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Joe Whittemore, a former member of the United Methodist Church’s Committee on Audit and Review (part of the General Council on Finance and Administration), has authored an extensive column about the pending court case involving the UM General Board of Church and Society.

Joe Whittemore

The case, now awaiting a ruling from the Superior Court of the District of Columbia, relates to whether the Board of Church and Society can disregard specific provisions a 1965 Declaration of Trust (PDF) that earmarked certain assets for the promotion of “temperance and [ministries related to] alcohol problems” (backgrounder here).

Mr. Whittemore’s column — offering in some instances a first-hand account of events that led to the court case — is published in the March 20 edition of the Wesleyan Christian Advocate, the newspaper of the North and South Georgia Conferences.

The column, shortened from its original length due to space limitations, is available only to Advocate subscribers. However, MethodistThinker.com has been able to obtain the full version of Mr. Whittemore’s column. It is posted here (PDF—5 pages).

Excerpts from Mr. Whittemore’s piece are presented below (links to source documents referenced have been added by MethodistThinker.com):

In February 2007, the General Board of Church and Society…filed a [three-part] legal request (PDF) in the Superior Court of the District of Columbia:

1) Asking the Court to bless the expanded use of trust assets and rule on the ambiguity of the language of the 1965 Methodist Building Endowment Trust;

2) Requesting approval of the Court for [the Board] to continue to operate the trust as it has for the last thirty to thirty-five years; and

3) Asking the court to release the restrictions if the Court could not rule in [Board's] favor in the first two requests. These requests are referred to as Count I, Count II and Count III in [the Board of Church and Society's petition to the Court].

Shortly after [the Board] filed its request with the Superior Court, it withdrew Count III at the insistence of the General Council on Finance and Administration, the financial agency of the general church.

The reasoning for withdrawing Count III was that if the Court determined that Church and Society’s use of trust money and assets was outside the Trust Agreement, it would not be appropriate to ask the Court to change the expressed will of the persons who created the Trust.

In other words, the financial agency of The United Methodist Church (GCFA) was properly calling for a program agency of the church to obey and live by the Trust document which was agreed to by that agency. In the accounting world this is sometimes referred to as “living within the trustee’s fiduciary responsibility” by carrying out the provisions of a trust agreement….

The case is before the District
of Columbia Superior Court

[Then, i]n a Summary Judgment issued on Jan. 18, 2008, the Superior Court rejected Church and Society’s Count I request and ruled that the Trust Agreement restricts usage of income generated by the trust to “abstinence from alcohol — a commonly understood meaning of temperance — and to other alcohol problems.”

Church and Society’s position, as stated in its 2007 Financial Statement (PDF—see page 9), was that “management believes the work it performs in all (emphasis added) core programs of the Board meet the ‘public morals’ and ‘general welfare’ descriptions… This would include the following core programs: Public Witness and Advocacy, Legislative Briefing, Ministry of Resourcing Congregational Life, Communications, Christian Social Action, Resource Production, United Nations Office, and the program-related portion of the General Secretary’s Office.”

In other words, management of Church and Society has been spending trust assets and income for just about anything the agency does.

Indeed Church and Society has not even been accounting for trust assets, income, or expenditures over the past thirty years. The agency has treated all trust income and assets as being without any restrictions and has spent millions of dollars of trust money as if the assets and income were owned outright by Church and Society.

The Trust Agreement restricts trust funds for “work in the area of temperance and alcohol problems.” There is a huge difference in the specific wording of the Trust and how things have been handled by agency management over the years.

Mr. Whittemore goes on to explain that the General Board of Church and Society has used assets from the trust, including the United Methodist Building on Capitol Hill in Washington, to generate significant other income.

In 2006 alone, rental income from the Methodist Building was $1,739,255 while expenses were $979,032, producing a net rental income of $760,223. Over the seven-year period from 2000 through 2006, the net cash generated from the building has been approximately $5,000,000.

During this time Church and Society used $5,000,000 without any restrictions, as if no Trust [Agreement] existed.

In the first-hand portion of his account, Mr. Whittemore describes how the General Council on Finance and Administration’s Committee on Audit and Review (A&R) began looking into concerns about whether the General Board of Church and Society was fulfilling its fiduciary responsibilities. (A three-page PDF file detailing the responsibilities of the Committee on Audit and Review is here, excerpted from GCFA’s 2008 report, “The Financial Commitment of the United Methodist Church.”)

A&R brought this matter to light in 2003 when it examined the 2002 financial statements of Church and Society which contained disclosures required by new accounting standards.

Two footnotes in the 2002 financial statements contradicted one another. One footnote said there were no restrictions on trust income and another footnote said Church and Society was treating part of the trust assets as restricted.

A&R asked for a copy of the 1965 Trust Agreement (PDF) and discovered clear and strongly worded restrictions on every aspect of trust assets and income.

A&R, of which I was a member, refused to accept the Church and Society financial statements the way those disclosures were written. Church and Society then shopped around for a legal opinion that would support its unrestricted treatment of the income of the trust.

The opinion they finally settled upon was not strong enough to support what was being claimed by Church and Society management, and over the next three years A&R pressed for clear documentation of the financial statement positions being taken by management.

In his column, Mr. Whittemore refutes the idea that the current court case is part of a vendetta against the General Board of Church and Society.

Once Church and Society filed its request in Superior Court, the Attorney General of the District of Columbia was charged with the responsibility of representing the people.

Generally in this type case, if the Attorney General does not file an objection to a request the judge will rule in favor of the petitioner [in this case, the General Board of Church and Society]. This makes it imperative for the Attorney General to have full knowledge and background of all the facts and circumstances.

When dealing with a forty-year-old trust, discovery can be time consuming. This is where several present and past Church and Society Board of Directors members felt a responsibility to the church.

These persons (called “Intervenors” in the language of the court) requested to be heard and the judge ruled — over Church and Society’s objections — that the Intervenors could assist the Attorney General by presenting arguments and facts opposing what Church and Society was requesting the Court to approve.

That is what the Intervenors have done. They did not initiate the court action, they are not official parties of the case, and they do not represent the opposition — the Attorney General of the District of Columbia is the “opposition” to Church and Society….

Church and Society has no one to blame for this situation other than management of the agency over the past forty years. Claiming that people are out to “get” the agency is a “kill-the-messenger” mentality. A&R did not ignore the Trust provisions. GCFA did not accept the assets and then use funds for purposes not authorized by the Trust Agreement. The Intervenors did not bring the legal action….

In all fairness, it needs to be remembered that the Directors of Church and Society and especially the Trustees should not be blamed for the misuse of trust funds over the years. Prior to 2004, none of the Directors knew of the Trust. They did not have a copy of the Trust Agreement, which when read even by a novice to trust fiduciary responsibility, can be easily seen as problematic for the lack of accountability to the provisions.

This does not change the way things are — or Church and Society’s responsibility to the Trust — but individual directors who are kept in the dark about a trust agreement cannot very well control what has happened.

∞

On Jan. 8, 2009, the Acting Attorney General for the District of Columbia and the Intervenors filed a “Joint Proposed Findings of Fact and Conclusions of Law” (PDF) with the D.C. Superior Court, based on trial testimony and the process of discovery.

Among their findings: “Evidence presented at the trial established that the Old Board of Temperance and the New Board of Temperance [predecessor agencies of the General Board of Church and Society] communicated to…donors that the money given [to these Boards] would be used for temperance and alcohol problems.”

The document further notes that the Trust was created for three reasons:

1) the settlors [of the Trust] believed they had a moral obligation to…donors;

2) the settlors did not want Old and New Board of Temperance’s [sic] money to be used for areas other than temperance and alcohol problems; and

3) to preserve the primary and historic work of the Old and New Board[s] of Temperance.

In closing arguments last October, Jeffrey A. Liesemer, an attorney for the General Board of Church and Society, argued that an October 1965 compromise agreement among three Methodist boards that were being merged into one supplanted the Declaration of Trust drawn up just months earlier.

According to a United Methodist News Service account, Liesemer said the compromise made it clear that “the money could be used for all programs and couldn’t be squirreled away for temperance and alcohol problems.” The “October Compromise” creates a legal basis for “reformation” of the Trust, he argued.

That line of argument is refuted in  the Joint Proposed Findings and Conclusions of Law document. “The so-called October Compromise, if it exists at all, was a proposed modification that occurred six months after the settlors executed the Trust on [March] 23, 1965…. Even if clear and convincing evidence of the October Compromise exists, it occurred post-execution.”

Such an agreement, therefore, would carry no legal weight. “[M]odification of the Trust is not permissible because the Trust document itself does not reserve the right of modification,” the document notes.

∞

Mark Tooley, author of the recent book, Taking Back the United Methodist Church, speculated in a 2004 article in Good News magazine, that “[i]f income from the [trust is] restricted to alcohol-related work, it would be a devastating blow to Church and Society’s ability to lobby for its more favored liberal political causes.”

The UM Building in Washington, D.C.

A record of the Board of Church and Society’s 2006 spending (PDF) shows that the bulk of the Board’s $2.3 million program budget was spent on areas such as “Economic and Environmental Justice,” “Education and Leadership Formation,” and maintaining an office at the United Nations.

That same record shows a line item of only $137,933 for programs focused on “Alcohol, Addictions, and Health Care,” with no breakdown of how much of that dollar amount actually went to specific alcohol-related ministry. Another $7,303 (a designated gift) was spent on “Substance Abuse Training.”

In 2007, the Western North Carolina Conference overwhelmingly passed a resolution calling on the Board to comply with the “purpose stated in the Trust and use Restricted Funds for the work on temperance and alcohol related problems” (see “Petition 34″ here—PDF).

The resolution asserted that the Board has not “followed either the letter of the trust or the spirit of its founders as it has expended a large portion of the funds from the trust (approximately $2 million annually) on items and programs not in accordance with the requirements of the trust.”

District of Columbia Superior Court associate judge Rhonda Reid Winston (PDF), a graduate of the Duke University School of Law, is the presiding judge in the case.

∞

The 65-member Board of Directors of the General Board of Church and Society is holding its Spring 2009 meeting this week at the M Street Renaissance Hotel in Washington, D.C. Board members are listed here.

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