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AME Church retirement fund loss led by funding in Florida property, Motorskill

When the Rev. James F. Miller took over the AME Church’s retirement workplace final summer time, he grew to become…

By Staff , in Investments , at May 6, 2022

When the Rev. James F. Miller took over the AME Church’s retirement workplace final summer time, he grew to become the primary new director in twenty years to sort out the function of safeguarding the clergy’s $127 million nest egg.

However he arrived on the division’s places of work in Memphis to a troubling sight: not a doc within the place.

Six months later, in late January, Miller and a brand new group of advisers met with the church’s leaders. And dropped a monetary bombshell.

The church’s pension fund wasn’t value $127 million in spite of everything, forensic auditors had decided. The overwhelming majority of its supposed wealth was a mirage, trumped up by inflated estimates for investments that turned out to be nugatory. Greater than two-thirds of the fund’s purported worth — $88.5 million — had vanished seemingly in a single day in dangerous investments, just some years after its then-leader pledged “conservative funding methods and cautious monitoring.”

The federal authorities was investigating. So was an inside group. Lawsuits would observe.

Since that assembly, the worldwide church’s leaders have offered scant particulars to the hundreds of distraught ministers who’re relying on the evaporated financial savings for his or her golden years. Church leaders insist they will’t elaborate now with the federal investigation pending. However in an Easter message, they insisted: “The church is a sufferer, and now we have been working each day to search out the reality.”

The Put up and Courier obtained inside paperwork that shed new gentle. They present the pension fund invested tens of tens of millions of {dollars} with a now-defunct enterprise capital agency in Texas earlier than the corporate vanished with no hint. The newspaper additionally scoured public information to disclose new particulars concerning the fund’s ill-fated investments, together with a luxurious growth in Florida that by no means materialized.

These findings elevate new questions on selections by the division’s former long-time chief — and the observe information of businessmen he entrusted with massive sums of cash from a retirement fund offering for almost 5,000 members. No less than one failed funding was made within the early 2000s, suggesting unsound selections went unnoticed for almost 20 years.

Class-action suit filed against AME Church over $90M in lost pension funds

In March and April, ministers throughout the Southeast filed federal lawsuits in opposition to the two.5 million-member church alleging breach of fiduciary obligation and negligence. 5 fits are vying for class-action standing.

The Rev. John Paul Brown, who retired from pastoral ministry after 45 years, received out of the pension plan simply in time.

The broadly recognized pastor’s retirement celebration in 2019 drew two Charleston mayors, a sheriff and two police chiefs. However past the jubilee, Brown quietly pulled his retirement financial savings out of the church’s pension fund and moved it.

He believed his cash might be managed higher elsewhere.

Now, he thanks God that he did.

AME Church Conference

The AME Church’s common officers put together for the opening worship service for its July 2021 convention in Florida when the Rev. Jerome Harris’ successor was elected. (AP Picture/John Raoux)

‘Asleep on the wheel’

Till Miller arrived on the retirement workplace final summer time, the identical man had helmed the division for twenty years: the Rev. Jerome Harris, a pastor from Alabama.

Within the years earlier than his summer time 2021 retirement, Harris mirrored on how far the pension division had come beneath his tenure. Earlier than he arrived in 2000, the division “had not saved tempo” with the altering occasions, he wrote on its web site. The AME Church, he added, had did not seize upon “the brand new alternatives out there within the funding business.”

“The division had largely assumed the function as ‘caretaker’ of the retirement annuity funds reasonably than as an funding supervisor,” he wrote.

His message advised that he not thought it was sufficient for his division to easily stick cash into slow-growing investments like annuities, which usually supply protected however modest returns. Till 2013, the retirement workplace was formally known as the Division of Annuity Investments and Insurance coverage, a nod to the sorts of merchandise its members thought it was investing in.

Now, Harris wrote of a brand new mandate: “growing the funding returns … whereas safeguarding principal.”

His workplace in Memphis operated with a tiny employees, at the same time as its ambitions had been rising bigger. Lately, Harris had simply two or three staff, in line with archived employees pages and division stories. Payroll for the complete workplace was solely round $160,000 a yr, audits present. The employees didn’t embody an funding analyst.

At totally different occasions, nevertheless, it did embody Harris’ spouse as coordinator of high quality management and his son as administrative assistant. The workplace had only one accountant, a longtime staffer who isn’t licensed as a CPA, in line with the Tennessee State Board of Accountancy.

The division additionally employed an Illinois accounting agency to audit its books, however the stories didn’t replicate Harris’ extra aggressive investments. The Put up and Courier reviewed audits protecting 2014 to 2018; they indicated that the overwhelming majority of the cash the division obtained went towards “annuity and insurance coverage funds.”

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The stories made solely transient mentions of different kinds of investments, stating that they had been “restricted” — lower than $1 million at a given time. Plus, the audits added, these investments had been solely “brief time period” in nature. The audit agency, Rodney Brown & Firm, didn’t reply to requests for remark.

After taking workplace, Harris ran unopposed 4 occasions to maintain his place. Key leaders — together with the varied bishops who chaired the retirement providers fee throughout his tenure — gave Harris sole decision-making authority over the fund, at the least one of many pension lawsuits alleges. The final to serve in that function was Bishop Samuel L. Inexperienced Sr., whose district spans South Carolina and its roughly 450 lively pastors.

The AME Church and an legal professional for Harris didn’t reply to written questions. The church’s seventh District, over which Inexperienced presides, didn’t reply to a request for remark.

“They had been asleep on the wheel, actually,” stated legal professional Scott Lempert, whose agency filed one of many pension lawsuits. “All of it boiled down to at least one particular person.”

On the Jan. 31 assembly, Miller, the fund’s new chief, pledged that “by no means once more will we enable one particular person to depend the cash,” one lawsuit says. Miller additionally stated that counting the cash after Harris left had been a problem: In accordance with the lawsuit, he stated that after arriving on the Memphis workplace, he discovered solely “empty recordsdata and paperclips.”

As Miller and advisers employed by the church dug into early clues that one thing was terribly amiss, they discovered a gaping gap. Outdoors of the annuities, the fund had truly bought, the pension plan had few investments that had been nonetheless value a lot.

A kind of sat off the coast of southwest Florida, on a T-bone-shaped island known as Key Marco. It’s a refuge from the development-packed resort city of Marco Island throughout the water, a spot that also has extra woods than properties.

The issue for the AME church’s pensioners is that for nearly 20 years, they’d unwittingly invested in its growth.

AME Church celebrates 200 years as cultural force

Island enterprise

Harris had a background in banking, however his biography didn’t point out expertise managing investments. He had labored as a company supervisor throughout a 30-year profession at Areas Financial institution in Alabama whereas rising within the AME Church’s ministerial hierarchy.

Lastly, in 2000, a church elected him to run the pension plan.

Harris had been in workplace for about three years when he made a wager on the way forward for Key Marco.

It was 2003, and he loaned $2.5 million from the pension fund to a enterprise known as Meridian/AMEC, property information present. Meridian was brief for Meridian Land Co., which owned a lot of the island. AMEC stood for the AME Church. The enterprise purchased 5 tons from Meridian.

They had been purported to change into websites for mansions with views of the bay. At a cocktail social gathering in 2007, Meridian and its companions unveiled mannequin properties elsewhere on the island. They’d names like Casa Del Mar and The Hamilton and featured mahogany flooring and walk-around showers, in-home spas and slips on the island’s marina, in line with an area newspaper. The most affordable price just below $4.5 million.

In return for financing the opulent growth, the pension plan was purported to obtain quarterly curiosity funds over the next 5 years. Then the enterprise would pay again the preliminary mortgage. The church’s $2.5 million would develop to roughly $3.2 million.

That didn’t occur. It’s not clear whether or not the pension obtained a single fee. Data filed shortly earlier than the mortgage was due in 2008 present that the excellent stability had, in actual fact, grown: It was simply over $3.2 million.

For Meridian Land Co., 2008 was a tumultuous yr. The house owners, together with Key Marco developer Clay Winfield, additionally owned a small financial institution in Illinois that regulators shut down that yr. It marked the state’s first financial institution failure in six years. Winfield additionally sat on the board of a multi-level advertising and marketing firm known as YTB Worldwide Inc. That yr, California’s legal professional common sued the corporate, accusing it of operating a get-rich-quick pyramid scheme.

Winfield was listed in Florida enterprise information because the founding supervisor of Meridian/AMEC. He didn’t reply to cellphone calls or a letter despatched to his growth firm’s workplace in Florida.

In the meantime, in 2008, the church took management of the land. Recognizing that the mortgage wouldn’t be repaid, Meridian transferred possession to an LLC managed by the pension fund.

There isn’t a file in Collier County, Fla., the place the island sits, that the builders ever pulled a constructing allow for any of the 5 tons. Regardless, nothing was constructed.

The tons stay vacant, 19 years later. The AME Church nonetheless owns them.

Damaged belief

Amongst AME Church clergy and members, considerations a couple of lack of monetary accountability will not be new. They ring notably acquainted to the households of the 9 individuals killed inside Charleston’s historic Emanuel AME Church in 2015.

When the Rev. Sharon Risher heard concerning the lacking pension funds, she thought: “Right here we go once more.”

Families critical of Goff

Risher was an AME trauma chaplain in Dallas when a white supremacist murdered her mom and eight different worshippers inside Emanuel throughout their Bible examine. After the tragedy, mourners around the globe despatched tens of millions of {dollars} in donations to the church in touching gestures of shared grief.

However as cash arrived by the bag-load, the taking pictures survivors and victims’ family members struggled to get details about the donations, reminiscent of proof of how a lot the church had obtained and for whom it was supposed.

One sufferer’s husband stated he watched three ladies within the church open envelopes addressed to the households and take away money and checks with out conserving a log of the cash. Emanuel’s secretary stated that when she raised questions concerning the dealing with of the donations, she was let go. And church leaders by no means produced an itemized listing of the cash given, the households stated.

As with the Emanuel donations, mismanagement of the pension fund displays a broader lack of monetary accountability within the church, a number of clergy informed The Put up and Courier.

The Rev. Shirley Brown, an area elder at Ebenezer AME in downtown Charleston, known as the pension fund losses “disturbing in a approach that surpasses funds.” It pertains to belief.

“Transparency has left the church,” she added. “No person desires to handle that. However till that’s addressed, we received’t see any change.”

The Rev. Lee Russell Brown agrees. Whereas pastoring in Tennessee, he took a go away and is working at a seminary in Washington, D.C., and pursuing his doctorate. If he nonetheless had a congregation, he wouldn’t put any more cash into the retirement fund, although church guidelines require 12 % of pastors’ salaries go into it.

“The church appears to have subscribed to the evils of capitalism,” he stated, reasonably than specializing in its mission “to carry gentle into the world and unfold the Gospel of Jesus Christ.”

Brown is a fourth-generation AME member, from a household of AME pastors. He insists he loves the church. He has hope for it. “However my hope means nothing if there’s not a strategic and intentional purpose towards fiscal accountability, employee justice and monetary integrity.”

Bishop Jeffrey Leath has been a key, high-ranking voice calling for reforms — together with bolstered oversight of the retirement division — for a number of years.

Lengthy earlier than the pension fund scandal broke, Leath took to his weblog to name on the church to create a retirement plan board reasonably than have one particular person overseeing tens of tens of millions of {dollars}. “The administration of our retirement funds mustn’t relaxation with a single particular person having restricted data of, and participation in, main administrative selections,” the submit says.

In a Might 2 submit, Leath criticized abuses of authority together with “silencing critics” and “hiding and withholding data.”

In an announcement, church leaders argued that they can not say a lot but. “Because the federal investigation into the matter stays lively, many particulars stay unavailable.” After they study extra, they pledge to share particulars with plan members and church members. (The church has not stated which federal company is investigating.)

Ame Church Bicentennial

A sculpture depicting Bishop Richard Allen stands in entrance of Mom Bethel African Methodist Episcopal Church in Philadelphia. Allen was a founding father of the AME church that dates again to 1787. File/Matt Rourke/AP

The AME Church, just like the Roman Catholic Church and a few Protestant denominations, is hierarchical. Energy flows from the highest down. Bishops of the church are largely accountable to nobody, a number of clergy stated.

Particularly, AME bishops can transfer pastors of their districts primarily at will. If a bishop doesn’t like what a pastor does, he can switch the subordinate hours from residence to a tiny church that may barely pay a modest wage.

This fosters a local weather of worry and silence, pastors stated, even amongst these significantly harmed by the retirement fund losses.

The Rev. Alexander Gatson, a newly retired presiding elder in Tennessee, is amongst those that have watched his retirement financial savings almost evaporate. He’s pissed off that extra of his fellow ministers received’t communicate out.

“I can’t consider we’re permitting this technique to deal with us this manner,” he stated. “It’s the intimidation the bishops of the church maintain over individuals.”

In South Carolina, the Rev. John Paul Brown echoed that. “Even those that know you’re proper will flip their backs on you. That’s the reason it’s arduous for good individuals to do the proper factor. It prices a lot.”

Some additionally hedge at criticizing an establishment so sacrosanct to the Black trustworthy.

The AME Church dates again to 1787 when previously enslaved males established its precursor, the Free African Society. “The church was born in protest in opposition to slavery — in opposition to dehumanization of African individuals,” its web site says.

It has since grown into a world establishment with members spanning 5 continents. Concentrations of AME church buildings stretch throughout the American South and alongside the East Coast. South Carolina alone is residence to about 500 with lengthy histories of offering non secular sanctuary and political muscle to members combating racism and injustice. 

“However now now we have a complete totally different group of individuals with totally different wants, and they don’t seem to be addressing the wants of the individuals,” Rev. Shirley Brown stated.

The Rev. John Paul Brown, who isn’t associated to Shirley Brown, stated he’s talking as much as immediate reforms that can strengthen the establishment.

“I like this church,” he stated. “I consider in it. And I consider that on the finish of the day, it should stand up and do the proper factor. I consider that. I consider the bishops can be godly overseers.”

Then, he quoted a directive from the Gospel: “To whom a lot is given, a lot is required.”


Rev. John Paul Brown speaks at a Charleston Illumination Mission prayer gathering at Emanuel AME Church in 2016. File/Grace Beahm/Employees

Phantom worth

Phrase of the Florida land deal didn’t start to unfold broadly by way of the church till January, virtually twenty years after the primary paperwork had been signed.

It emerged on the assembly when Miller, the brand new retirement director, and his group outlined their alarming findings to church leaders. When Harris retired, he and his allies celebrated the pension fund’s development. He’d inherited a fund value $47.5 million. As he left, the division reported its worth had ballooned to virtually $127 million.

Now church leaders obtained a brand new message: Most of that cash was only a quantity on paper.

The $127 million valuation, as an example, assumed that the Key Marco land was value $1.5 million. Miller’s group stated it was actually value simply $1 million, in line with a replica of their presentation. (Collier County’s tax appraisal is even decrease: just below $312,000.)

Different elements of the $127 million estimate had been much more troublesome. A lot of the supposed worth was housed in a now-defunct Texas funding agency known as Motorskill Ventures.

Video of the January presentation isn’t out there to the general public, however The Put up and Courier obtained a abstract of the assembly. Slides in it present investments in Motorskill accounted for $88 million of the $127 million, or 69 %. Actually, that funding was nugatory.

The information point out that between 2005 and 2015, the AME pension fund put at the least $35.3 million into Motorskill, each straight and thru an middleman. Motorskill then despatched the church statements claiming the worth was rising. In actuality, in line with the presentation, the upper valuations had been baseless. More cash by no means truly landed within the pension fund’s coffers.

An SC judge auctioned foreclosed properties. His wife and children bought dozens.

Exceedingly little is understood about how Motorskill invested its shoppers’ cash. Its web site has gone darkish, and archived copies comprise solely obscure references to investments in know-how, well being care and actual property, amongst different industries.

Whereas it was nonetheless reside, the positioning was loaded with indecipherable jargon, beginning with its slogan: “synergistic funding and assist for brand spanking new market innovation.”

When considered one of Motorskill’s managers, Ryan Erwin, sat for a deposition in 2018, he didn’t supply rather more element, in line with parts made public. He described Motorskill as an organization that “makes investments in different personal corporations.”

However he did supply one instance: He stated Motorskill had put cash into an organization known as Uptown Photo voltaic, which offered photo voltaic methods to owners in locations like California, Illinois, Louisiana and Texas. That enterprise, he stated, “form of took a dive.”

Actually, the few kernels of data out there about Motorskill’s founders level repeatedly to photo voltaic investments. Erwin and a enterprise companion acknowledged in depositions that they had been linked to a number of companies within the business, together with one which manufactured photo voltaic panels and one other that made units to attach them to the grid. He stated he believed at the least one was partly owned by a Motorskill affiliate.

Erwin didn’t reply to messages. Telephone numbers the enterprise listed on annual stories to the Texas Secretary of State not work.

It will take years for the AME Church to study that its investments in Motorskill had gone bust. In accordance with courtroom papers, the church wasn’t notified till June 2021.

By then, it had been years because the state of Texas stopped recognizing Motorskill as an lively enterprise.

Ame Church-Bicentennial

Proven are curved pews at Mom Bethel African Methodist Episcopal Church in Philadelphia, Wednesday, July 6, 2016. The church marks its two hundredth anniversary within the metropolis the place it was based by a former slave. (AP Picture/Matt Rourke)

Cash right into a gap

Again in Tennessee, the AME Church’s residence state, Rev. Gatson fumes extra over the dearth of solutions and accountability than the retirement financial savings he fears he has misplaced.

He was serving as a presiding elder, a center supervisor between bishops and pastors, when his spouse was identified with a mind tumor. She then suffered two strokes. In October, at 65, he retired to take care of her.

Given he had served 26 years within the active-duty Military, he figured he may reside off his navy retirement. His financial savings from 20 years as an AME minister would cowl his spouse’s care, probably in a nursing residence. His final assertion confirmed he had virtually $60,000.

However when he requested the cash be despatched to him, he obtained a letter. The retirement fund was frozen, it stated, whereas the division underwent a forensic audit.

Three months later, he logged onto his retirement fund portal — and stared on the quantity, shocked.

His account’s new worth: $17,000.

“I trusted the system,” Gatson stated. “However I seem to have been placing cash right into a gap.”

He notes that Harris headed the retirement workplace for 20 years. Provided that the bishop who serves because the division’s chairman rotates each 4 years, Harris had 5 bishops over him.

Gaston wonders: Didn’t every incoming chairman validate the property within the fund when he took over?

Now, church leaders have pledged to repay the cash put into the pension fund on behalf of every pastor, plus 1.5 percent-a-year curiosity. That will price $45 million — and eat up 1 / 4 of the nationwide church’s price range for over a decade, inside paperwork present. In current months, they’ve additionally thought-about promoting land or taking out a mortgage.

“The AME Church is dedicated to creating each fund participant complete by restoring their full funding plus curiosity,” a March assertion says. Church leaders insist they’re actively working with federal authorities to recuperate any misappropriated funds. “The method of restoration has begun.”

In the meantime, as he waits, Gatson’s daughter reminds him of the weekends he labored and the lengthy holidays the household didn’t take in order that he may fulfill his pastoral duties. He did so willingly, he says, sure that his church would handle him, as he had cared for the church.

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