Editorial: Government Intervention Needed to Curb Religious Financial Fraud

Senator Charles Grassley, the former ranking Republican on the Senate Finance Committee, has completed a five-year investigation of religious financial fraud that uncovered weaknesses in the United States tax code which allow churches to become tax shelters. The investigation revealed how televangelists exploit love offerings and housing allowances as nontaxable income and operate companies from their churches. Unfortunately two mistakes crippled the investigation:

1. No subpoenas were issued and this resulted in an incomplete investigation.
2. Questionable activities by televangelists Benny Hinn and Joyce Meyer were overlooked after they cooperated in the investigation.

In response to these mistakes Christian Headlines is calling for the IRS to audit the six TV ministries and complete the investigation. Christian Headlines is also endorsing legislative proposals from the Senate and supporting whistleblower protections for nonprofit organizations. And lastly, Christian Headlines is recommending that the Evangelical Council for Financial Accountability (ECFA) adopt compensation limits and revise its membership application to obtain additional information regarding church nondisclosure agreements and self dealing.

IRS Should Complete the Investigation by Performing Audits

Senate Finance Committee attorney Lynda Simmons authored four reports describing questionable activities uncovered in the ministries of Kenneth and Gloria Copeland, Creflo and Taffi Dollar, Eddie Long, and Paula and Randy White. These reports list companies and questionable integrated auxiliaries that televangelists have operated from church properties. When someone operates both a nonprofit organization and for-profit corporation and these entities do business with each other, it can be illegal to excessively profit from these self dealing transactions. ₁

An IRS audit should examine at least seven issues:

1. Did church employees provide free labor for the televangelists’ companies?
2. Did these companies obtain free office space from the churches or did they pay rent? If more than $1,000 was paid in rent during the year, a 990-T form for unrelated business income should have been filed with the IRS. No 990-T forms were listed as sources in the Senate reports. An IRS audit would determine if any of these forms were required and if they were filed.
3. Did the churches purchase products and services from these companies? If so, did the churches pay for these products and services at fair market value? For example, if Paula White Enterprises sold Paula Whites’ books to Without Walls International Church at full retail price rather than wholesale, then an illegal transaction took place and Paula White received excessive compensation from the transaction.
4. Did Long receive any income from New Birth Missionary Baptist Church (NBMBC) besides a love offering? Did attendees of NBMBC receive tax receipts for giving to love offerings taken for Long? ₂
5. Is Kenneth Copeland operating secret foreign bank accounts? Copeland did not provide to the Senate Finance Committee any information about money collected at conventions held in Fiji, Nigeria, and Singapore. ₃ 
6. Did Creflo Dollar pay a gift tax when he gave almost $1 million to Kenneth and Gloria Copeland? ₄
7. Did each televangelist reimburse their church for use of the church-owned jet when used for personal trips?

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An Overview of Religious Financial Fraud

The $34 Billion Scandal

The January 2011 issue of the International Bulletin of Missionary Research reported that Christian religious leaders will commit an estimated $34 billion in financial fraud in 2011 while $31 billion will be spent on global missions. Researchers from the Center for the Study of Global Christianity estimate that Christian religious leaders will commit $90 million in financial crimes daily and the fraud is growing at a rate of 5.97% each year. If the researchers are correct, religious financial fraud among Christians will almost double in 14 years to $60 billion annually by 2025. ₁

Dr. David Barrett, the first editor of the World Christian Encyclopedia and a researcher for the Center, has been studying religious financial fraud for more than 20 years. According to Dr. Todd Johnson, the Center’s director, these statistics were the result of Barrett “developing a balance sheet for global Christianity.” Barrett was “trying to understand the totality of Christian finance.” ₂

A Global Problem

Barrett and Johnson in the reference book “World Christian Trends” reported, “Probably 80% of all cases are kept private or swept under the carpet, but each year a rash of megathefts (over $1 million each) is uncovered and publicized in the secular media.” ₃ Here is a small sample of religious financial scandals from around the world:

• Brazil: Bishop Edir Macedo, head of the Universal Church of the Kingdom of God, and 9 of his associates have been charged with embezzling more than $2 billion. ₄
• Canada: Televangelists Ron and Reynold Mainse allegedly recruited investors in a Ponzi scheme. ₅
• China: A whistleblower goes to jail for speaking out after donations for earthquake victims were stolen. ₆
• Italy: Police confiscated 23 million euros in a Vatican bank account as part of an investigation into money laundering. ₇
• Ukraine: Pastor Sunday Adelaja charged with fraud in promoting a business venture to his congregation that lost $100 million. ₈
• United Kingdom: Church treasurer Derek Klein embezzled funds to pay for a stamp collection. ₉
• United States: Trent Huddleston, former senior accountant at Oral Roberts University, alleges that more than $1 billion was money laundered annually by members of the Oral Roberts University board. ₁₀

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Whistleblower Protections

10 days ago a pastor’s wife called me after a friend of her’s was threatened for planning to expose financial fraud and a cover-up in the Assemblies of God denomination.

I responded by posting the following comment on the Christian Headlines home page:

“Christian Headlines is investigating financial fraud in the Assemblies of God denomination. Recent threats indicate that a whistleblower’s life could be in danger. Please pray for the criminals that they will repent, that the embezzled money will be returned, and no physical harm will be done.”

Since hearing of the threats I have spoken to two people familiar with this scandal and they confirm the allegations.

This story shows the need for strong whistleblower protections.

The National Whistleblowers Center is dedicated to protecting people that expose fraud.