MARTIN CHEMNITZ PRESS
A MIGHTY FORTRESS LUTHERAN CHURCH
Pastor Gregory L. Jackson, Ph.D.
WALL STREET JOURNAL NAILS LCMS IN MONEY SCANDAL
Wall Street Journal, November 21, 2000, Front Page. Left column: “A Flock Divided. When a Church Made Some Bad Bets, Donors Say They Were Fleeced. Parishioners Sue Over Loses from Risky Investments By Lutheran Foundation.”
The Barry/Otten/McCain administration is being rocked by a scandal involving millions of dollars. Not long ago I wrote about the Southern Baptist foundation scandal, where money was mismanaged and millions lost. You may remember another Ponzi scheme I described, where conservative evangelicals were told their money would be doubled. I also wrote about WELS, where a widow was cheated and had to take her synod to court to get her money back. Holy Mother WELS fought her in court but lost. WELS had to pay her $1 million.
LCMS members have filed a class action lawsuit against their own synod. One of the first quotes is about how evil it is for Christians to sue Christians, according to one LCMS pastor in Sedona, Arizona. However, no one objected when the adulterous Concordia Seminary professor sued Herman Otten. No one in the entire synod structure said the lawsuit was wrong. The synod also refused to hand over information to Otten’s lawyer, wasting tons of money in fruitless efforts.
Norm Sell has resigned from the LCMS Foundation. Mark H. Stuenkel is now the president. Fred Stickt (my age) is being blamed for the mess. As I read it, the problem stems from institutional greed. The foundation wanted to sell more gift agreements and therefore needed high returns. The way to leverage interested based returns is through strips. In short, strips perform extremely well under ideal conditions, but they are vulnerable in the very fact that they leverage returns. That means losses and gains are multiplied.
What church bodies want to sell you is the “charitable remainder trust.” First note that it begins with an irrevocable gift – a gift you cannot take back. If you are inclined to leave your money to charity, I suggest keeping control of it and parceling it out your own way. Then you can change your mind. The church bodies love the irrevocable gift and push that hard.
The idea is this – You give everything away, but the church promises to pay you and your widow a certain amount of money each year. You may donate your farm, your house, all your stocks, cash. Remember this – you gave it away for good. Your heirs have lost all of this equity because the charity has the money forever.
You cannot change the gift but the foundation can change what it gives you. Some annuity companies use smoke and mirrors too, but they do not get away with it for long. Lawsuits and bankruptcy follow.
The WSJ article is well worth reading because it gives many examples of how individuals have been hurt by the reckless investment of their money. Also note how paltry the funds are from the irrevocable gifts. In essence the charity becomes the annuity company, betting that a large number of people will die at predictable rates.
One man, Edward Hachey, was getting a pathetic amount, $12,000 a year, after giving away his $500,000 home. He could have created a reverse mortgage, taking equity from his home until he died, giving the rest to charity. As it is, they have his home and Holy Mother LCMS now gives him $8,000 a year. A 5% return on the equity would be $25,000 a year! He could have sold the home, bought an annuity, received much more money (mostly tax free, since any annuity settle assumes return of capital) and left the remainder to the greedy synod. But no, they have his home and money. Now he has a check for $2,000 every quarter.
I looked over the WSJ article to check on the details about Mr. Hachey. He was 84 when he got his special deal from the LCMS. Do I need to tell you the mortality rate of 84 year old men? (The older you are, the more money you get from any annuity.) For that reason, his return should have been enormous. Did the LCMS foundation cut their own salaries? No, they cut the payments to their victims.
The board of directors let the people in charge load up the fund with risky investments, $100 million in strips. They held onto the strips when the market went sour, hoping and praying that the strips would gain back value. Orange County in California went into bankruptcy over the same investment wisdom – using strips.
Some losses to consider when you trust the church body with your money:
Don’t fret about poor Mr. Sticht, the man who lost so much money for these church entities. He is now working for the secular company who sold him the strips. Yes! He is still a fund manager. God has opened an effective door for him, according to the article.
His prayers were answered.