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Mormon Sect Leaders Charged in Food Stamp Fraud Scheme

(CN) - Eleven top leaders and members of Warren Jeffs' fundamentalist Mormon sect, including two of his brothers, were arrested Tuesday on federal charges of conspiracy to commit food stamp fraud and money laundering.

According to the two-count indictment unsealed Tuesday in Salt Lake City Federal Court, prosecutors believe leaders of the Fundamentalist Church of Jesus Christ of Latter-Day Saints diverted funds from the Supplemental Nutrition Assistance Program, or SNAP, and ordered church members to use the benefits to place goods in a communal storehouse to later be distributed among church members.

A large number of FLDS members living in the border towns of Colorado City, Arizona and Hildale, Utah receive millions of dollars in SNAP benefits per year, the federal government claims.

The indictment comes near the end of a federal religious discrimination trial in Phoenix spearheaded by the U.S. Department of Justice against Colorado City and Hildale alleging the towns limit access to utilities, housing and police for residents who are not church members.

Charged in the indictment are Lyle Jeffs, 56; John Wayman, 56, Kimball Barlow, 51; Winford Barlow, 50; Rulon Barlow, 45; Ruth Barlow, 41; Preston Barlow, 41; Seth Jeffs, 42; Nephi Allred; Hyrum Dutson, 55; and Kristal Dutson, 55.

Lyle Jeffs, a bishop in the FLDS, handles the daily affairs of the sect while its leader, Warren Jeffs, is imprisoned in Texas for life plus 20 years for the sexual abuse of two young girls he took as "spiritual wives."

Seth Jeffs, also a brother to Warren Jeffs, leads a congregation of FLDS followers in Custer County, South Dakota, the federal government says.

"This indictment is not about religion. This indictment is about fraud," U.S. Attorney John W. Huber said in a statement Tuesday. "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."

In 2011, Lyle Jeffs initiated the "United Order" - a group of followers within the church who "promise to donate their lives and all their material substance to the church," the indictment says. It was at that time members of the order began to donate all of their material belongings to the FLDS Storehouse, "a communal clearinghouse charged with collecting and disbursing commodities to the community," and were ordered to get all of their food and goods directly through the storehouse.

The indictment claims that between 2011 and 2013, church leaders Lyle Jeffs, Seth Jeffs, John Wayman and Kimball Barlow, instructed members to buy food items using SNAP benefits at two local businesses that are extensions of the storehouse - Meadowayne Dairy and Vermillion Cliffs Produce.

Members were told to either donate the items to the storehouse or convert SNAP benefits "directly to fungible assets by swiping EBT cards at Meadowayne or Vermillion without the exchange of any food products." SNAP proceeds are issued through EBT, or electronic benefit transfer, cards.

Proceeds from SNAP were then deposited into the accounts of the two businesses that would transfer the funds to a number of other companies acting as a front for the storehouse, prosecutors say.

Meadowayne Dairy and Vermillion Cliffs Produce are two small convenience stores, but engaged in a number of SNAP transactions that rivaled and surpassed "sales generated by much larger stores like Wal-Mart and Costco," the indictment says.

"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," Eric Barnhart, a special agent in charge of the FBI's Salt Lake City field office, said in a statement. "This type of conduct represents nothing less than pure theft."

The indictment was sealed when filed last week, but unsealed Tuesday when arrest warrants were executed.

Lyle Jeffs and John Wayman were arrested Tuesday in Salt Lake City. They are scheduled to make an initial appearance on the charges Wednesday morning in Salt Lake City Federal Court.

Seth Jeffs was arrested in Custer County, South Dakota, and will have an initial appearance in Federal Court there. All other defendants were arrested in Hildale and Colorado City and will appear Wednesday in Federal Court in St. George, Utah.

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