Arguing that the District of Columbia Superior Court’s ruling “constitute[s] legal error,” the D.C. attorney general has taken the usual step of asking the court (PDF) to “alter and amend” its ruling in a case involving endowment funds held by the United Methodist General Board of Church and Society (GBCS). The attorney general’s office represents the public interest in District of Columbia cases involving charitable trusts.
Last month, Superior Court Associate Judge Rhonda Reid Winston ruled (PDF) that a 1965 Declaration of Trust (PDF) that restricted much of the board’s endowment for use in temperance-related ministry was based on “mistakes of fact” and that the GBCS should have essentially unrestricted use of the endowment funds.
The endowment money came to the GBCS via its predecessor organizations in The Methodist Episcopal Church and The Methodist Church, including the Board of Temperance and the Division of Alcohol Problems.
Based on legal advice it received in the 1970s, the board has been operating for more than three decades as though the endowment funds were virtually unrestricted.
In 2007, following repeated inquiries from the Audit and Review Committee (PDF) of the UMC’s General Council on Finance and Administration about how the endowment funds were being used, the General Board of Church and Society petitioned the Probate Division of the D.C. Superior Court, seeking a “reformation” of the 1965 trust (GBCS is headquartered in the United Methodist Building in the District of Columbia.) That reformation was granted last month, with the court striking a dozen clauses in the trust document that referred to restricting funds to temperance-related ministry.
According to a source close to the case, the General Board of Church and Society spent close to $1.5 million in legal fees in its quest to have the trust reformed.
Two weeks after the ruling, D.C. Attorney General Peter J. Nickels, acting on behalf of the District of Columbia, submitted a motion under Rule 59(e) of the D.C. Superior Court Rules of Civil Procedure (PDF) requesting that Judge Winston “alter or amend” the court’s ruling, arguing that “[i]f the Court’s reformed language were allowed to stand, this would constitute legal error.”
Specifically, the attorney general’s motion suggests that the “reformed language is unduly broad in light of both the trial record and the Court’s own finding of fact.”
That the settlors [of the 1965 trust agreement] intended to restrict the use of the Trust funds to some purpose more limited that any lawful purpose is evident from the record….
Contrary to what the reformed language permits, the evidence at trial simply does not support the conclusion that the settlors’ would have intended that the Trustees use the funds for any lawful purpose related to public welfare. At most, the evidence suggests that the settlors’ intention would have been to expand the use of funds from temperance and alcohol problems to include other “public morals.”…
Clearly, the evidence establishes that the settlors intended to limit the Trustees’ discretion over the purposes for which the Trust Funds could be spent. Therefore, reformed language that limits use of the Trust Funds to issues related to “public morals” would better reflect what the settlors would have intended than reformed language that gives Trustees virtually unfettered discretion.
The attorney general’s motion notes that the 1960 Discipline of the Methodist Church, which is specially referenced in the Declaration of Trust, “defined [public morals] as including issues related to gambling, narcotics, tobacco, exploitation of sex, including the elimination of pornographic literature, and Sunday observance laws.”
“Principles of equity and prudent trust management lead to the conclusion that all funds should be restricted to causes involving ‘public morals,'” the attorney general’s motion states.
It is not known how long it will be before Judge Winston either accepts or denies the attorney general’s motion.
Judge Rhonda Reid Winston (PDF) was appointed to the federal bench in 1994 by President Bill Clinton. She is a graduate of Duke University Law School.
In a commentary posted Oct. 28 on the website of the UM renewal ministry Good News, Rob Renfroe, a former member of the General Board of Church and Society and now president of Good News, wrote that Judge Winston’s ruling in the GBCS case is puzzling.
Thirteen times the [1965 trust] document states that funds in the trust and funds generated by the trust were to be used for “temperance and alcohol problems.” The stated intention of the trust could not be more clear.
For many years, the General Board of Church and Society has used the trust monies for its general purposes and now has been given the green light to continue to do so.
But if these monies were intended for general purposes, why were they ever restricted in the first place? Why designate the funds originally if you intended the funds to be used for any and every purpose that the Board adopts?
Persons of good faith can debate how broadly the phrase “temperance and alcohol problems” can be interpreted — and we have always believed the funds could properly be used for many causes such as alcohol abuse, drug and other addictions, pornography, and gambling. But certainly that phrase was meant to be a restriction of some kind.
It is simply impossible to believe “temperance and alcohol problems” was meant to give permission for the Board to use these funds for any and every purpose it feels a need to address.
Does “temperance” really include writings that promote sex outside of marriage as a moral choice, changing the church’s stance that the practice of homosexuality is incompatible with Christian teaching, and lobbying for federally funded abortion — all positions that trust monies were used to support?
The result of the ruling will be dire for the United Methodist Church. The Board of Church and Society’s willingness to spend over a million dollars to change the intent of the trust gives a clear message to anyone contemplating the donation of a trust or other restricted gifts to any of our Boards in the future.
The message is this: Once you are deceased, your original intent may not be honored and the Board with whom you placed your trust may spend whatever it takes to break that trust. The monies spent to do so will be United Methodist apportionments and, ironically, the very monies generated by the trust itself.
A trust is called a trust for a particular reason. And regardless of a court’s decision, a trust has been broken.
Good News played a role in the case, acting in concert with the Confessing Movement and the Institute on Religion & Democracy. The three groups — working together as the Coalition for United Methodist Accountability — supported five individuals who served as “intervenors” in the trust case. The intervenors assisted the office of the D.C. attorney general by providing testimony and other evidence.
The United Methodist General Board of Church and Society is the successor to the Board of Temperance, Prohibition and Public Morals and two other agencies of the former Methodist Episcopal Church. In the early 1920s, Methodists concerned about alcohol abuse donated millions of dollars to construct a headquarters for the Temperance Board near the U.S. Capitol in Washington.
The 1965 trust agreement, which transferred the building and other assets to what was to become the General Board of Church and Society, stipulated that income from the trust would be devoted “in perpetuity” to addressing the “areas of temperance and alcohol problems.” (The trust language is consistent with ¶1008.2 of the United Methodist Book of Discipline: “Funds vested in any of the predecessor boards shall be conserved for the specific purposes for which such funds have been given.”)
Attempts to loosen the restrictions of the trust began as early as 1969. In that year, the Investment Committee of the Endowment Fund Trustees concluded that language in “original” Board of Temperance documents is “broader in scope and more inclusive than certain language in…the Declaration of Trust of March 23, 1965.”
These original documents include the Temperance Board’s 1917 Certificate of Incorporation, which said the board was being created “to promote the cause of temperance by every legitimate means; to prevent the improper use of drugs and narcotics; [and] to render aid to such causes as in the judgment of the Board of Trustees, tend to advance the public welfare.”
In the mid-1970s, GBCS — in an attempt to further loosen the 1965 trust restrictions — sought an opinion from outside legal counsel. The result of that consultation is described in the GBCS’s financial statements (PDF) for 2005 and 2006:
The Board’s management, on March 5, 1975, asked outside legal counsel whether the income from the Trust Fund could be properly spent on certain activities carried out by the board related to “public morals” and “general welfare.”
The list reviewed by the outside legal counsel included not only alcohol and temperance concerns, and drug abuse, but also…policy aspects of the public welfare problem and policy aspects of our health care delivery system… [as well as] questions of public morality relating to human sexuality… [and] the cost of administration for these programs…
On May 12, 1975, outside legal counsel stated that “it would be proper to interpret the [types of] work [which the Board described when it requested the legal opinion] as [being] included under the category of ‘public morals’…and ‘general welfare’ for Trust Fund purposes. This would mean that income from the Trust Fund could be used on an annual basis for these purposes.”
In an October 2002 letter, GBCS attorney Milton Cerny noted that it was unlikely that “the trust instrument’s language could be interpreted any more broadly than has already been done.”
Today, temperance-related spending now accounts for a relatively small percentage of GBCS expenditures. A record of the Board’s 2008 spending (PDF—see p. 7 of the file) shows a line item of $158,100 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.
The bulk of the Board’s $2.8 million program budget in 2008 was spent on areas such as “Education and Leadership Formation,” various undefined “program-related” expenses of the general secretary’s office, and maintaining an office at the United Nations.
In addition to money from trust, the General Board of Church and Society receives apportionment money from local churches via the United Methodist World Service Fund. GBCS’s financial statement for 2008 (PDF) showed total revenue of $6.1 million. About $2.6 million of that amount came from apportionments.
The General Board of Church and Society has long been a lightning rod for criticism within the United Methodist Church. As noted by Steven M. Tipton in his 2007 book, Public Pulpits: Methodists and Mainline Churches in the Moral Argument of Public Life (University of Chicago Press), “For decades…vigorous critics of the board have protested its public advocacy as politically partisan and radically left-wing.”
In 2009 and early 2010, the GBCS used its resources to advocate for a controversial Democrat-led health bill that called for significantly expanding the federal government’s role in the U.S. health care system. The board’s work earned a public thank-you from House Speaker Nancy Pelosi.
“Our coalition ranges from the AARP…to…the United Methodist Church,” she said on the House floor March 23, moments before passage of the Patient Protection and Affordable Care Act. The 2,685-page legislation, known colloquially as “Obamacare,” passed the House of Representatives by a vote of 219-212 (50.8%-49.2%). Every Republican and 34 Democrats voted no.
The board’s involvement in advocating for the unpopular bill created a strong backlash within the United Methodist Church.