Lutheran Church Canada - LCMS Releated - In Financial Meltdown from Outrageous Monetary Practices

 Why did we loan all that money out with no repayments?

Michael Schutz (Michaelschutz) New member Username: Michaelschutz Post Number: 1 Registered: 5-2018

Posted on Thursday, May 03, 2018 - 1:12 pm:       Hi all, I'm a pastor in LCC. I poke my head in here from time to time to read a little bit of the goings-on, but haven't been compelled to enter into discussion until now. I'm a member of the LCC District in question, and can tell you much of the very long story, but I'll make that very long story very short for now in hopes of answering the original question, at least a little bit. In January 2015, we found out by letter from our District President that the District's Church Extension Fund was essentially insolvent. It was described as a "cash flow shortage" and so all further deposits and withdrawals were frozen at that point while it began to be sorted out. We came to learn that there was almost $100 million deposited in CEF, that the assets were at that point valued at somewhere around $50 million, and that there was no indication that the situation could be improved. We learned there was one project that had been going on for the last 25 or so years that comprised the vast majority of the portfolio - a church, school, and seniors housing project in Alberta. Tens of millions had been lent over the years, and virtually nothing had been paid back, not even interest. This wasn't the only project that had been having trouble with repayments, but because of the size of it and because it was such a large percentage of the fund (and because the CEF was not its own legal entity but a component of the District as a corporation) its problems essentially caused the whole District to collapse financially. Over the past 3 years, all CEF loans have been called in - even those in good standing. All District assets are being sold off; not just CEF properties but everything, including the offices. District staff has gone from about 12 to 2. Depositors have collectively lost millions, though efforts are underway to recover as much as possible, including this big project being turned into a corporation with the depositors as shareholders. It's possible that depositors could gain all their deposits back with the promised interest, but that could be decades away, and with so many elderly depositors, the mandate for this new corporation is to get it ready to sell and sell it off as quickly as possible. In short, it's a huge mess. The situation has been described by District leadership as "erring on the side of ministry", and as you might imagine, there's been the whole gamut of reaction to that, from essentially agreeing with that all the way to a class-action lawsuit that is now also underway against the District leadership. In terms of restructuring, there are two types of restructuring going on right now. Firstly, the District has been under court-ordered protection for the last three years (technically, it's not bankruptcy) so that the assets of the District can be sold off and as much as possible can be returned to depositors. This has been managed by a court-appointed firm. Concurrent to all this, LCC as a Synod, with our 3 Districts, has been undergoing a Synodical restructuring. In my opinion, our District's CEF situation was the catalyst for this actually happening, but the idea had been under discussion for many years (really, ever since the founding of LCC in the late 1980s). Again, opinions vary widely as to the specific need and the specifics of the solution we've adopted, but we are working through it. The financial/business side of this is bad, of course, but the spiritual implications have (and will continue to be) massive as well. When it's church leadership that breaks a trust like this, the spiritual implications are even a bigger deal than the civil ones, in my opinion. Of course, there's much, much more to the story, but I hope that gives some clarity at least to the fundamentals of the situation.

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 In 2012 the Prince of Peace Village development had a loan worth $70 million from the investment fund. (CBC)

 Let's see. The fund gave roughly 70% of its cash to this white elephant, but this ministry did not even pay interest on the loan. When did the auditors begin to smell the pot roast?

Alberta British Columbia District of the Lutheran Church Canada (LCMS - eh?) - Bankrupt

Costing cutting at district headquarters is our priority.

http://www.lccabc.ca/wp-content/uploads/2015/01/Pastoral_Letter_ABC_District.pdf

January 19, 2015 Dear Members of the Alberta-British Columbia District, Two weeks ago Church Extension Fund Investors began to receive letters informing them that the Fund faced a sufficient cash shortage and that its assets were less than its obligations to its investors. 

The Fund was frozen and no further withdrawals would be honoured.

A source says:

"The President of LC-C (Bugbe) says many, many people will lose thousands and thousands of dollars.  The court is going to appoint a Chief Restructuring Officer -- so much for a District President."

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Lutheran Church-Canada Alberta-B.C district still protected from bankruptcy

The Alberta B.C district of the Lutheran Church-Canada will continue to be protected from bankruptcy and legal proceedings after the church requested an extension under the Companies’ Creditors Arrangement Act.

The request was granted by the Court of Queen’s Bench of Alberta in Calgary on Friday.

The move will continue to protect the district from bankruptcy and from being sued until March 27, 2015, while giving the church time to draft a plan on how to restructure its investment funds. The church had wanted a 90-day extension, but was given a  30-day extension instead.

In early January, about 2,000 investors with one of the church’s investment funds were told their accounts had been suspended and the church would not be able to fully pay back the $95 million owed to them.

At the time, the district’s president, Don Schiemann, said he took responsibility for the financial crisis because it happened on his watch.

• District Lutheran President says he 'bears responsibility' for financial mess, promises review

Since then, the financial mess facing the church has deepened and spread to another investment fund, District Investments Ltd. Accounts with that fund have also been frozen, affecting more than 900 investors who cannot withdraw money from their RRSPs, RRIFs and TFSAs. The deposits as of Nov.30, 2014, were $37 million.

A court-appointed monitor has been overseeing the finances of the Alberta-B.C district since the end of January.

• Finances of Lutheran Church district now overseen by monitor

In a statement posted on its website the church said it is working to get the “right people to the table” by hiring a chief restructuring officer, a new restructuring committee and a creditor committee.

Part of the church’s restructuring may mean it will be forced to sell off assets.

The current financial crisis facing the church has raised questions from the national office of the Lutheran Church-Canada over whether churches should be in the business of financing.

In January, the church’s national president, Rev. Robert Bugbee, called it a serious situation that warranted a review of how other Lutheran church districts administer their investment funds.

The church has set up an emergency fund for investors who rely on money from the investment funds to meet basic living expenses.

The investment fund began in 1921 as an internal savings and loan program, because banks at that time were not lending money to churches.

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District Lutheran President says he 'bears responsibility' for financial mess, promises review

The president of the Alberta-British Columbia District of the Lutheran Church-Canada says he takes responsibility for the financial mess the church is now in, a situation that happened under his leadership.

“It happened on my watch,” Pastor Don Schiemann said during an interview in his Edmonton office.

He said he realized how serious the financial situation was about a year and a half ago. In March 2014, the investment fund at the centre of the problem stopped accepting deposits.

“I personally feel terrible for what’s happened and certainly, as I say, bear responsibility for it, because I’m president of this district.”

In a letter to about two thousand investors sent Jan. 5, Schiemannsaid the Church Extension Fund (CEF), an investment fund that has existed since 1921, has been suspended and is not able to fully pay back the $95 million owed to investors.

Two staff at the district office have been laid off, though one person left before being given a layoff notice. Schiemann isn’t ruling out more layoffs, saying “that’s on the table, if need be, we’re fully prepared to do that.”

In 2012 the Prince of Peace Village development had a loan worth $70 million from the investment fund. (CBC)

​Sources close to the Alberta-B.C. district say the CEF ran into trouble when money from it was used to build the Prince of Peace Manor and Harbour east of Calgary in the 1990s.

“We made decisions in favour of ministry, and as a result there were some poor financial decisions,” said Schiemann, who has no regrets over the ministerial work done at the Prince of Peace development east of Calgary.

"Perfect storm" led to financial crisis

Schiemann said he’s still trying to understand how the district landed in such financial trouble. The financial crisis was caused by what he describes as a “perfect storm” of factors, including: investors withdrawing; outstanding loans, including the one to the Prince of Peace that in 2012, the last audit available, shows it was worth 70 million dollars; and, not having any other investments that could earn money.

The church must now start selling off assets. Investors are being asked to consider two options: liquidate the district’s assets immediately; or receive payments from Prince of Peace Manor and Harbour, while also selling off assets, such as sites purchased for new churches. There is no timeline for when a final decision will be made.

The Prince of Peace Village includes a church, a K-9 school an a supportive living facility. (Prince of Peace Christian Community)

​What is clear is that everything, even the building Schiemann currently works in, could eventually be up for sale.

“We’re not tied to a building," he said. "If this building needs to be sold, it’ll be sold, but we will continue to do our work as the Alberta - British Columbia district of Lutheran Church Canada."

Schiemann couldn’t say exactly how much the church’s assets are worth, but did say if investors choose the first option, of selling off the assets immediately, a return of up to 65 cents on the dollar is expected.

From November 2012 to November 2014, almost 13 million dollars was withdrawn from the CEF. In December, all withdrawals and all accounts were frozen.

Schiemann is adamant that anyone who knew about the financial situation did not make withdrawals.

“How could we stand in front of investors and say with inside information we took advantage of that and we saved our dollars but you’re stuck with what you’ve got? There’s no way we could do that."

Schiemann, who has served as district president for 15 years, doesn’t shy away from the gravity of the situation and said the church administration has a moral and ethical obligation to try to return as much of investors' money as possible.

A review will happen, says Schiemann

He agrees with the Lutheran Church Canada’s national president, Reverend Robert Bugbee, that the current precarious financial situation raises the question of whether church’s should be in the business of financing. Schiemann said the district intends to review how it has been running the investment fund with the goal of determining how it ended up in this financial mess, adding that some churches that have relied on fund may need to look at refinancing with the banks.

He confirmed the church has hired a public relations firm to help communicate with investors about what’s happening with their money.

Schiemann intends to retire from the position of president in May, a decision he said has nothing to do with the current financial crisis facing the district.

“I look at our church, and I look at our people and I look at our gracious God and we’ll pull through this. Our church may look somewhat different, and that may not be bad,” he said.