Feb 24, 2016

Polygamous church leaders indicted, arrested in investigation of alleged food-stamp fraud

Erin Alberty, Jessica Miller and Nate Carlisle
The Salt Lake Tribune
February 23, 2016

Indictment against Lyle Jeffs, other FLDS leaders

In a case that some say could destroy Utah's largest polygamous sect, federal prosecutors on Tuesday announced indictments against leaders and members of the polygamous Fundamentalist Church of Jesus Christ of Latter-Day Saints on charges related to food stamp fraud.

Lyle Jeffs, who has been running the FLDS for his imprisoned brother, is one of nearly a dozen people named in an indictment that was unsealed Tuesday while FBI agents and sheriffs deputies searched businesses in Hildale, Utah, and Colorado City, Ariz., that are owned by members of the FLDS.

Also indicted was Seth Jeffs, brother to both Lyle and FLDS President Warren Jeffs, the religion's president and prophet — and who is serving a sentence of up to life in prison plus 20 years in Texas for crimes related to marrying and sexually abusing underage girls.

"If they're finally going to prosecute Lyle and the leaders of the church, it will eventually bring the church down," said Wallace Jeffs, Warren Jeffs' half-brother, who was expelled from the church. "This pretty much cuts the head off the snake."

Hildale and Colorado City, collectively known as Short Creek, are home to the FLDS church. Isaac Wyler, a former member of the church, said Tuesday's action appears to be the largest law enforcement raid in the towns since 1953, when Arizona authorities arrived to arrest polygamists.

"There are officers all over town," Wyler said.

Lyle Jeffs and 10 other FLDS Church leaders and members were arrested Tuesday in Utah and South Dakota, according to a news release from the U.S. Attorney's Office. They face one count each of conspiring to defraud the Supplemental Nutrition Assistance Program (SNAP) and conspiracy to commit money laundering.

A large percentage of FLDS Church members living in Short Creek receive SNAP benefits, amounting to millions of dollars in benefits per year, the news release said.

Prosecutors say church leaders ordered members to give their SNAP benefits — in food and cash transfers — to the church, which collects and redistributes commodities to the community. The leaders tell church members that they must obtain their food and household goods only through the church, the indictment alleges.

"This indictment is not about religion. This indictment is about fraud," U.S. Attorney John W. Huber said in the news release of the multi-year investigation. "This indictment charges a sophisticated group of individuals operating in the Hildale­-Colorado City community who conspired to defraud a program intended to help low ­income individuals and families purchase food."

Charged in the indictment are Lyle Steed Jeffs, 56, John Clifton Wayman, 56, Kimball Dee Barlow, 51, Winford Johnson Barlow, 50, Rulon Mormon Barlow, 45, Ruth Peine Barlow, 41, and Preston Yates Barlow, 41, all of Hildale.

Also charged are Nephi Steed Allred, 40, Hyrum Bygnal Dutson, 55, and Kristal Meldrum Dutson, 55, all of Colorado City; and Seth Steed Jeffs, 42, of Custer, South Dakota.

Arrest warrants were issued for all the defendants and at least five of them were in custody by Tuesday evening.

In the physical absence of Warren Jeffs, Lyle Jeffs handles the daily affairs of the organization, including its financial matters, prosecutors said. Another of Warren Jeffs' brothers, Seth Jeffs, leads a congregation of FLDS members in rural Custer County, South Dakota.

"This is what will really bring down the church," Wallace Jeffs said. "The church is basically just a money laundering criminal organization. The fact that they're actually targeting them financially and getting them for these frauds and these money laundering issues is going to bring the church to its knees."

But Wallace Jeffs, who has been in and out of the church's good graces over the years, added that the FLDS Church likely will remain operational for the immediate future.

"They still have people who can operate the church even though Lyle's arrested," he said. "They always have resources to fall back on in case of an emergency like this."

Still, with its assets in jeopardy and its line of succession disrupted, Wallace Jeffs said he anticipates the church will be defunct within "a year or two."

The indictment does not name Warren Jeffs' two younger brothers, Nephi and Isaac, who may be left to operate the church, Wallace Jeffs said. But with the three eldest in custody, the family's ability to control to the organization is weakened, he said.

"Those brothers ... are pretty much the backbone of the church," Wallace Jeffs said. "If you knock them all out and get them put in prison, they really don't have anybody to lead the church. Somebody could try to stand up and say, 'I'm going to do it.' But they're not going to have any credibility. The influence lies in that family. There's nobody that has the influence to keep running the church."

But former FLDS apostle William E. Jessop said there still remains someone with considerable influence and ability to run the church: Warren Jeffs himself. He points to federal investigators' evidence in an ongoing discrimination case that Jeffs continues to run the church from prison, including communications with Isaac and Nephi Jeffs.

"We believe there's so much coming out of the prison, with Warren continuing to give direction," said Jessop, who leads a more progressive polygamous group that has left the FLDS Church. "They they have their little source. There's a whole [regiment] of little soldiers just trying to follow orders. ... Wherever corruption is, it's going to continue on as long as there's people to carry it on ... no matter whose the name."

Washington County Sheriff Cory Pulsipher said Tuesday that his office helped initiate the investigation and has officers participating on the FBI's Public Corruption Task Force.

"What started as a small investigation quickly grew to a point where it was important to work with federal agencies to build a case to present to a grand jury," Pulsipher said in a statement.

Eric Barhart, Special Agent in Charge of the FBI's Salt Lake City Field Office, called Tuesday's indictment the "culmination of the tireless efforts" of the FBI task force, the U.S. Department of Agriculture's Office of Inspector General, the Washington County Sheriff's Office and the Washington County Attorney's Office.

"The violations included in the indictment are especially egregious since they allege that leaders of the conspiracy directed others to commit crimes, for which only certain people benefited," Barnhart said. "This type of conduct represents nothing less than pure theft. The FBI and its law enforcement partners will actively pursue those entities or persons who unlawfully manipulate and control government programs for their own gain."

Washington County Attorney Brock R. Belnap, whose office also participated in the investigation, will participate in prosecuting the case.

"I am grateful for the numerous partners who have worked diligently on this case," Belnap said. "It is our shared hope that this action will help innocent families receive the food assistance that they genuinely need while holding people accountable who conspire to divert those resources to illegal purposes."

KUTV showed video of Mohave County, Ariz., deputies blocking streets around a dairy retailer in Colorado City. Other witnesses told The Salt Lake Tribune that agents were at Reliance Electric, a longtime contributor to the FLDS, as well as a produce business.

The prosecutors' indictment says the alleged fraud is rooted in the FLDS Church's "United Order," instituted in 2011, which instructs all adherents to donate their lives and all their material substance to their church.

Members were told to divert their food stamp benefits to the church by purchasing food from church-owned businesses like the Meadowayne Dairy Store and Vermillion Cliffs Produce and then bring those items to the FLDS Storehouse for "donation," according to the indictment.

"These leaders also provided instruction on how to avoid suspicion and detection by the government," the indictment alleges.

FLDS leaders also told members to transfer their SNAP benefits to the church-owned stores without receiving any food products, according to the indictment.

On one occasion, Wayman is accused of taking an EBT card — which operates similar to a debit card and is linked to a SNAP account — from a qualifying person and giving it to an unauthorized person to buy food and goods.

Prosecutors also allege that the proceeds from the SNAP fraud financed ineligible purchases, such as paper products, a tractor and a truck.

Last year, 728 households received food stamps in either Colorado City, Ariz. or Hildale, Utah, according to officials in each state. And the combined benefit reached about $7.2 million.

Colorado City had about twice as many SNAP recipients as Hildale, 500 to 228, and it was worth twice as much, $4.8 million to $2.4 million.

The Arizona Department of Economic Security participated in the investigation and celebrated Tuesday's indictments.

Department of Economic Security Inspector General Juan J. Arcellana said: "The indictments in this case will put an end to a sophisticated, organized and illegal operation."

Blake Hamilton, an attorney who has represented Reliance and the dairy in the past, said in a text message he was only learning of the raid and had no comment. The church itself has no spokesperson.

Hamilton pointed out none of those indicted work for or serve in elected positions with Hildale or Colorado City, though Kimball Barlow is a former member of the Hildale City Council. Wayman is a longtime FLDS businessman and church elder who briefly served as the bishop of Short Creek in 2012.

Agents have not said what was seized in the raids, whether the storehouse remains in operation, or whether FLDS members are still receiving food benefits.

Huber said during a Tuesday press conference that he wasn't sure whether the indictments would affect the community's ability to get government food benefits going forward.

"I can imagine, using common sense, that if you engage in fraud, it may disqualify you from taking part in the program in the future," he said.

While Jessop and Wallace Jeffs both praised federal officials for pursuing the case, they were concerned that FLDS families — who they say have given all they own to the church and may have no independent means of survival — could suffer in the wake of the raids.

"It does affect women and children more particularly," Jessop said. "This is the food that gets put on the table for a lot of them."

Members also may feel dissuaded from accepting food and supplies from sources not sanctioned by the church, Jessop said, and some may embrace scarcity as a righteous cost.

"They've been taught for years that the government's an enemy," he said. "For the government to come in, they think it's just answering the prophecy. Some will continue to hold strong to their beliefs. Some will pay a serious element of sacrifice to hold onto what they believe."

The Short Creek searches come as the municipal governments in the towns are on trial in a Phoenix courtroom. The U.S. Department of Justice is suing the towns, claiming they discriminate against people who do not follow the FLDS. The case could go to the jury next week.

There has been testimony in that trial that families with food stamps would use their government-issued debit cards at retail stores operated by FLDS members. The stores would be reimbursed by the government but food would go to the FLDS storehouse, according to the testimony.

Lyle Jeffs and Wayman are expected to appear Wednesday morning at the federal courthouse in Salt Lake City.

Seth Jeffs is due in a South Dakota courtroom, and the remaining defendants arrested in the Hildale/Colorado City area will appear in the federal courthouse in St. George.

Huber said he hopes authorities will be able to take the remaining suspects into custody soon.

"Today, thus far, we are very fortunate that this law enforcement business was conducted safely and that [for the] people who were taken into custody, it was done so safely and orderly," he said. "We hope that will continue."

The potential penalty for conspiracy count is five years in prison. The money laundering count carries a potential penalty of 20 years in prison.

This is the second time this month federal agents have raided Utah businesses associated with a polygamous sect. On Feb. 10, agents from the FBI, the IRS and the Environmental Protection Agency searched the Salt Lake County offices of Washakie Renewable Energy, which is operated by members of the Kingston Group.

The Kingstons and the FLDS are separate polygamous churches. Huber said the two raids were not related.


The accused and the allegations against them:

Lyle Steed Jeffs » handles the daily affairs of the FLDS Church organization in Hildale, Utah and Colorado City, Arizona — including its financial matters. He is accused of directing members to divert their food stamp benefits to the FLDS Storehouse. Members are told they must obtain all of their food and goods from this storehouse.

Seth Steed Jeffs » is accused of acting as signator on the Quality Wholesale Distributors bank account into which Meadowayne Dairy Store’s operators transferred SNAP fraud proceeds. Prosecutors believe Quality Wholesale was a front for the FLDS Storehouse.

John Clifton Wayman » acted as the bishop of the Short Creek Stake congregation in 2012. He is accused of circulating instructions for diverting SNAP benefits to the storehouse. He is also accused of taking a benefits card and giving it to an unauthorized person to purchase food and goods.

Kimball Dee Barlow » managed the FLDS Storehouse, and is accused of disseminating protocol for diverting SNAP benefits to the storehouse.

Nephi Steed Allred » is accused of organizing Quality Wholesale Distributors in an effort to conceal and disguise the involvement of the FLDS Storehouse.

Winford Johnson Barlow » acted as president of Meadowayne Dairy Store from May 2012 and April 2015.

Rulon Mormon Barlow » served as the general manager of Meadowayne Dairy Store and is accused of transferring SNAP fraud proceeds to accounts associated with Quality Wholesale Distributors.

Ruth Peine Barlow » is the wife of Rulon Barlow, and assisted her husband in the operation of the dairy store.

Hyrum Bygnal Dutson » was the general manager of Vermilion Cliff’s Produce, and is accused of transferring fraudulent SNAP proceeds to accounts associated with companies acting as a front for the FLDS Storehouse.

Kristal Meldrum Dutson » is the wife of Hyrum Dutson, and helped her husband in the daily operations of the produce store.

Preston Yates Barlow » took over managerial control of the dairy store in October 2015, and is also accused of transferring fraudulent proceeds to accounts of companies believed to be fronts to the storehouse.

— Source: U.S. District Court indictment



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