Should A Church Return A Tithe?

Orginally published on Friday, October 14, 2005 at 8:39 AM
by Todd Rhoades

Now here’s an interesting dilemma… should your church return money received in its offerings from someone who got the money from activity that wasn’t above board (or legal)?  More specifically:  Should Corona, CA’s largest church return $144,735 it received from a man who has since pleaded guilty to fraud?  This article is from PE.com.  I’d love to hear your thoughts…

Church leaders have declined to comment, but ethicists, churchgoers and watchdogs say the money given by Randall Harding and his wife, Alice, puts Crossroads Christian Church in a morally murky position. Some want to see the money go back to investors; others say the church has no duty to return it.

Harding regularly attended Crossroads and sang in its choir while he ran JTL Financial Group -- also known as Just the Lord. JTL closed in 2004.

Authorities say he funneled the cash to Riverside-based MX Factors and paid early investors with money from later ones -- a classic Ponzi scheme. MX investors still are owed $39.4 million, according to court-appointed receiver Robb Evans & Associates.

In more than a year, Robb Evans has recovered about $3 million to reimburse investors and has not decided whether it will pursue the church. The receiver collects bank accounts, sells homes and sometimes pursues salesmen and those who have profited from such schemes to repay investors.

Whatever money comes in will be dispersed as a judge determines to the hundreds owed, said Kenton Johnson, executive vice president at Robb Evans.

Senior Pastor Barry McMurtrie said through his assistant, Kim McGuire, that he would have no comment for this article. He did not answer an e-mail or a letter requesting an interview. Neither did Executive Pastor Mark Gantt.

Harding agreed in a September e-mail to answer a reporter's questions if his attorney gave him the go-ahead. Harding's attorney, Jim Henderson of Santa Monica, did not return three phone calls made in the past two weeks.

Harding pleaded guilty in January to wire fraud and money laundering. He has not yet been sentenced and could face as much as 30 years in prison and a $500,000 fine.

Crossroads hosts about 5,000 churchgoers at weekend services, according to its Web site. Sitting on 36 acres, the church property is valued at $9.3 million, according to Riverside County Assessor Larry Ward.

This year, the evangelical megachurch opened a new sanctuary, where thousands of seats come with cup holders to hold Starbucks drinks from its cafe.

Regardless of what the church decides to do with Harding's gifts, Crossroads should debate the options to show it has seriously considered an important ethical issue, said Michael Josephson, founder of the Josephson Institute of Ethics in Los Angeles.

"If they took it in good faith, as I assume they did, and they used it, do they become another victim?" he asked.

Arguments can be made for keeping the money and for giving it back, Josephson said.

But he knows what he'd do. "If it's ill-gotten gain, I would vote to return it," he said.

Recruiting Investors

For years, Harding operated The Packaging Store in Rancho Cucamonga, where his mother-in-law also worked, according to former employee Bob McLean. The store sold packing supplies and crate-shipped items and, by 2002, was used to pitch investors on JTL, McLean said.

Reports by the receiver show that in the nearly two years JTL operated, Harding paid himself $2.7 million. The money went to loans for The Packaging Store, cars, travel and the gifts to Crossroads, the receiver says.

Harding used the congregation to recruit investors, including at least three pastors, according to court records.

Worship Pastor Adam Price, who sings on stage at services, put in $154,165, according to a lawsuit he filed seeking the return of his money.

Price also raised money for Harding, investors said. Price declined to comment when reached by phone at his home and did not respond to e-mail requests for an interview.

Ties, such as religion or ethnicity, are used to exploit common interests when conmen raise cash for Ponzi schemes, said Susan Wyderko, the Security and Exchange Commission's director of investor education. Often, perpetrators enlist religious leaders to spread the word, she said.

"Leaders become unwitting victims of the scam and assist in bringing others in to be similarly victimized," she said.

Just because investors made a bad call, Crossroads isn't necessarily obligated to bail them out, said Paul Nelson, president of the Evangelical Council for Financial Accountability, a watchdog group. But having church leaders invested and raising money for JTL does make the burden heavier for Crossroads, he said.

"I can't say whether the church should give the money back, but the church should be saying, 'What is the right thing to do?' " Nelson said.

Brian Goodwin, who has attended Crossroads for four years, said one of the church's pastors approached him a few times about investing with JTL. He came close to putting in $200,000, money that he instead invested in real estate and his Corona graphics company.

Goodwin, though, is unsure whether Crossroads should repay Harding's victims.

"What if someone stole $5 and gave it to the church? How are they going to know and what are they going to do about it?" asked Goodwin, 46.

The choice is clear-cut to Charles Crites, who said he invested a six-figure amount with JTL. Crites previously attended Crossroads but declined to say why he left the church.

He wants Crossroads to hand over what Harding donated.

"It wasn't Harding's to give," said Crites, who also participated in a Bible study with Harding for several months.

Some people wonder if Harding made donations beyond the $144,735.

Crites said Harding told him that he had pledged $1 million to a Crossroads school-building fund. Others confirmed that the pledge was announced at a church auction.

Trust Fund

Sometimes churches give back money they made from investments in Ponzi schemes. A group of religious organizations started a trust fund last year after they learned their investments profited from what authorities say was a Ponzi scheme ran by Gregory Setser's International Product Investment Corp. Based in Ontario, IPIC owes investors close to $75 million.

So far, the fund has brought in more than $3.5 million, which has already been given out to hundreds of jilted investors, said Nick Roossien, an accountant who works for the company reimbursing investors.

But getting back money donated to nonprofits can be difficult, said Scott Cormode, the George Butler professor of church leadership at the Claremont School of Theology.

Often, he said, it's no longer there.

"If it's $144,000 to build a new room on a building project, the room's built. It's not like they can liquidate a room," he said.

Cormode said he would counsel the church to evaluate its range of obligations, including its congregation, the community and JTL investors.

Because the $144,735 came from someone who has admitted to fraud, the church should return it, said Christian ethics professor Glen H. Stassen at the Fuller Theological Seminary.

He suggested that Crossroads write to investors explaining what it has done and ask whether it's OK to keep it.

"I think the church does have some obligation to the people who've been defrauded, but that's a mutual thing," he said. "It's certainly for the people who've been defrauded to say, 'Thank you for your kindness, and we think you should use the money for these good purposes.' "

It's unusual to find that a Ponzi perpetrator has given the money to a church, Robb Evans' executive Johnson said. But in another case, the receiver located more than $500,000 in tithing and donations made to a Mormon temple.

Last year, the receiver asked the Salt Lake City headquarters of The Church of Jesus Christ of Latter-day Saints to return the money, Johnson said. It did so, with interest, he said.

But Johnson declined to discuss whether the receiver would try to retrieve the $144,735 from Crossroads.

Though it would mean an average of only $204 per investor if it were spread among those owed, Ken Schwartz of Spokane, Wash., said the church should return what it got from Harding.

"If it wasn't his property to begin with, it shouldn't be the church's property either," said Schwartz, 46, who invested $45,000 in savings.

After losing money to JTL, J.D. Walker left Corona and Crossroads last year to move to his home state of Arizona.

But Walker, who fondly remembers Crossroads, doesn't expect the church to reimburse investors.

"If some of my money went to do some good, it's better than Randy getting it all," he said.

So... would you give it back?

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Hi... I'm Todd Rhoades. I'm a Christ-follower, husband, father and I love to connect leaders with other leaders. Hopefully you'll find something here at MMI you like and will return often. If you want, you can find out more about me or follow my every step on Twitter.

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