A federal grand jury today indicted former Hanover Corp. CEO Terry Kretz and CFO Robert Haley on fraud and conspiracy charges related to the 2006 collapse of the Nashville company, which authorities say was a Ponzi scheme that cost mom-and-pop investors some $18 million.

The indictments come after what U.S. Attorney Ed Yarbrough termed a "lengthy and complex investigation" into Hanover, which convinced hundreds of investors to lend it money in return for a guaranteed interest rate of 2% per month. The grand jury, echoing the claims of several investors who have sued Kretz and the company in recent years, charged that Hanover used money from new investors to pay off old note holders.

The new charges against Kretz, 56, of Lebanon, and Haley, 50, of Gallatin, include one count of conspiracy, one count of securities fraud, one count of wire fraud, four counts of mail fraud, and seven counts of money laundering. Kretz was also charged with one count of making false statements to a bank.

As The City Paper reported last year, state securities regulators tried to shut down Hanover's operations in 2005, but Davidson County Chancellor Carol McCoy declined to impose an injunction on its activities. An estimated $7 million of the investor losses were incurred after those court proceedings.

Investors put the company into involuntary bankruptcy in October 2006 as the losses came to light. Kretz later filed for personal bankruptcy, giving him automatic protection from civil legal action, but Bankruptcy Court Judge George Paine ruled that the protection should be stripped. Paine concurred with a group of investors who claimed that Hanover was a "fraudulent Ponzi scheme."

In 2007, bankruptcy trustee Sam Crocker sued Madison's Cornerstone Church, where Kretz and several other parties involved with the company are or were parishioners, after learning that Hanover had given the church some $176,000 over the years. The church eventually agreed to pay $50,000 to settle the matter.

In a 2007 deposition, Kretz explained that the company existed to do good in the world. "The whole premise of Hanover Corporation was to help people who had lost money in the market in general," he testified.

"You know, our whole thing was about a regeneration of funds for folks. That was our premise. And then alongside of that is – we're believers in Jesus Christ and religious people, and our thing was to fund the Kingdom of God, and that is where we stand with it."

Assistant U.S. Attorney Ty Howard is handling the government's case. Agents from the Federal Bureau of Investigation, the Internal Revenue Service and the United States Postal Inspection Service took part in the investigation.

Links to all of NashvillePost.com's articles on the Hanover case since 2006 are freely available here.