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In October 2001, a few days before the election that would select the next mayor of the city of Fairbanks, Jim Hayes sat for an interview with the News-Miner as he prepared to give up the office he had held for nine years. Already he had served longer as mayor than any other person in the city's history.

"I'm going to do some things that have needed to be done for a long time around the house," he said. "I'll be busy with the church, and I'll be doing things with my wife."

About his future, he said, "My steps are ordered by the Lord. I'll get guidance from him."

Hayes' immediate future at the time would see his continued involvement with the new 22,000-square-foot home of the Lily of the Valley Church of God in Christ, of which he became pastor in June 1997.

He would also be involved with LOVE Social Services, a nonprofit tutoring and mentoring center founded in 2000 by Hayes, his wife - who was also the new center's paid executive director - and others, including some family members. Lily of the Valley's old building would become home to the new nonprofit.

Now, however, the former mayor is spending time fending off the federal government's charges that the nonprofit he helped found was an enterprise laced with fraud and deception.

A federal grand jury has issued a lengthy indictment against Hayes and his wife, Murilda "Chris" Hayes, allowing the government to proceed with its claim that the couple misused, through a conspiracy, more than $450,000 of the nearly $3 million in federal grants directed to LOVE Social Services Center from 2001 through December 2005.

The indictment, issued one year after more than two dozen federal agents served search warrants at several Fairbanks locations, says the Hayeses misused the funds for personal enrichment and to help pay for construction and operation of the new church building.

The government is seeking the return of up to $825,000 in cash or property it says is traceable to the alleged crimes.

A review of the record

The dozens of criminal charges - 92 against Chris Hayes, 23 against Jim Hayes - include fraud, theft, conspiracy and money laundering.

If proved true, it would mark a precipitous fall for a prominent Fairbanks couple. Jim Hayes is the former three-term city mayor, current member of the University of Alaska Board of Regents, pastor, recipient of the Distinguished Alumnus Award from the University of Alaska Fairbanks Alumni Association, and former consumer fraud investigator for the state. Chris Hayes is a member of the Alaska Commission on Human Rights and in 2005 was named one of the Women of Distinction in Fairbanks by the Farthest North Girl Scouts Council.

The Hayeses pleaded not guilty to the charges last month in U.S. District Court in Fairbanks and have asked that their trial be delayed until September or October due to the complexity of the charges against them.

The indictment is blunt: "The purpose of the conspiracy was to illegally misapply government funds awarded to LSSC for programs to benefit underprivileged youth for the personal benefit of Chris Hayes and James Hayes; and for the construction, furnishing and operation of LOVCOGIC's new church and other LOVCOGIC related religious entities."

It says the Hayeses, among several actions, used the grant money to help pay the $200,000 shortfall in the $1.75 million cost of the new church, located at 24th Avenue and South Barnette Street; wrote checks payable to "cash" for the purpose of paying personal bills and bills of the church; altered documents to conceal the grant as the source of those funds; and created false invoices.

And while the full detail of the case has yet to unfold in court, the Daily News-Miner has obtained hundreds of pages of documents from a variety of federal agencies under the federal Freedom of Information Act and from other sources over the past 18 months. The documents show years of problems and potential problems with what LOVE Social Services, chiefly through Chris Hayes, reported to the federal government about its plans for the grants, which constituted virtually all of the nonprofit's income, and with how the government monitored the spending of that money.

(See some of those documents here.)

The review also shows no mention, in any of the documents, of the relationship of Jim and Chris Hayes, their daughter, and Chris Hayes' nephew - all of them repeatedly named in the government paperwork about the grants and all of them involved with LOVE Social Services and on the staff of Lily of the Valley Church.

Jim Hayes' attorney, John Murtagh of Anchorage, and Chris Hayes' attorney, federal public defender MJ Haden, declined to comment on the case. Both attorneys were told the general content of the News-Miner's review. Assistant U.S. Attorney Karen Loeffler also declined to comment, citing ethics rules.

What follows today and in the coming days is a look at what the newspaper's review of the public record shows and how that record relates to some of what is mentioned in the grand jury indictment against the Hayeses.

LeeRoy's old church

The weathered 50-by-145-foot building at the corner of 24th Avenue and Barnette Street in South Fairbanks doesn't look like much from the outside. Its white siding walls rise from the ground and are punctuated at regular intervals by a few slender vertical windows. Gone now from its simple, utilitarian architecture is the steeple that had long topped this house of worship that minister LeeRoy Parham and others built in the late 1960s.

The old building, which for so many years vibrated with the singing of the Lily of the Valley Church choir, now is a central point in the federal government's case against Jim Hayes and his wife, Chris. Chris Hayes is the youngest daughter of Parham and his wife, Mazie, the church mother at the time.

First, the government says that the Hayeses inflated the sale price of the old church, which Lily of the Valley Church was selling to LOVE Social Services. The government says the Hayeses, as part of a broad conspiracy with "others known and unknown to the grand jury," overstated the sale price so as to divert enough of the nonprofit's federal funds to complete the initial $1.4 million financing package for construction of the new and vastly larger Lily of the Valley Church building across the street.

The indictment says Chris Hayes, shortly after receiving word that LOVE Social Services would receive a $1 million grant from the U.S. Department of Housing and Urban Development, wrote a letter to "Pastor Hayes" - her husband - offering to buy the old Lily of the Valley Church building for $375,000. The government notes that neither the letter, the grant application submitted to HUD nor the sales agreement for the building mentioned the marital relationship between the Hayeses.

As work on the new church progressed, the cost continued to rise. In the end, the total reached $1.75 million - well more than the expected $1.4 million cost. Lily of the Valley's total funds - in bank loans, from its assets in a minor account and from the sale of the old church - were more than $200,000 short.

That's where the old church building, in new life as the home of LOVE Social Services Center, comes in again.

The government alleges that the Hayeses misstated and double-listed projected budget expenses of LOVE Social Services to divert even more of the $2.9 million in federal money to the new church to cover that shortfall. The renovation of the old church figures prominently in three of the five grants obtained by the nonprofit.

The indictment doesn't mention the proposed renovation. Rather, it includes a general observation that the grant application to the Department of Justice "for the most part, mirrored the activities and programs listed in support of" a previously approved grant from the Department of Housing and Urban Development, the indictment states. "Similarly, the budget request contained in the DOJ grant applications requested funding to cover many expenses already provided for in the HUD grant."

But the public record provides scant indication of what work was done on the old church and shows no government verification that work was completed or even undertaken as proposed. Two people associated with LOVE Social Services declined to answer the News-Miner's questions about the proposed renovation.

Big ideas

Paperwork submitted to HUD in November 2000 by Chris Hayes and Don Thomas - Chris Hayes' nephew and board president of LOVE Social Services at the time - states that $375,000 of the $1 million appropriated by Congress just weeks earlier at the direction of U.S. Sen. Ted Stevens would be used to purchase the old Lily of the Valley Church building and that $150,000 would be used to renovate it.

"The building is a church, which has been in existence since 1969 and now [sic] building a new facility and relocating to another building," reads the cover page of LOVE Social Services' application to HUD. "The LOVE Social Services center will then be able to provide more than the tutoring and mentoring program now in operation to grade school and high school students."

In July 2001, LOVE Social Services submitted an update to HUD that included a letter from Chris Hayes mentioning that a fence would be installed and that the center had plans to repair "a minor foundation problem in the near future. Next year the plan is to renovate the building for functions geared to the LSSC clients."

Another update, from January 2002, says the center "has been in the process of renovation since the center purchased the building it now resides [in] from the Lily of the Valley Church …" It says the work included the partial renovation of the former church's sanctuary into a classroom and that the next phase of the renovation would include the repair of "some floor structural damage."

In March 2002, Hayes and Thomas submitted paperwork to acquire funds from a second Stevens-generated earmark, this time from the Department of Justice's Office of Juvenile Justice and Delinquency Prevention.

The paperwork listed $44,100 for building maintenance that was to include roof and foundation repairs, painting and $20,000 for an elevator lift. A budget notation lists the items as "Necessary repairs to a building which was built in 1969. Safety issue for roof and foundation. Elevator/lift is ADA requirement for disabled children and visitors to have access to reading and recreation area."

Three years later, on May 30, 2005, repairs and renovations - including a different request for elevator funds - appeared again, this time in paperwork submitted by Chris Hayes to the Department of Housing and Urban Development to obtain money under a supplemental earmark obtained by Stevens for fiscal 2005. The paperwork includes a budget sheet that lists several repairs and renovations, including $13,000 to "Add handicap lift"; $6,000 to "Paint interior and exterior"; and $14,600 to "Renovate plumbing, electrical, kitchen, study room."

About two-thirds of that additional $173,600 grant remained as of mid-January this year, HUD spokesman Brian Sullivan said.

Neither HUD nor the Department of Justice has records showing how much money was actually spent on renovation work. And neither has conducted a review to determine if the money was spent as proposed.

What about …

What about the elevator, first proposed five years ago, for example?

The LOVE Social Services building still doesn't have one, despite it being noted by the nonprofit as a requirement of the federal Americans with Disabilities Act. The building does have a ramp for use by people with disabilities but has no elevator or lift, said Howard Hornbuckle, who works at LOVE Social Services and who took the News-Miner on a brief tour of the building last month.

Some interior remodeling clearly has occurred, however. The tour of the building did show the center's interior, both the upper and lower levels, to be well-maintained. It includes a small administrative office, an upstairs kitchen area that featured newer white appliances and a downstairs study area - the former church's sanctuary - filled with chairs and long tables and a separate recreation area that includes a pool table.

What about the proposed roof and foundation work and the plumbing and electrical renovations?

The city of Fairbanks has no building permits on file for that or any other work at the old church building for the period covered by all of the federal grants, said Steve Shuttleworth, the head of the city's building department.

"Permits are required anytime you alter a building," he said. "The only time permits aren't required is if you're doing finish work - papering, painting, those types of finishing elements."

"But when you are changing wiring, permits are required. New outlets, new lights - permit required," he said. "Foundation repairs - absolutely required to have a permit."

Shuttleworth said the scope of work outlined by LOVE Social Services in its filings with the federal government would require a permit "anywhere that I am aware of, certainly in Fairbanks. That doesn't fall under any exemption."

Obtaining a permit for work isn't the end of the process; rather, it's the beginning. Permits only allow the work to get under way. Having a permit, Shuttleworth said, means a person would have had to submit plans for review by city engineers and then follow those plans. "Along with that, there's a half a dozen required inspections."

Don Thomas, one of the founding members of LOVE Social Services and who in 2006 is listed as president of the nonprofit's board on a biennial corporation report filed with the state, said in a mid-February interview that he can't recall what work was done on the roof and foundation during the period of the grants. Thomas also is a deacon at Lily of the Valley Church.

"There was some work done," said Thomas, who owns a design and drafting service. "I'm not sure what was done."

When told the city had no permits on file, he said, "That's odd. They should have permits."

Shuttleworth, told of Thomas' claim, is adamant that the city has nothing. Further, he cites a record of Thomas being uncooperative with the city: The city does have a file on other work done on the church building years before it was transferred to LOVE Social Services, but Thomas, Shuttleworth said, rebuffed five years of phone calls and letters from the city to arrange the required final inspection on that work.

Likewise, Shuttleworth said, Thomas has not requested the required final inspection of the new church's construction, which was completed in 2001.

On to a new life

Jim Hayes began 2002 out of public service but in greater service to his church, which had at that time only recently opened the doors of its new and expansive building across 24th Avenue from the little church that LeeRoy Parham had seen built so long ago to accommodate his own growing Lily of the Valley congregation. The two buildings, and what occurred with and inside them, would occupy a great part of the lives of Jim and Chris Hayes, of several members of their family, and of many others through the ensuing years.