Tag: RICO

ECFA Report: Gospel for Asia Solicited Funds for Narrower Purposes Than the Eventual Expenditure of Funds

Since 2015, I have investigated the mission giant Gospel for Asia. First privately and then publicly, former employees of GFA sounded alarms about financial and personnel management. A former donor alerted me to the situation and eventually numerous insiders in India and the U.S. came forward with information about the second largest mission organization in the U.S.

At present, former and current leaders of GFA are defendants in two lawsuits which allege that they conspired to defraud donors by using donations in ways contrary what donors intended. One case is stalled in federal court but the other — Murphy v. GFA — is moving forward.

At the heart of Murphy v. GFA is the allegation that GFA didn’t use donations as donors intended. The judge in the case, Timothy Brooks, ordered GFA to produce documentation which could address this basic allegation. Because GFA has not produced documentation responsive to Brooks’ requests, he signaled his intention to appoint a Special Master to oversee the discovery process.

Although the federal suit is potentially more serious, GFA has been investigated on these allegations before. In 2015, the Evangelical Council for Financial Accountability investigated GFA’s financial dealings and eventually evicted GFA from membership due to multiple violations of ECFA standards.

The ECFA Investigated GFA’s Financial Accountability

Prior to removing GFA, the ECFA prepared a report of their investigation which was provided to GFA board members. The report was written in the form of a letter dated September 2, 2015 to GFA founder and president K.P. Yohannan. Former board member Gayle Erwin provided it to me after his resignation from GFA’s board.

Periodically over the next few weeks, I am going to highlight aspects of the ECFA report which are relevant to issues raised in Murphy v. GFA. This is especially relevant to the decision of GFA attorneys to ask the 8th District Court of Appeals to force Judge Brooks to withdraw his sanctions and not appoint an attorney to oversee the discovery process.

Since the key issue in the case is about how GFA spent donor funds, I will start with what the ECFA found on this question. On page 4 of the letter, ECFA’s representative wrote:

6. GFA solicits funds for narrower purposes than the eventual expenditure of the funds.

During ECFA’s review on August 12, GFA staff provided a document to demonstrate the flow of funds from GFA to field partners. ECFA learned that donor-restricted donations are appropriately tracked by particular revenue classifications. However, we also discovered, and it was confirmed by GFA staff, that the disbursement of the gifts are tracked in much broader categories. For example, donations were received and tracked for 38 different specific items including kerosene lanterns, bio sand filters, chickens, manual sewing machines, blankets, bicycle rickshaws, and others, but related expenses were only tracked as “community development.” In other words, donations were raised for 38 specific items, with the donations pooled for expenditure purposes instead of expending them specifically for the purposes raised.

ECFA did not find any evidence that donors to the 38 different giving categories had awareness that their gifts were grouped and used in a broader category than the specific categories in which the gifts were raised. ECFA’s staff raised concerns regarding GFA’s compliance with ECFA Standard 4, 7.1, and 7.2 in raising funds for a particular purpose but then failing to document the actual use of those funds by the particular donor-restricted purpose.

Subsequent to this conversation, on August 16, GFA staff indicated that GFA field partners will begin tracking expenditures by specific item accounts to provide adequate transparency as to the use of designated funds.

The Murphys donated $34, 911 to GFA between 2009 and 2014. According to the information provided by GFA to the ECFA, expenditures were not tracked by specific item accounts until at least after August 2015. GFA led donors to believe their donations would go for one of 38 items, but GFA did not track the way those funds were spent to know if the funds were spent as intended. “Community Development” is a label which could obscure many activities and allow GFA’s field partners to spend money on things not contemplated by donors. This admission by GFA staff, some of whom are defendants in Murphy v. GFA, seems particularly relevant to the discovery process but has not been disclosed to the Court by GFA’s attorneys.

Thus, I am left wondering which account is true – the one in the ECFA report or the one offered by GFA attorneys in various Court pleadings. To the ECFA, GFA staff claimed field partners in India didn’t track expenditures by specific items accounts. In their filings, GFA attorneys have indicated that documents in exist in India.  In the recent writ of mandamus to the 8th District Court of Appeals, GFA attorneys wrote:

There are millions of such documents spread over 12,000 locations in almost every part of India. SASA00718-SA00720. Plaintiffs have made no effort to inspect those documents. Petitioners also secured and produced over 60,000 pages of bank statements, ledgers, and summaries from the field. (p. 16)

Presumably, when this case gets to trial, the ECFA report will be entered into evidence. It might be that ECFA staff who were involved will be deposed. Eventually, the admissions made by GFA staff regarding the same questions at issue in this trial will come out.

 

Gospel for Asia Asks 8th District Court of Appeals to Withdraw Sanctions

Gospel for Asia’s Writ of Mandamus Contradicts Investigation Filed by Evangelical Council for Financial Accountability

On June 18, Gospel for Asia’s legal team took the extraordinary step of petitioning the 8th Circuit Court of Appeals for writ of mandamus which, if granted, would vacate Judge Timothy Brooks’ sanction of GFA and his order for a Special Master to oversee discovery in the fraud case against GFA brought by Garland and Phyliss Murphy.  Earlier this month, Brooks found that GFA had willfully delayed discovery and failed to comply with court orders. In response, he sanctioned GFA and signaled his intention to give an attorney access to GFA’s records as a means to speed up GFA compliance with court ordered discovery of information in the case.

Despite being a nonprofit organization, GFA has faced repeated questions and frustration from Judge Brooks over the inability to produce sufficient responses to discovery requests. Now, with the prospect of additional transparency, GFA is seeking to have the action reversed through the Court of Appeals.

GFA’s Case

In their June 18 filing, GFA defendants claim that Judge Brooks should not have sanctioned them because they have done their best to produce documents showing how they spent donor funds. Judge Brooks recently ruled that GFA had not done enough and abused the discovery process. As a result, he sanctioned the mission group.

GFA now counters by claiming that Judge Brooks erred by assuming GFA leaders in the U.S., namely K.P. Yohannan, have more control over operations in India than they actually do. GFA attorneys claim Brooks presented no evidence that Yohannan has the power to compel the production of necessary documents.

GFA also claims that Judge Brooks did not adequately take into consideration the burden of discovery as compared to the claims raised by the case. Specifically, the Murphys donated nearly $35,000 but the discovery requests involved over $360-million in donations.

GFA’s 100% Claim

As a part of GFA’s prayer to the appeals court, they make some claims that are at odds with other information in the public record. GFA’s attorney’s state:

As explained in opposition to Plaintiffs’ certification motion, GFA encouraged donors to participate in the good works GFA was sponsoring in Asia, but it’s the representations it made to donors varied. ECF73. For example, GFA told many donors that “100% of what you give toward sponsorship goes to the field,” ECF1, ¶17, but donations must be made “without restrictions” with GFA retaining discretion to use donations to best fulfill its mission. ECF71 at 4. There was no guarantee that each of the $376 million donated would be used for its exact designated purpose.

There is little dispute that GFA frequently touted their claim to spend 100% of donations on the field. This became a point of contention after concerns about their spending practices in India became public. After that, GFA made some changes which allowed them more flexibility.

In 2015, when interviewed by the Evangelical Council for Financial Accountability, GFA representatives acknowledged the claim that they sent 100% to the field. On page 5 of the ECFA report to GFA, this admission is clear:

Use of funds restricted for the field for other purposes. On June 3, ECFA discussed GFA’s claim that 100 percent of field funds are sent and used in the field. GFA staff confirmed that this was accurate.

On August 24, ECFA was informed that GFA India made a gift to GFA of $19,778,613 in 2013 to complete GFA’s new office. On August 27, GFA’s staff confirmed that the funds relating to this donation were originally received by GFA as gifts restricted for the field and GFA transferred to field partners to fulfill donor restrictions.

It appears to me that the attorneys for all sides might want to interview the people who conducted and participated in this report. Here we have an admission that nearly $20-million was donated for field work but then was sent back to the U.S. for completion of the Texas headquarters. The ECFA report continues:

Reallocating gifts donated for field purposes contradicts GFA’s claim that 100 percent of funds are sent to the field. In fact, a significant amount of donations restricted for the field made a circuitous trip back to GFA and were used for the headquarters construction, as though they had never gone to the field. This appears to be a violation of Standard 7.1.

GFA claimed that the field partner (presumably Believers’ Church) took out a loan to pay back the $20-million and then used field generated money to pay back the loan. If that is the case, then it should be a simple matter to produce the documents.

In May 2015, defendant David Carroll told me via email:

Our field office is also audited by an independent accounting firm, to ensure compliance with regulations governing the recognition and spending according to donor designations of monies received.

While I don’t know if these audits have been offered as a part of the discovery process, I have to wonder if they actually exist.

GFA’s Claim About Control over the Field

GFA’s attorneys claim Judge Brooks used the wrong definition of control in reference to the GFA defendants. Furthermore, they claim no evidence was presented to support any theory of control. From the writ:

Plaintiffs did not introduce evidence to prove that Petitioners had control over the documents in India. Instead, the court’s decision relied on what it termed “the power of the pursestrings.” A00262, A00360. Because GFA made large donations to third parties in India, the court assumed that Petitioners could compel the third parties to produce the documents Plaintiffs wanted. The court’s assumptions are no evidence of control, regardless of which standard is applied.

The district court also assumed that control existed because Petitioner K.P. Yohannan held a prominent position in BEC, and his family members were allegedly involved in related entities. A00011. Of course, there is a significant difference between being an ecumenical leader in a church and having the legal right to compel production from over 12,700 churches all over India on demand. And involvement in transferring funds does not equate to the legal ability to compel production of documents (and bank records have already been produced). Plaintiffs offered no evidence to connect Yohannan’s family members with particular entities from whom documents were requested, nor do Plaintiffs show that Yohannan could compel these unnamed family members to use their alleged positions to obtain documents from any, much less, all of the 12,000 locations in India where documents are located. The district court’s reasoning is all based on assumptions of control, not evidence.7

Note here that GFA does not offer any evidence that Yohannan is without authority in India. Instead of asserting something, the attorneys simply cast doubt.

Why has GFA not produced documents describing Yohannan’s role in India?  The only Constitution which can be found designates him as the supreme authority over all matters temporal and spiritual. He doesn’t just hold a “prominent position;” Yohannan is the supreme leader.

Yohannan’s son-in-law Daniel Johnson is on the board of Believer’s Church as is Yohannan’s niece Siny Punnose. Yohannan sits on multiple boards of the hospitals, schools, Bridge of Hope, and other entities in India and around the world. Yohannan’s name is on all of the deeds of property owned by the church.

This notion of no control in India was doubted in 2015 by the ECFA as well due to the church Constitution of 2003 which is the copy given to ECFA by GFA. In that Constitution, Yohannan is referred to in this way:

By virtue of the ecclesiastical position, the Metropolitan Bishop is the legal authority on everything that belongs to the Church.

Based on their review of documents and GFA’s statements about Yohannan, ECFA came to the following conclusion:

Based on this level of oversight and control as well observed during our review, ECFA staff questions whether GFA has a sound basis to disclaim any control over the activities of field partners.

In some respects, the ECFA investigation was a preview of the Murphy case. If the RICO case turns out like the ECFA investigation, GFA might want to consider a new legal strategy.

RICO Suit Dismissed Without Prejudice; Sutton Turner Reveals Mars Hill Church Global Fund Figures

The RICO lawsuit against Mars Hill Church was dismissed without prejudice.  The plaintiffs have not lost their rights to sue again. From the order (read it here):

The court finds that Plaintiffs have not acted in bad faith, recklessly, or with an improper purpose. Accordingly, in light of the court’s duty to carefully exercise its inherent powers, the court declines to impose the drastic sanctions Defendants seek. See Hearns, 530 F.3d at 1132 (noting drastic nature of sanction of dismissal with prejudice); Chambers, 501 U.S. at 44 (noting courts must exercise inherent powers with restraint). Mr. Turner’s allegations about Plaintiffs’ behavior in filing this case, apparently adopted by Mr. Driscoll (see Driscoll Mot. at 3), are conclusory at best and do not demonstrate that Plaintiffs have acted improperly. Merely filing a complaint alleging RICO violations for Defendants’ part in the alleged misuse of Plaintiffs’ donations to MHC does not constitute bad-faith conduct, even if the allegations case Defendants in an unfavorable light. (See Turner Mot. at 9-10.) In addition, Plaintiffs’ complaint is not frivolous on its face (see generally Compl.), and there is no evidence other than Defendants’ conclusory allegations that Plaintiffs filed this suit merely to harass and disparage Defendants (cf. Turner Mot. at 4 (arguing that Plaintiffs’ failure to serve “can lead to only one conclusion. . . . The Plaintiffs and their counsel sought to harass, disparage, and defame Mr. Turner through the public act of filing a lawsuit”)). Furthermore, Plaintiffs refute this allegation, stating that they “never had a desire for retribution nor to harass [Mr.] Turner or [Mr.] Driscoll.” (Resp. at 6.) Plaintiffs also did not act in bad faith by publicizing the case to garner support for their cause. Finally, Plaintiffs’ failure to raise the necessary funds to fully litigate their suit before filing it, Plaintiffs’ counsel’s failure to respond to Mr. Turner’s offer to accept service, and Plaintiffs’ failure to dismiss their claims of their own accord after the 90-day window for service had passed are not so far outside the bounds of acceptable litigation conduct that Plaintiffs should be sanctioned. Simply put, Plaintiffs have done nothing to “defile the very temple of justice.” Haeger, 813 F.3d at 1244 (internal quotations and alterations omitted) (quoting Chambers, 501 U.S. at 46). Plaintiffs have not committed any acts that indicate bad faith, recklessness, or an improper purpose.

For these reasons, the judge dismissed the suit without prejudice:

Based on the foregoing analysis, the court GRANTS in part and DENIES in part Defendants’ motions to dismiss (Dkt. ## 4, 7). The court DISMISSES Plaintiffs’ claims without prejudice.
Dated this 25th day of August, 2016.
JAMES L. ROBART United States District Judge

According to Brian Jacobsen, the plaintiffs would consider moving forward again if funds were available.
Even after he left Mars Hill Church, Sutton Turner was told by Mars Hill lawyers that he shouldn’t reveal how much Mars Hill spent from their Global Fund on missions. Now he has done so.

Mars Hill Global

Mars Hill Global began in 2009 to raise money from the global audience (those who listened via podcast) to help fund the mission of Mars Hill Church: “Making Disciples and Planting Churches.” Until late 2011, Mars Hill had not significantly funded international church planting but was heavily invested in US church planting. From 2009 to 2012, Mars Hill spent $8.6M in U.S. church planting and $170k outside of the U.S.
When I joined Mars Hill in 2011, I built relationships with the Kale Hewyott Church in Ethiopia to train church planters there. My passion for Ethiopia (which existed before I arrived at Mars Hill) began to dominate the message of Mars Hill Global. In hindsight, I see how many believed that the only reason Mars Hill Global existed was to fund Ethiopian church planting.
When people started to question the distribution of funds given to Mars Hill Global, the church brought in ECFA and independent auditors, Clark Nuber. Both groups gave Mars Hill a clear opinion that the church had done nothing wrong. In spite of these findings, we felt led to send 3765 emails and 6000 letters to 100% of donors to Mars Hill Global from 2011 to 2014 to clarify their gift intent. Less than 40 families responded; Mars Hill Church sent an additional $40,000 to Ethiopia because donors requested their donations to Mars Hill Global be for Ethiopian church planting.
A full and total timeline from 2009 to 2014 with videos, blogs and other information is stored here.
From 2012 to 2014, Mars Hill Church spent $13.7M in church planting in the US and sent $545k to Ethiopia and India. During its existence, Mars Hill Church invested over $23M in church planting in the US and around the world. This amount is over and above the general and administrative costs of Mars Hill Church’s central operations and staffing. (47% of the funds given to Mars Hill Global from 2012-2014 were large donations from a small number of donors who specifically asked prior to giving for their donations to be counted in Global.  Many of these donors did not attend one specific Mars Hill location and wanted their donations supporting all Mars Hill operations including U.S. and international church planting.)
Many have asked for these numbers. There was I time when I was restricted from providing these numbers. Now, everyone has the Mars Hill Global information that I had when I resigned in September 2014 (Eph. 5:13).

I knew it wasn’t much in comparison to what was spent on the US locations, and as it turns out, it wasn’t. This still doesn’t tell us how much came earmarked for international missions and how much was spent on international missions. And by earmarked for missions, I mean how much was given to the Global Fund from 2012-2014?
The rest of the post provides additional information on executive compensation, the governing board and Result Source.
 

Former Executive Elders of Mars Hill Church May Face RICO Lawsuit

According to former Mars Hill deacon Rob Smith and Seattle attorney Brian Fahling, a lawsuit is being prepared with Mark Driscoll, Sutton Turner, David Bruskas, and Jamie Munson named as defendants. The suit may not be filed until later this week or early next week. Those bringing the suit have alerted Mars Hill Church leaders and hope to engage in talks which could serve to prevent the suit from going forward.
A civil RICO claim (see link for statutory basis of a Racketeer Influenced and Corrupt Organizations suit) must allege an injury to the plaintiffs. In this case, plaintiffs donated funds for specific purposes based on church leaders’ representations. The funds were then diverted to other purposes. In addition, plaintiffs believe that funds from the general fund were used fraudulently to scam the New York Times best-seller list for Mark Driscoll’s self-inurement.
As has been documented here, Mars Hill leaders solicited donations for various specific purposes (e.g., Jesus Festival, international misions). However, those funds were often used for other purposes (e.g., establishing Mars Hill video locations) via Mars Hill Church. The suit will allege a pattern of activities occurring over at least four years. The Evangelical Council for Financial Accountability may also be named in a separate action.
Smith, who has raised numerous concerns about Mars Hill, recorded a You Tube video to promote a legal fund for the suit. The rationale is provided on the fundraising site:

Mars Hill Church, according to Paul Tripp who recently served on their Board of Advisors and Accountability, “is without a doubt the most abusive, coercive ministry culture” he has ever been involved with.
Because of the abuse of both people and money, it is essential that the dissolution of the church be delayed until the abuse can be clearly articulated by the church leadership, and repentance and restitution be made.
At this point, only a just legal action will stop the dissolution of the church. A legal team has been hired and the delay of the dissolution will be sought so that true repentance and restitution can occur.
Please support this effort.
As this year has unfolded, we have seen the widespread abuse of people, and of money.
Mark Driscoll, who built his image calling men to take personal responsibility for their actions, rather than take responsibility himself for his part in the abusive culture, resigned and left the church. He failed to address the abuse that Paul Tripp spoke of. He failed to address the hundreds of shunned and abused members, ex-members and donors.
The remaining leadership, rather than dealing head-on with the abuse, has continued to make decisions behind closed doors and simply ignored the multiple requests of members, ex-members and donors to deal with the abuse.
Rather than be transparent about the misuse of the finances of Mars Hill and the widespread abuse of people, they have chosen to hastily dissolve the corporation, and is promising whatever cash is left over to the individual campuses of Mars Hill Church.
The lead pastors of each of these campuses, rather than raising their voices for transparency and closure for the hurting ex-members, many of whom were under their care, are saying nothing. The word in the street is that they will lose their part of the “spoils” if they rock the boat. So they appear to have no interest in bringing healing to the members that their campus has harmed, or to the hurting members and ex-members from other campuses.
These “pastors” are not even calling for the public shunning of Paul Petry to be lifted. This is continued cruelty that has lasted over 7 years. Paul Petry represents many other members and families that were wrongly disciplined or ex-communicated.
At this stage of the game, without legal action being taken, Mars Hill Church will dissolve and the assets, including money, will be distributed in back-room deals that members and donors are excluded from. The many members, ex-members and donors who feel defrauded and abused will not see a just resolution to their wounds.
It is in the interest of transparency and healing that the dissolution be stopped. It will prove to be the righteous course of action. It will allow leadership that has particpated in the shocking level of abuse to clear their consciences, speak the truth, do the right thing, and be forgiven.
It will be a wonderful testimony to all. To simply dissolve will permanently harm all who are seeking healing and closure.
Please support this fund.

From my vantage point, it would be to the advantage of Ethiopian and Indian pastors if the dissolution of the church could be stalled to allow Mars Hill more time to disclose how much money should go to them. The Global Fund brought in millions and an investigation would help clarify how much money should be funneled to those who were used to raise the funds which ultimately were used to support Mars Hill’s expansion.