Saturday, August 15, 2009

A Further Look into ECUSA Finances

In a post last week I discussed how some of the exhibits presented to the Court in the Pittsburgh litigation offered a window into the fast track available to certain insiders within ECUSA who signaled their willingness to cooperate with the Church's litigation strategy: never acknowledge that a Diocese has withdrawn, but organize those remaining and "recognize" the insiders as quickly as possible in order to give the appearance of an ongoing entity. Then use that claim of an ongoing entity to have it take on the role of plaintiff in a lawsuit against the departed Diocese.

As I have pointed out in this post concerning the similar strategy being followed in San Joaquin, ECUSA is playing a very high-risk game. It is staking everything on the success of its being able to prove to secular courts that dioceses are not at liberty to withdraw from the voluntary association which is the Episcopal Church (USA). Not only does this argument ignore the very nature of voluntary associations, but it violates First Amendment principles of free exercise and freedom of association as well.

A chief reason for this strategy is probably this: the Dennis Canon provides no means or argument with which ECUSA can go after the property and assets of departing dioceses. By its terms, the Dennis Canon addresses only property held by or for the benefit of individual parishes. Thus to maintain any claim to the assets of a diocese, ECUSA has to act as though the diocese never left, and is coming into court to take back from those who did leave that which (it says) they had no right to take with them.

ECUSA's concerns for property are thus shaping its legal arguments, and that is not a healthy dynamic. In this post, I want to underscore that point by showing how another of the Pittsburgh exhibits demonstrates that ECUSA appears (on the surface, at least) to disregard the terms of trusts to which it is subject: namely, the gifts, bequests and devises that have been left to it over the years. You will see below how, to suit its immediate needs and purposes, ECUSA at first would seem to twist and contort the terms of individual bequests to enable it to carry on with its misguided litigation strategy. But then a surprisingly different possible interpretation suggests itself, as I also spell out below. Which interpretation is correct? You will have to be the judge.

I gave a link in the earlier post to the first of three downloads of exhibit volumes filed with the Court. It is a large download, and probably not worth your trouble for my present purposes, since I want to focus on just one exhibit, which I shall quote here in full: Exhibit 35, which is a two-page copy of a resolution adopted by the Church's Executive Council at its meeting in Helena, Montana in October 2008, as certified by the Rev. Dr. Gregory Straub, the Council's Secretary. It begins:

November 3, 2008

The following is a true copy of a Resolution adopted by the Executive Council at its meeting on October 20 - 23, 2008, in Helena, Montana, at which a quorum was present and voting.

Resolved, That up to $700,000 of undistributed accumulated income and appreciation be made available in calendar year 2009 from one or more of the following trust funds established to support the missionary work or mission work of the Church,

TF# 756 Lloyd, Ethel S., Bequest of (1966)
TF# 200.02 The St. Leger Fund (1909)
TF#492 Hopkins, Theresa B., Bequest of (1936)
TF# 723 Zabriskie Memorial Fund (1961)
TF# 814 Boyd, Lizzie E. Fupd (1978)
TF# 656 Monteagle, Lydia Paige, Bequest of (1953)
TF# 678 Olden, Sarah E., Bequest of (1955)
TF# 860 Gregg, Ellen F. and David McM. Memorial Fund (1982)
TF# 540 Seager, Schuyler E, Gift of(1941)

and be it further

Resolved, That these funds be used to provide fmancial assistance during calendar year 2009 in the Diocese of San Joaquin, the Diocese of Pittsburgh, and other similarly situated dioceses for clergy salaries and other expenses; and be it further

Resolved, That in the light of the action of the Presiding Bishop in deposing the Rt. Rev. Robert W. Duncan as Bishop of Pittsburgh for abandoning the Communion of this Church, the Executive Council joins with the Presiding Bishop in recognizing the Rev. James Simons, the Rev. Jeffrey Murph, and Ms. Mary Roehrich as the current Standing Committee of the Diocese of Pittsburgh, and designates a portion of the funds referred to in the first Resolve be used to provide financial assistance during calendar year 2009 to the current leadership of the Diocese of Pittsburgh for clergy salaries and other expenses; and be it further

Resolved, That the Executive Council joins with the Presiding Bishop in recognizing The Rev. Keith Axberg, The Rev. Glenn Kanestrom, Ms: Cindy Smith, Mr. John Ledbetter, The Rev. John Shumaker, Mr. Richard Jennings, Ms. Beryl Simkins, and The Rev. Tim Vivian as the current Standing Committee of the Diocese of San Joaquin and designates a portion of the funds referred to in the first Resolve be used to provide continued financial assistance to the current leadership of the Diocese of San Joaquin, as well as to the leadership of other similarly-situated dioceses, for clergy salaries and other expenses during the calendar year 2009 . . .
Now this seems rather transparent, does it not? In order for ECUSA's legal theory to succeed in court, we need to have some official "recognition" of the remnant groups by the Church itself. So the Executive Council obligingly passes a resolution attesting to its "recognition" of certain individuals as constituting a "Standing Committee". Never mind that there is, as yet, no formally organized association in the eyes of the law to which such a "Standing Committee" could belong. (Pittsburgh had, as of October 2008, not yet held its "Special Convention", and San Joaquin's, called in March 2008, had been improperly noticed and lacked a legal quorum.)

"Recognition" is one thing, but what is this in the Helena Resolution about pulling out "up to $700,000 of undistributed annual income and appreciation" from certain trust funds to pay for "clergy salaries and other expenses"? Why should there be any "undistributed income" at all, if the trust fund is designated for a particular purpose? And what does it mean that there is "undistributed" appreciation? Since when is the increase in the value of a trust fund regarded as something to "distribute"? (Obviously, if a trustee kept paying out the yearly appreciation in a fund along with its income, it could never grow at all. And in years when it went down in value, it could never come back later, if any subsequent gains were distributed as they occurred.) Intrigued by the references to specific trust funds in the Council's Resolution, I decided to do some further digging.

It turns out that, as a consequence of all the brouhaha over the embezzlement of millions by a former treasurer of the Church, ECUSA was required by the Attorney General of New York to do an audit of its funds held in trust. As part of the audit, it agreed "to prepare an annual trust fund book and promptly provide copies of it to members of the church who request it." Now, this was news to me; I had not seen any such "annual trust fund book". I went looking for it on ECUSA's official Website, and what do you know -- I found it. (Caution -- the link is to a 308-page .pdf download of the last such book published, for calendar year 2007 [the most recent year for which there are audited figures]).

This "Annual Trust Funds Book" provides a wealth of information about the wealth of the Domestic and Foreign Missionary Society of the Protestant Episcopal Church in the United States of America -- which is the official name of the incorporated arm of ECUSA, organized under New York law in 1846 (but existing in earlier form ever since 1820). The DFMS was modeled on two similar predecessors established under the Church of England: the Society for the Propagation of the Gospel in Foreign Parts, and the Society for Promoting Christian Knowledge. In accordance with those models, the main purpose of the DFMS was to facilitate the work of missionaries and the spread of Church missions both domestically and in foreign countries, and it was through its efforts that ECUSA became a national church that affiliated over the years with a number of foreign dioceses.

Over those same years, a great deal of money was given to further the missionary work of the DFMS. The 2007 Trust Funds Book reports the total value of all funds it currently holds in trust at $363,218,308 as of the end of that year. All of the individual bequests are pooled into a common investment fund, which is allocated 72% to equities, 20% to bonds (mostly of the United States), and 8% to other types of investment, chiefly hedge funds (see the tabular breakout on page 6).

The Trust Funds Book also lists each separate bequest it tracks, and classifies them by the purpose for which the income from the bequest (and principal, in some cases) may be used. The largest single such category is Category 200: "General Purposes of the Society" (listed at pp. 235-240). The listing in the Helena Resolution quoted above identifies the nine funds by their individual numbers in the main listing of all funds in the book in chronological order (the higher the number, the more recent the gift). Of the nine, six are in Category 200, two are in Category 210 ("Program"), and one in Category 211 ("Domestic Missions"). Here are their individual descriptions as they appear in the main body of the book, again in chronological order:

200.02 St. Leger Fund (1909) A Special
First Section: Two-thirds [Trust Fund No. 200.02] for general missionary work; one-third [Trust Fund No. 200.01] for hospital work in Alaska in memory of Captain Isaac Waite. . .

Shares in Pool: 18,799.212 Category: 210 (Program)
Market Value, 12/31/2006: $428,899 12/31/2007: $452,670

492.00 Hopkins, Mrs. Theresa B., Boston, MA (1936) No. 1, Bequest of
Income to be used for general missions. Principal may be used as well, but only for a pension system for unordained missionaries.

Shares in Pool: 8,992.529 Category: 200 (General Purposes)
Market Value, 12/31/2006: $205,162 12/31/2007: $216,533

540.00 Seager, Schuyler F., Berkeley, CA (1941) Gift of, A Special
In memory of Leila Betts. Established under terms of trust agreement. Income to go to a life beneficiary. Upon her death (beneficiary died September 16, 1953), income for missionary work of the Society.

Shares in Pool: 1,798.521 Category: 200 (General Purpose)
Market Value, 12/31/2006: $41,033 12/31/2007: $43,307

656.00 Monteagle, Lydia Paige, San Francisco, CA (1953) Bequest of, A Special
When Mrs. Monteagle died in 1930, her will established several trusts. The Society was bequeathed the remainder of one trust, subject to a life income interest. The life beneficiary died in 1953, and under the terms of the will, the Society received the principal "to be used by it for such Missionary work as it may determine."

Shares in Pool: 4,968.089 Category: 200 (General Purpose)
Market Value, 12/31/2006: $113,346 12/31/2007: $119,628

678.00 Olden, Sarah E., New York, NY (1955) Bequest of, A Special
The income from this fund was restricted by the donor to missions within the United States.

Shares in Pool: 4,373.153 Category: 211 (Domestic Missions)
Market Value, 12/31/2006: $99,772 12/31/2007: $105,302

723.00 Zabriskie Memorial Fund, New York, NY (1961) A Special
Received from the Helen and Reginald Zabriskie Memorial Fund. Income for specific projects of missionary work in the United States and foreign countries.

Shares in Pool: 9,875.932 Category: 210 (Program)
Market Value, 12/31/2006: $225,317 12/31/2007: $237,805

756.00 Lloyd, Ethel S., Detroit, MI (1966) Bequest of, A Special
To establish the "Memorial Fund." Given "to the glory of God and in loving and grateful memory of Thomas Lloyd and Emily B. (Pulling) Lloyd, by their children: Arthur H. Lloyd, Bertha E. Lloyd, and Ethel S. Lloyd. Income for the missionary expansion of the work of the Society in the United States and throughout the world."

Shares in Pool: 141,111.113 Category: 200 (General Purpose)
Market Value, 12/31/2006: $3,219,413 12/31/2007: $3,397,845

814.00 Boyd, Lizzie E., Richmond, VA (1978)
Income to be used in such manner as the Society may from time to time deem best in furtherance of its missionary work.

Shares in Pool: 7,694.097 Category: 200 (General Purpose)
Market Value, 12/31/2006: $175,539 12/31/2007: $185,268

860.00 Gregg, Ellen F. and David McM., Memorial Fund, Pennsylvania (1982) Bequest of George S. Gregg
Income is be used perpetually for general missionary work. This fund resulted from the bequest of the remainder of a residuary trust under the decedent's will, subject to the life income interest of an individual beneficiary. The income beneficiary died in 1981, and this trust was set up with the proceeds received by the Society.

Shares in Pool: 3,116.406 Category: 200 (General Purpose)
Market Value, 12/31/2006: $71,100 12/31/2007: $75,041

In these descriptions of the individual bequests, time and again one reads that they are "for the purposes of the Society", and for "general missionary work". One is restricted for "domestic missionary work" -- Fund #678, the Sarah E. Olden Bequest -- but none of the others have geographical restrictions on them. Now let us look at the rest of the text of the Helena Resolution, and see how the Executive Council justifies the appropriation of the "undistributed income and appreciation" from these funds for "clergy salaries and other expenses" in the putative dioceses of Pittsburgh and San Joaquin:

Resolved, That the Executive Council of The Episcopal Church commends the work of all those involved in supporting the efforts by Dioceses to exercise their pastoral and fiduciary responsibilities in regard to the ownership of properties and funds; and be it further

Resolved, That the disbursement of these funds from one or more of the above trusts be made by the Presiding Bishop and the Treasurer.

Some members of the Episcopal Church in the Dioceses of San Joaquin and Pittsburgh have opted to leave the Church. The remaining members of these dioceses -- lay and ordained -- find they have reduced resources from which to care for one another and to reach out to those who do not know the Gospel of Christ. Ordained ministers, who provide an ongoing pastoral presence to the continuing Episcopalians, now face insecurity with respect to their salaries.
The mission of the Church is to restore all people to unity with God and each other in Christ -- through prayer and worship, proclaiming the Gospel, and promoting justice, peace and love. These dioceses have become fertile areas for mission work.

The Executive Council authorized a draw of up to $500,000 to fund similar work in 2008. Through October, nearly $421,000 had been expended to support mission in the dioceses of San Joaquin, Fort Worth and Pittsburgh. These disbursements were reviewed and approved by legal counsel, who confirmed that the disbursements complied with the terms and conditions of the trusts.

The undistributed appreciation in the above named trust funds totaled an estimated $3.0 million as of 09/30/08.
(Except for the word "Resolved", I have added the bold emphasis to the original.) Note that only the disbursements totaling $421,000 made through October 2008 had been "reviewed and approved by legal counsel" --- not the $700,000 which the Executive Council authorized to be disbursed by this Resolution. The total market value of all of the nine funds at the end of calendar 2007 comes to $4,833,400, with nearly two-thirds of that coming from the Ethel S. Lloyd Fund, a gift made in 1966. Thus, according to the Treasurer, nearly two-thirds of the market value of the identified funds is available for use by ECUSA.

But available for what purposes? For "general missionary work" -- meaning to keep clergy preaching to the remnants in Pittsburgh, Fort Worth and San Joaquin? And to pay unidentified "other expenses" -- such as legal fees, perhaps? It seems to this attorney, based just on the descriptions given in the book, somewhat irregular that ECUSA would decide that the nine funds it identifies could be used for such a purpose. Especially when one considers that the book lists the following fund (to take just one example I found):

663.00 Clergy Sustentation Fund (1953) A Special
This fund was established by an anonymous gift. The donor directed that "this fund as well as the income from it, is to be used exclusively for the payment of ministerial salaries, with preference to be given to those localities where clergy of the Catholic Apostolic Church now exist or formerly existed and where members of that church now reside, notably in the Dioceses of New York, Long Island, New Jersey, Pennsylvania, Connecticut, Illinois, Missouri, and California." The income and/or principal is to be appropriated by the Presiding Bishop at his discretion. [Note: The principal of this fund had previously been described (in the 1993 Trust Fund Record) as donor restricted, but it is clear that the Presiding Bishop has discretion to apply both principal and income to the specified purposes. The donor's expression of preference for certain dioceses does not restrict the Presiding Bishop's discretionary authority.]

Shares in Pool: 81,950.182 Category: 109 (Presiding Bishop's Discretionary Fund)
Market Value, 12/31/2006: $1,869,672 12/31/2007: $1,973,296

There is nearly $2 million of which both principal and interest may be used at the discretion of the Presiding Bishop for clergy salaries in any diocese whatsoever, without restriction. And yet this fund is not tapped, but instead the funds chosen to be used are ones designated for "general missionary purposes".

Do you see what is being hidden here? The attorneys for ECUSA approve the expenditure of missionary funds in the areas of San Joaquin, Fort Worth and Pittsburgh. These "dioceses" are not -- and probably will never be, unless and until they win their respective lawsuits and gain access to the funds of the majorities who voted to leave -- self-supporting, even though the dioceses which left each allowed those remnants to keep their own properties and bank accounts. But that is inadequate for them to keep their own clergy paid while the suits are pending -- because all of the individual parish pledges and plate collections must go 100% to the payment of the cost of maintaining the current lawsuits. Thus there are no local funds available to pay clergy, and the helpful DFMS must step in.

At the same time, however, the attorneys for ECUSA do not authorize the use of moneys from a trust fund specifically designated for the payment of "ministerial salaries". And why not? Look again at the description of the trust's purposes as stated in the Trust Fund Book and quoted above. It speaks of specific Dioceses where those funds are to be used -- "New York, Long Island, New Jersey, Pennsylvania, Connecticut, Illinois, Missouri, and California" -- although counsel have opined that the Presiding Bishop is not restricted by that listing.

I ask myself: could the operative word here be "Dioceses"? And could the fact that the groups in Fort Worth, San Joaquin, Pittsburgh and Quincy have yet to prove in a court of law that they are fully legal and duly constituted dioceses of ECUSA have anything to do with what is going on here? Might it just be that conservative legal advice pointed out that, until that question is finally resolved in the courts, it would be imprudent to use funds to support clergy who might not be in dioceses, but in missionary areas? (The New York Attorney General has the power to order Church officials personally to refund any moneys that are expended in violation of the specific terms of a trust.)

I do not pretend to know the answer, since I have no access to the original trust documents. But it certainly is an interesting distinction which the Executive Council has drawn: missionary funds are to be used in what are currently only missionary areas (even though the Council will never admit that they are), while funds designated for clergy in specific dioceses accumulate unspent back in New York.

Moreover, the Church's missionary funds are drawn down to support operations in what the Church clearly wants to be regarded as full-fledged dioceses, with already established parishes. That, in fact, satisfies no definition of "mission" of which I am aware -- and it denigrates nearly 200 years of honorable and outstanding work by actual missionaries to spread the Gospel to those who are unaware of it.

The question, at any rate, is certainly worth asking. Now, will anyone at ECUSA step forward and provide an explanation?


  1. Dear Mr. Haley,

    In response to your rhetorical question, namely "Now, will anyone at ECUSA step forward and provide an explanation?"

    I suspect the response will be something along the lines of "Ummmm. I think not, thank you."

    Pax et bonum,
    Keith T&oum;pfer

    P.S. Greetings from a working survey ship anchored in the vicinity of Homer, Alaska.

  2. Martial Artist, it's good to hear from you -- you've been absent, but now I see why.

    Yes, I agree there will probably not be any explanation forthcoming from 815 any time soon as to why they are raiding their missionary trust funds.

  3. It does appear that 815 is saying out of one side of their wallet that the rumps are missions and out of another that they are dioceses.

    A wallet with openings on both sides winds up empty rather quickly.

  4. I'm usually up for a round of progressive bashing, but I think the answer is that for 815, what they are doing is missionary work. In prog-speak, to the extent missionaries are needed, then we are all missionaries. If we are all missionaries, then any church work we do is missionary work. Therefore, funding church work in conflicted dioceses is within the meaning of the various funds' purposes.

    (I'm leaving off any jokes about California, Pennsylvania, Texas and Illinois being foreign to New Yorkers.)

    I think the logic is there, it's just that the premises are flawed.

    (I'll also note that when I first read your post I immediately pictured David Booth Beers wearing a blue uniform and kepi saying "I'm shocked, shocked to find there's litigation going on here.")

  5. You are right to call such talk "prog-speak", Matthew. The point is that when the DFMS was formed and money given to it in the 19th century, no one gave it money to go into existing dioceses, or to pay the salaries of clergy in existing parishes. That was not "mission" work -- but that is how 815 is interpreting the language of those gifts now.

    Notably, the gift for the "sustenance" of clergy salaries was not made until 1953, and then it was given not to DFMS as such, but to the Presiding Bishop's Discretionary Fund. Even as late as that date, donors could distinguish between clergy support and mission work.

  6. Given the "70% invested in equities, 20% invested in fixed
    income, and 10% in convertibles, hedge fund-of-funds and real estate2. policy, what will have happened to the value of these trusts since 2007?

    I shudder to think.