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EASTERN DISTRICT OF KENTUCKY COVINGTON

OCT - 6 2005 AT COVINQTON

LESLIE 0 WHlTMfR CLERK U S DISTRICT COURT

CRIMINAL ACTION NO. 05-41-DLB

UNITED STATES OF AMERICA PLAINTIFF

V. PLEA AGREEMENT

LARRY J. DAVIS DEFENDANT

* * * * *

1. Pursuant to Federal Rule of Criminal Procedure 1 l(c)( 1)(C), Larry J. Davis

(hereinafter referred to as “the defendant”) will enter a guilty plea to Counts 1 and 5 of

the Indictment, alleging violation of 18 U.S.C. 0 1014 (Making False Statements in

Connection with a Loan Application) and 26 U.S.C. 0 7201 (Income Tax Evasion),

respectively. At the time of sentencing, the United States will move to dismiss Counts 2,

3 ,4 ,6 and 7 of the Indictment, and will not bring any additional charges based on

evidence currently in its possession related to this case.

2. The essential elements of the Count 1 of the Indictment are:

a. That the defendant knowingly made a false statement to a bank;

b. That the statement was made with the purpose of influencing the bank’s

actions;

c. That the bank deposits and accounts are insured by the Federal Deposit

Insurance Corporation.

3. The essential elements of Count 5 of the Indictment are:

a. That the defendant willfully attempted to evade or defeat income tax

and;

b. That there is additional tax due and owing.

4. The United States could prove the following facts that establish the essential

elements of the offense beyond a reasonable doubt, and the defendant admits these facts:

a. From on or about 1985 and at all times material to this Indictment, the

defendant was the pastor of the First Baptist Church of Cold Spring (hereinafter referred

to as “FBC”), Cold Spring, Kentucky.

b. In his capacity as pastor, Davis had access and control over most of the

bank accounts, investment accounts, and credit cards belonging to and funded by the FBC

congregation.

(1) One such account was the Interim account, established to act as

a clearing account for the construction expenses related to FBC’s expansions. The

defendant had exclusive control over the Interim account.

(2) The Interim account was funded by the COME account,

investment accounts, and payments to FBC for various church sponsored activities.

(3) From 2000 through 2003, the defendant issued checks from the

Interim account for legitimate FBC expenses and business purposes. In addition, the

defendant made out checks to himself and cash, which he endorsed and negotiated, and

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made cash withdrawals through automatic teller machines (ATMs) from the Interim

account that were not for legitimate FBC expenses and business.

c. In 2001, FBC was undergoing a rapid expansion of the size of its

congregation. To accommodate this trend, FBC began planning the construction of a new,

large sanctuary. The FBC congregation authorized the defendant and other

representatives of FBC to obtain financing of up to $3,500,000.00 to pay the cost of

construction of the new sanctuary and to satisfy an existing mortgage on the property.

d. In April 2002, Fifth Third Bank (hereinafter referred to as “FTB) made a

loan to FBC in the amount of $3,500,000.00 for construction of the new sanctuary and to

satisfy an existing mortgage on the property. Shortly thereafter, construction on the new

sanctuary commenced.

e. A new account, known as the Miscellaneous account, was opened, into

which most of the FTB loan proceeds were deposited.

f. Initially, a general contractor was hired by FBC to oversee and

coordinate the construction of the new sanctuary. Due, however, to problems that arose

during the early phases of construction, the general contractor was fired. Ultimately, the

defendant, at the request of FBC, took over the duties of the general contractor, and

coordinated the subcontractors throughout the duration of the construction of the new

sanctuary.

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g. During construction of the new sanctuary, the various subcontractors

submitted invoices to the defendant for payment. Payment of the subcontractor’s invoices

was authorized and made by the defendant from FBC’s Miscellaneous account.

h. In addition to the payment of legitimate FBC expenses and business from

the Miscellaneous account and the General account, the defendant wrote checks and

obtained counter checks made out to cash or to himself, which he endorsed and

negotiated, and obtained items through direct merchant transactions on a debit card from

the Miscellaneous account that were not for legitimate FBC expenses and business. The

defendant also made ATM withdrawals from the Miscellaneous account, and some of

those withdrawals were at local racetracks. The defendant diverted funds in 2002 and

2003 to himself from the Miscellaneous account and from the General account.

i. In September 2003, FBC lacked the funds necessary to pay for the

construction of the new sanctuary.

j. FBC’s congregation was aware that there had been some errors made

during the early phases of the construction of the new sanctuary, and the defendant

informed members of the congregation of FBC that there were other unexpected cost

overruns associated with the construction of the new sanctuary.

k. The defendant raised concerns with various members of FBC that FBC

may need additional funds to finance the completion of the new sanctuary.

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1. At no time did the congregation of FBC formally authorize the defendant

or any other person to obtain additional financing to complete the construction of the new

sanctuary.

m. On or about September 1 1,2003, at Campbell and Boone Counties, in

the District of Kentucky, and elsewhere, the defendant submitted two false documents to

the FTB with the intent to influence FTB’s decision to loan FBC an additional

$500,000.00 on the construction of the new sanctuary.

n. The first document the defendant submitted to FTB was a letter

purporting to be a FBC resolution authorizing the defendant to borrow an additional

$500,000.00 on the construction loan from FTB. The defendant created the letter without

any such authorization on FBC letterhead, and then forged the signature of one of FBC’s

long-standing members. That person had no knowledge of nor did that person permit the

defendant to forge her signature or use her name. The defendant did not inform the

individual that he had forged her signature and used her name on the letter until after law

enforcement began investigating his activities.

0. The second document the defendant submitted to FTB was a list

purporting to show contractors and others owed money by FBC as a result of the

construction of the new sanctuary in the amount of approximately $500,000.00 on or

about September 11,2003. The defendant knowingly made the following representations

to FBC on the document.

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(1) The defendant listed Arc Electric as owed $78,662.00, which

was the correct amount;

(2) The defendant listed Jolly Plumbing as owed $8,612.00, which

was the correct amount;

(3) The defendant listed Bray Trucking as owed $9,465.00, which

was the correct amount;

(4) The defendant listed Davis Landscaping as owed $12,975.00,

which was the correct amount;

( 5 ) The defendant listed JPS Painting as owed $12,465.00, which

was the correct amount;

(6) The defendant listed McD Concrete as owed $17,817.00, but

was owed only $7,817.50;

(7) The defendant listed Reis Concrete as owed $1,665.00, which

was the correct amount;

(8) The defendant listed Cardinal Engineering as owed $29,140.00,

which was the correct amount;

(9) The defendant listed Louisville Gypsum Floors as owed

$7,299.00, but it had been paid in full;

(10) The defendant listed Dumas Manufacturing as owed $836.00,

but it had been paid in full;

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(1 1) The defendant listed himself as owed $71,130.00, but he was

not owed that entire sum of money in relation to the construction of the new sanctuary;

(12) The defendant listed Top N Sound as owed $1 1,432.00, but it

had been paid in full;

(13) The defendant listed BSH as owed $10,904.00, but it had been

paid in full;

(14) The defendant listed his credit cards as having incurred

$12,560.00, which was the correct amount;

(1 5) The defendant listed FBC as owed $152,000.00, but FBC had

not paid that full amount .from other accounts for the construction of the new sanctuary;

and

(1 6) The defendant listed Art Partin Trucking, owned by a personal

friend of the defendant, as owed $60,583.00, when it was owed nothing and had never

participated in the construction project.

p. The defendant submitted the documents to FTB to justify the request for

the additional funds.

q. At no time did the defendant intend FTB to lose any part of the

$500,000.00. The defendant believed that FBC would repay the loan in full. The loan

was necessitated, in part, by the defendant’s conversion of FBC funds for his personal

use.

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r. The accounts of FTB are insured by the Federal Deposit Insurance

Corporation.

s. During the period of 2000 through and including 2003, the defendant

stole by conversion approximately $500,000.00 to $730,000.00 from the FBC accounts

over which he had partial or complete control.

t. That during the calendar year 2003, the defendant was a resident of Cold

Spring, Campbell County, Kentucky, who during the calendar year 2003 was married, and

had received taxable income in the sum of approximately $300,000.00 to 400,000.00.

(1) That the source of the defendant’s income was his salary paid by

FBC and the funds he converted from FBC’s Interim account and Miscellaneous account

and other FBC accounts under his control.

(2) That was owing to the United States of America an income tax

of approximately $80,000.00 to 108,180.83 for the tax year 2003.

(3) That during the tax year 2003, the defendant attempted to evade

and defeat said income tax by concealing the funds he converted from FBC in the

following manner:

(A) Failing to file an income tax return that was due on or

about April 15,2004 and as required by law;

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(B) Utilizing cash transactions. For instance, the defendant

withdrew over $16,700.00 through an ATM card and wrote checks to cash, which he

endorsed, in the amount of approximately $240,000.00 from the Miscellaneous account;

(C) Making direct account transfers and utilized debit

purchases. The defendant made approximately $7,243.00 in debit purchases against the

Miscellaneous account from such businesses as National Sports, SE, and Kohls and he

made direct transfers to his Ifimd-Secure account, a personal investment account.

u. That the income tax due and owing the United States for the calendar

years 2000 through and including 2003 is fiom approximately $150,000 to $199,000.00,

and that said range of tax due and owing represents the defendant’s relevant conduct with

respect to Count 5 of the Indictment.

5. The statutory punishment for Count 1 of the Indictment is not more than 30

years imprisonment; a fine of not more than $1,000,000.00, or both, and a term of

supervised release of not more than 5 years. The statutory punishment for Count 5 of the

Indictment is not more than 5 years imprisonment; a fine of not more than $250,000.00,

or both; and a term of supervised release of not more than 3 years. A mandatory special

assessment of $100.00 applies, and the defendant will pay this assessment to the U.S.

District Court Clerk at the time of the sentencing, or as directed by the Court.

6 . The United States and the defendant agree to the following sentencing

guidelines calculations, and the parties and the Court are bound by these calculations.

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a. United States Sentencing Guidelines (herein after U.S.S.G.) of November

1 , 2004, is the appropriate guidelines to be used herein.

b. With regard to Count 1 of the Indictment, the parties agree to the

following:

(1) Pursuant to U.S.S.G. 5 2Bl.l(a), the base offense level 7. As the

parties stipulate that the defendant intended no loss to FTB, there is no increase in the

offense level under U.S.S.G. Q 2Bl.l(b)(l).

(2) Pursuant to U.S.S.G.5 2Bl.l(b)(8), the base offense level is

increased to 10 because the defendant misrepresented that he was acting on behalf of a

religious organization in that he did not have formal authorization to obtain a the

additional $500,000.00 loan proceeds from FTB.

(3) Pursuant to U.S.S.G. 5 3El.1, decrease the offense level by 2

levels for the defendant’s acceptance of responsibility.

c. With regard to Count 5 of the Indictment, the parties agree to the

following:

(1) Pursuant to U.S.S.G. $8 2Tl.l(a)(l) and 2T4.1(F), the base

offense level is 16 (tax loss more than $80,000.00 but less than $200,000.00).

(2) Pursuant to U.S.S.G. 5 2Tl.l(b)(l), the offense level is increased

2 levels because the defendant failed to report income exceeding $10,000.00 in each of

the relevant years.

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(3) Pursuant to U.S.S.G. 0 3B1.3, the offense level is increased 2

levels because the defendant abused his position of trust as the pastor of FBC.

(4) Pursuant to U.S.S.G. 6 3El.1, decrease the offense level by 2

levels for the defendant’s acceptance of responsibility. If the offense level determined

prior to this 2-level decrease is level 16 or greater, the United States will move at

sentencing to decrease the offense level by 1 additional level based on the Defendant’s

timely notice of intent to plead guilty.

d. There is no increase in the offense level under U.S.S.G. 0 3D1.4. The

parties agree that the offense level is 17.

7. No agreement exists about the defendant’s criminal history category pursuant to

U.S.S.G. Chapter 4.

8. The defendant will not file a motion for a decrease in the offense level pursuant

to U.S.S.G. § 3B1.2 or a departure motion pursuant to U.S.S.G. Chapter 5, Parts H or K,

and the defendant will not seek a variance from range of punishment established by the

above recommended guidelines.

9. The defendant may argue for sentencing at the low end of the guidelines, and

the United States may oppose any such argument. The United States may argue for

sentencing at the high end of the guidelines, and the defendant may oppose any such

argument.

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10. The defendant waives the right to appeal and the right to attack collaterally the

guilty plea, conviction, and sentence, including any order of restitution.

1 1. After pleading guilty, the defendant will make a full and complete financial

disclosure to the United States and will assist the United States in the gathering of all

financial information. The defendant will complete and sign a financial disclosure

statement or affidavit, will sign financial releases prepared by the United States, and will

submit to a deposition in aid of collection at times and places that the United States

directs.

12. The defendant will cooperate with agents of the Internal Revenue Service in

the determination and collection of income taxes owing by the defendant for the years

2000 through 2003, by providing all pertinent information and documents requested by

the agents and will pay, to the extent of the defendant’s financial ability, all income taxes

owing for those years, together with penalties and interest, determined to be due and

owing in accordance with the rules and procedures established by the IRC and regulations

promulgated thereunder. This paragraph does not hinder or prevent an offer in

compromise for any and all tax years, or a settlement of any and all income taxes due and

owing as agreed to by the parties.

13. The defendant will, prior to the date of sentencing, file individual income tax

returns for the tax years 2002 and 2003. The United States agrees to seek a continuance

of the sentencing for a reasonable period, not to exceed 30 days from the initial

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sentencing date set by the Court, if the defendant needs such time to complete preparation

of the returns. The defendant’s failure to file such returns would violate this Agreement.

14. If the defendant violates any part of this Agreement, the United States may

void this Agreement and seek an indictment for any violations of federal laws, and the

defendant waives any right to challenge the initiation of additional federal charges in the

event of such a violation.

15. This document contains the complete and only Plea Agreement between the

United States Attorney for the Eastern District of Kentucky and the defendant. The

United States has not made any other promises to the defendant.

16. This Agreement does not bind the United States Attorney’s Offices in other

districts, or any other federal, state, or local prosecuting authorities.

17. The Defendant and the defendant’s attorney acknowledge that the Defendant

understands this Agreement, that the Defendant’s attorney has fully explained this

Agreement to the Defendant, and that the Defendant’s entry into this Agreement is

voluntary.

GREGORY F. VAN TATENHOVE UNITED STATES ATTORNEY

Date: 3 b c i OF By: 227- Robkrt K. McBride Assistant United States Attorney

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Date:

Date: /& - 3 - Q>-

Attorney for Larry J. DavisY

UNITED STATES DISTRICT JUDGE

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