Within five years, a businessman tithed about $300,000 to a Michigan megachurch. But after a grand jury indicted David McQueen in 2012 for running a $46.5 million Ponzi scheme, the federal government asked Resurrection Life Church for the money back.
In February, the 8,000-member congregation in suburban Grand Rapids said no. “[We] had no knowledge of the source of the funds,” finance pastor Bernard Blauwkamp wroteto the US Attorneys Office. Regardless, the money—donated from 2005 to 2009—was spent, he said.
Cases like this arise every year, said attorney Bruce Van Heukelem. He defended a Christian camp in Wisconsin that, along with World Vision and Trinity Evangelical Divinity School, argued against such repayments before a federal appeals court in 1995 and lost.
Given that precedent, ministries don’t have much of a choice but to reimburse the feds.
Receivers—those appointed by courts to collect the stolen funds—begin by asking for the money back. If the church or charity declines, the receiver can come back with a lawsuit.
Some states offer exemptions on so-called “clawbacks.” After Tom Petters’s $3.7 billion Ponzi scheme was exposed in Minnesota, the state passed a 2012 law that put a two-year statute of limitations on donations—essentially exempting nonprofits from returning the money.
That didn’t stop a judge from ruling in June that the University of Northwestern in St. Paul had to return about $5 million it received from Petters’s partner. But the Council for Christian Colleges and Universities member school no longer has the money, having given the funds to charities.
If higher courts agree that Northwestern needs to repay the cash, the school will be forced to pursue litigation against the charities or ask students to write larger tuition checks.
“We would never have taken that money if we knew it was dishonest,” said Northwestern president Alan Cureton. “But we live in a fallen world.”
“It’s a moral question: Who should absorb the loss of this crook?” said Frank Sommerville, an attorney who counsels churches to prevent litigation. Churches and charities are generally better able to absorb a large financial loss than an individual, he said.
It’s difficult for churches to say, “We didn’t do anything wrong,” when they are holding somebody else’s rightful property, Van Heukelem said. “But in the practical world, it becomes difficult. What are charities supposed to do? They can’t possibly monitor the source of a donations.”
Judges will rarely ask for the entire amount to be refunded, said Sommerville. “In my experience, they’re not here to put the church into bankruptcy.”
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SOURCE: Christianity Today
Sarah Eekhoff Zylstra