and learn about things.”
She said she voted on just the board agenda items in which she felt comfortable taking action on, deciding not to vote on items where she didn’t have background knowledge.
“But I should be able to get all of that and be up to speed in the next few weeks,” Parker said.
Her children Seth Parker, Grace Wijeratne and Anderson Parker showed up Tuesday night in support of their mother. Wijeratne’s husband, Amila, and Seth Parker’s girlfriend, Lorae Schafer, where also there.
“We’re happy she’s back to serve the children of Forsyth County,” Seth Parker said. “That’s always been her goal.”
He added that his mother talks about serving the community.
“Her reasoning for coming back this time is always for the kids,” he said. “It’s always to leave politics aside. She felt the board was in need and needed her service….She was happy to be appointed.”
Parker replaced Lori Goins Clark, who resigned Aug. 29, citing personal and family reasons. Clark’s resignation came amid revelations that she inadvertently sent a text message to former interim Superintendent Kenneth Simington that contained a racially insensitive image of a cartoon character.
The Journal filed two public records requests with the school system, asking for a copy of the message Clark sent, as well as a copy of any settlement that exists between Simington and the school system.
Brent Campbell, a spokesman for WS/FCS, said Tuesday that the requests are “still in process.”
This is the second time Parker has been appointed to the board.
She was appointed to finish Mark Johnson’s two-year term after he was elected as N.C. superintendent of public instruction in 2017. Before that, she served 16 years as an elected representative on the board. She is currently the preschool director for Ardmore United Methodist Church. She is also a volunteer at Cook Literacy Model School.
Parker has been a public school teacher. She has a bachelor’s degree in early childhood education and a master’s degree in education.
Val Young, president of the Forsyth County Association of Educators, said that association members are happy that they now know who is filling the vacant position and have seen Parker’s work.
“Like any other board member, we are willing to work with them to make a nice transition for her because she hasn’t been here in a while,” Young said.
But Young said that “as in anything, we’re looking for people who will be advocating for our children.”
The first words out of Agent Shannon O’Toole’s mouth demonstrated that he is no ordinary beat cop.
O’Toole took the witness stand Tuesday morning in a bond hearing for Kenneth R. Sullivan Jr., a Wake Forest graduate who’d been indicted the day before on three felonies connected to ripping off a church and members of his own family.
The allegations were complex — essentially a Ponzi scheme — and the presiding judge needed to know something about O’Toole’s qualifications.
“I’m a special agent with the North Carolina secretary of state’s office, the securities division,” O’Toole said.
“The nexus is anything investment related. … Financial crimes.”
Following the money would involve tedious examinations of bank accounts, wire transfers and paper records.
In other words, this was far beyond a run-of-the-mill dope dealer, wife beater or street hustler.
And individual victims would be difficult to locate.
Bond hearings, in most instances, are routine, slam-dunk affairs over in a matter of minutes. Many times, bonds are set in the belly of the jail by magistrates and don’t require the attention of a Superior Court judge.
But as mentioned, state v. Sullivan is hardly ordinary.
Sullivan was indicted Monday afternoon by a Forsyth County grand jury on two felony counts of obtaining property by false pretenses and one county of securities fraud.
Convictions carry a maximum of 19 years, 3 months in prison. Each.
The short version of a complicated — and still unspooling — story is that investigators believe that Sullivan preyed on Grace Presbyterian Church on Carver School Road and individual congregants including some of his own family. “He was a trusted member of the church,” O’Toole said.
Sullivan used money transferred from church accounts, O’Toole told Judge William A. Wood, to pay for such things as pawn shop loans, car payments and cellphone bills.
O’Toole also explained that investigators believe Sullivan took money individual investors, church members, who believed that they were buying shares in a company that Sullivan ran.
“They were not savvy investors,” O’Toole said. “They trusted him. They knew him for a long time.”
Sadly, we’ve seen this sort of thing time and again.
One similar case involved a Clemmons man named Russell Mutter, a former financial adviser charged with 36 separate financial crimes for stealing more than $2 million from investors including his own father.
O’Toole was front and center in that investigation, too. He worked in the financial world as a broker-trader before going into law enforcement, so he uses computers and bank records to chase crooks rather than snitches and DNA samples.
“I investigate Ponzi schemes,” he said.
On its surface, Sullivan’s hearing was to settle two simple matters: setting a bond and finding out what Sullivan intended to do about hiring a lawyer.
Beyond that, investigators no doubt hope that news of the indictment might prompt other victims to come forward.
“From my perspective, we don’t have a good handle yet on how many other victims are out there or whether he has access to their money,” O’Toole said.
To prevent further theft, District Attorney Jim O’Neill argued for a big bond to keep Sullivan in jail and away from computers.
“It’s like peeling an onion,” O’Neill said.
“We don’t know what we’re going to find. We’re asking for $4 million to $5 million because he poses a danger to other people out there.”
Wood apparently agreed. He set bond Sullivan’s bond at $3 million and ordered him to stay away from the church and alleged victims, including members of his own family.
“I’m concerned that there is still money out there and he could use that to flee,” Wood said.
While Sullivan considers his options, the investigation will continue. Additional victims (and charges) are likely to emerge.
And because these sorts of fast-talking rip-offs continue, O’Toole was kind enough to offer a few words of advice for potential investors.
Start by checking credentials with the U.S. Securities and Exchange Commission and the state secretary of state’s office.
“Financial statements should come from third parties, legitimate wealth management companies, not individuals,” he said. “It’s a red flag that somebody’s working out of their basement.”
An initiative that would place a new substance-abuse facility in Forsyth County has qualified for a $1.5 million federal grant toward its establishment.
However, it remains unclear where the project by Triangle Residential Options for Substance Abusers Inc. (TROSA) would be located, including potentially to the west of Forsyth. TROSA operates its primary facility in Durham.
TROSA announced plans in 2018 to open a transitional housing facility in Winston-Salem for 250 people receiving therapy and counseling for drug or alcohol abuse. The new campus is expected to have 18 staff employees.
The grant from the Appalachian Regional Commission (ARC) was announced Tuesday. The grant would focus primarily on a “recovery to work” strategy that emphasizes job and life skills training for participants with substance use disorders.
Though TROSA officials have not announced a project cost, they said Tuesday it would exceed $7.5 million. The 2018-19 state budget included a $6 million grant toward a Triad facility that remains available.
TROSA’s first preferred site, a 16.69-acre site along Old Greensboro Road at its intersection with U.S. 158/Reidsville Road, was removed as an option in May when the Winston-Salem City Council rejected a rezoning request by a 7-1 vote.
Brian Buland, the group’s associate director of special projects, said Tuesday that securing the ARC grant “is a very supportive investment” toward establishing the second facility.
“We’re still looking at the Triad as a whole,” Buland said. The goal is opening the facility by June 30.
TROSA leaders have spoken with officials in Forsyth and Guilford counties as they search for a property in the neighborhood of 10 acres that, ideally, would include one or more buildings suitable for renovation, such as an old school, church or small industrial/office complex.
However, because Guilford is not part of the ARC region, a site there would not be eligible for the federal grant.
Buland said TROSA’s preference is a Forsyth location.
“We have several properties in the due diligence process,” he said.
Forsyth County Manager Dudley Watts said Tuesday that the county is working with TROSA on potential sites.
Buland cautioned that the overall project cost is site specific, meaning that TROSA could opt to place the facility in a county west of Forsyth in the ARC region.
“The Triad makes a lot of sense for expansion because we already serve a number of individuals from the Triad at our Durham facility,” Buland said.
The Forsyth Board of Commissioners approved in September 2018 revising the Unified Development Ordinances, or UDO, to add the designation “Group Care Facility C (therapeutic community)” to accommodate the proposed TROSA facility.
A change was required because the two existing classifications, Group Care Facility A and Group Care Facility B, have a limit of up to 40 residents. The new use would be permitted only in the General Business district with special-use district zoning.
In May 2019, the City Council voted 7-1 against the zoning request of The Commons of Forsyth County Inc. Council members expressed concerns about the proposed location site, citing residential feedback.
The Commons is a collaborative effort between the N.C. Housing Foundation, Goodwill Industries, Winston-Salem State University, State Employees’ Credit Union and several other service organizations. The Commons provides homeless and rehabilitation services through a variety of programs, facilities and training opportunities.
“We’re very much embedded in the Durham community that we serve, and we felt we had pretty positive overall feedback for the first location,” Buland said.
“We understand that the council may have had other uses in mind for that property.
“If the original process had worked out, we would have been operational by now.”
The Forsyth campus would provide “several social enterprises, which will provide hands-on job skills training for residents while generating revenue to keep services cost-free.”
After completing the program, 100% of graduates would leave with full-time employment. At least 90% of graduates from the two-year program are expected to remain sober and employed for at least one year.
Buland said that vocational training is one of the hallmarks of its residential program, including opportunities in its kitchen, thrift store and automotive department.
He said TROSA has a strong relationship with Durham Technical Community College to offer more advanced types of vocational training.
“We look forward to having similar relationships right here in Winston-Salem as well,” Buland said.
“The residence size of 250 is important to note, because as a therapeutic community, it’s very much a peer-based model that relies on the health of the community and the size of the community.”