Unfinished Business for the Presbyterian Church in America (PCA)

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by Bob Williams, Managing Editor, Christian Observer

February 10, 2011 marked the third anniversary of the Cornerstone Ministries Investments (CMI) Chapter 11 Bankruptcy filing in the United States Bankruptcy Court – Northern District of Georgia – Gainesville Division. 3500 investors with US$142 Million in assets were affected, along with CMI stockholders who lost all of their holdings. From July-September 2010, settlements totaling US$7,625,000 were proposed to the bankruptcy court and later accepted, representing an average settlement rate of US$0.054 per dollar and a loss of US$134,375,000 by the 3500 investors.[1]

Included among the 3500 investors were the Associate Reformed Presbyterian Church (ARP), with pre-settlement investment assets of US$127,151.97, plus 19,230.97 shares of CMI stock; several PCA and other denominations’ churches including Linden Presbyterian Church (PCA), of Linden, Alabama, with pre-settlement assets of US$599,295.88, and Mason Memorial Church of God in Christ of Norfolk, Virginia, with pre-settlement assets of US$1,015,781.10; plus thousands of other investors including PCA Teaching Elders (TE’s), widows of PCA TE’s, retirees whose retirement savings were in CMI investment accounts, and PCA church members.[2]

Bankruptcy plan administrators Glass Ratner Capital and Advisory Group, LLC, selected the law firm of Reid Davis LLP (RDLLP) to handle the claims associated with the collapse of CMI, which RDLLP later characterized as a “[US]$140 million Ponzi scheme.”[3] The U.S. Securities and Exchange Commission defines a Ponzi Scheme as “…an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.”[4]

At the time of the 2008 bankruptcy filing, the two major CMI executive officers were the now late Rev. Cecil A. Brooks, and the Rev. John T. Ottinger, Jr., both PCA TE’s.

Of the US$7,625,000 settlement assets, the Estate of Cecil A. Brooks, the Covenant Family Trust UAD, and Jane C. Brooks, contributed US$1,350,000, based upon viable claims and causes of action asserted by the Settling Plaintiffs’ Representative “…for, inter alia [among other things], breach of fiduciary duty, fraud, negligent misrepresentation and fraudulent conveyances…,” and RE: Private Actions Trust, “…for fraudulent conveyances, violations of state and federal securities laws, and fraudulent and/or negligent misrepresentations to the CMI bondholders that assigned their claims to the Private Actions Trust.”[5]

John T. Ottinger, Jr., Julie Ottinger, Jack R. Wehmiller, and Jayme S. Sickert contributed US$4,330,000 to the settlement based upon viable claims and causes of action asserted by the Settling Plaintiffs’ Representative for “…breach of fiduciary duty, fraud, securities fraud, negligent misrepresentation, and fraudulent transfer….” The Ottingers contributed US$1,350,000 of their own assets to the settlement, with the remainder paid from a liability insurance policy held by CMI between 29 August 2007 – 29 August 2008.[6]

Perhaps the saddest aspect of this financial, fiduciary, and ethical debacle, is the fact that in the early 1990’s, the PCA General Assembly, as the supreme church court of the PCA, had the facts and the means at their disposal to bring to light the interest-conflicted and fiduciarily-irresponsible mess that was the eight not-for-profit and twelve for-profit corporations that listed 1852 Century Place, Atlanta, Georgia, as their mailing address, sharing the address with the early 1990’s PCA headquarters. The most significant of the corporations after the PCA, Inc., was the Investors Fund for the Building and Development of the PCA, Inc., whose CEO was the now-late PCA TE the Rev. Cecil A. Brooks and whose CFO and Secretary was PCA TE the Rev. John T. Ottinger, Jr.

The 1991 19^th PCA General Assembly, concerned about these matters, commissioned a legal audit of the PCA and its associated agencies, the results of which have been withheld from all but the Committees of Commissioners for the various Permanent Committees and Agencies.

Additionally, a group of like-minded PCA members had formed an independent organization called Concerned Presbyterians (CP), that was interested in the seeing results of the legal audit, in US$2.8 million in designated funds for the PCA home missions agency Mission to North America (MNA) that had been redistributed to other than designated purposes, and in other issues leading CP to believe that the PCA was turning away from its roots.

The cover of the May 20, 1994 Christian Observer[7] showed a picture of an open-air African church service with the headline: “In Uganda the Presbyterians organized a church three days after coming to town. In America the Presbyterians have spent three years waiting to see their legal audit.” The latter sentence referred to the article inside titled “Gilchrist Hides PCA Audit,”[8]

The article began by stating: “A major confrontation may be brewing in America’s second largest Presbyterian denomination over a decision not to release a “legal audit” of the corporate structure of the Presbyterian Church in America.”, then went on to describe efforts being made by CP and various PCA presbyteries to have the audit results released to the 1994 22nd PCA General Assembly, and the efforts being made by then-PCA Stated Clerk Paul Gilchrist and other PCA Administrative Committee (AC) members to keep the audit results from being released, purportedly to prevent the audit from being made available to parties wanting to sue the PCA, and concerns that release of the audit would make the audit admissible in court cases and would violate the copyright of the law firm that performed the audit. Gilchrist though, insisted that “there is no coverup or desire to keep secrets from the grassroots of the PCA.”

The recently deceased and then-chairman of CP, the Rev. Charles Wilson, commented: “What have they done that makes them so afraid of lawsuits? If ‘there is no coverup or desire to keep secrets from the grassroots of the PCA,’ why are they being so secretive? They won‘t tell anyone anything, they won’t answer questions. Why won‘t they answer basic questions and give basic information?”

The article went on to describe a written legal opinion by California attorney Walter Porr, who had been retained by CP, stating that all PCA pastors and ruling elders attending the annual General Assembly are legally entitled to obtain copies of the legal audit. Porr cited relevant sections of the PCA Book of Church Order(BCO), Rules of Assembly Operations, and Bylaws to justify his opinion.

The article continued: “The report also noted that there are almost two dozen for-profit and not-for-profit corporations which list “1852 Century Place (The PCA Office Building) as the registered Office of these Corporations” and the search lists “PCA employees as some of the directors and officers of these corporations….One key question is the relationship between the various for-profit and not-for-profit corporations doing business out of the PCA denominational building, many of which list top PCA denominational leaders as their corporate officers. Although the PCA was organized in 1973 and incorporated in 1974, most of these corporations are of much more recent date. With a few exceptions they were incorporated from 1989 to 1991.”[9]

Attorney Porr continued: “If you’re painting a worst case scenario you could have criminal fraud either in the context of criminal corporate violations or criminal tax or financial violations….Some corporate crimes or just simply tax fraud crimes could be tied up in this. People do go to jail in the extreme cases; you could have embezzlement, someone could be cooking the books.”

Porr questioned why so many of the corporations listed their registered legal address in a few suites of the PCA denominational building at Century Place[10], and why the not-for-profit corporations housed there had almost identical corporate officers as the for-profit corporations located in PCA headquarters.

Porr commented: “You have the PCA itself, a nonprofit corporation, with almost twenty or so corporations involving multiple interlocking directors doing business out of the PCA building in apparently unrelated fields….My first concern is breach of fiduciary duty by those PCA officials who are involved in these corporations; my second concern is insider-type trading or a nepotism problem with the various companies feeding each other business and all of them potentially feeding off the PCA treasury….I do not see in the minutes and in the reports of the General Assembly, nor have the teaching and ruling elders of  Concerned Presbyterians been able to bring to my attention, minutes or records of the General Assembly where the existence and relationship of these businesses has been discussed, noted, acknowledged, or approved. The impression one is left with is the people in power simply seized the opportunity to make these decisions, absent same action by the General Assembly and I’m aware of none.”

Porr went on to point out inconsistencies between the situation at 1852 Century Place and the PCA’s official conflict-of-interest policies and concluded: “It kind of goes back to the old adage, if it looks like a duck, if it flies like a duck, if it quacks like a duck, it’s a duck. Why in the world does a man need to have some eighteen to twenty corporations? It doesn’t take a rocket scientist to look at this and say this doesn’t look right.”

Shortly after the May 20, 1994 Christian Observer article was published, on May 16, 1994, Christian Observer Publisher the [now late] Rev. Edwin P. Elliott and the article’s author received a letter from an attorney representing PCA TE’s the Rev. Cecil A. Brooks and the Rev. John T. Ottinger, Jr., breathing out civil court versions of threatenings and slaughter, and demanding a complete retraction of the article on pain of being sued for libel and defamation of character. The attorney, Brooks, and Ottinger, were subsequently advised of the I Corinthians 6 prohibitions against Christians suing each other, the appropriate church courts to which such disagreements should be taken, and that the attorney that wrote the letter seemingly had not been aware of relevant case law between the 1965 Georgia statute cited in the demand letter and mid-year 1994. Whether or not the advice was considered, no Christian Observer retraction was published and no lawsuit was filed.

The PCA 22^nd GA met 6-10 June 1994 in Atlanta, Georgia, where stated clerk Paul Gilchrist’s decision was announced not to release the PCA audit to all PCA commissioners and to those that officially requested copies of the audit prior to the GA meeting. The GA went on to “[declare] that the characterization by the Christian Observer of the Stated Clerk’s actions in this matter as “hiding” the audit is erroneous; and That the Twenty-Second General Assembly of the Presbyterian Church in America respectfully requests the editors of the Christian Observer to publish this declaration at its earliest convenience.”[11]

The official PCA 22^nd GA request was honored in the July 1, 1994 Christian Observer article “Presbyterian Church in America Assembly Meets in Atlanta”[12] with this statement: “The court also expressed its full confidence in Stated Clerk, Paul Gilchrist, who had come under fire from the independent media including the Observer, in the weeks immediately prior to the assembly.”

The PCA then unofficially began a campaign which led to Christian Observer publisher and PCA TE the Rev. Edwin P. Elliott, Jr., departing the PCA, and another campaign to urge PCA subscribers to the Christian Observer to cancel or otherwise not renew their subscriptions.[13]

The August 5, 1994 Christian Observer included a guest article by PCA TE the Rev. Kennedy Smartt titled “The Truth About Cecil Brooks and the Investor’s Fund,”[14] which dismissed the report of attorney Walter Porr as a set of “worst case scenarios” by a “California lawyer not a member of the PCA,” and then went on to portray the Rev. Cecil Brooks and his fellow corporation managers as misunderstood, altruistic people with completely unselfish motives. (According to CMI bankruptcy documents filed in March 2008, the Rev. Kennedy Smartt and his wife owned a total of 1585 shares of CMI stock, and had investments of US$327,760 in CMI bonds.)

The PCA in 1994 officially divested itself of the Investors Fund for the Building and Development of the PCA, Inc., and the now nominally-independent corporation later became Cornerstone Ministries Inc. (CMI). Though the PCA had made a legal, corporate break from what later became CMI, as late as the publication date for the Winter 1999/2000 issue of Multiply,[15] the PCA Mission to North America’s magazine, a Presbyterian Investors Fund (PIF) [interim corporation name] ad was published that had no differentiation from the other Multiply articles, with a background graphic of a modern church building overlaid with “God’s Money for God’s Kingdom,” offering certificates of deposit in the PIF’s Mortgage Loan Fund and Church Development Fund with interest rates up to eight percent for three years and nine percent for five years respectively for the two funds. Interesting to note is that on the first page of Multiply, the corporation was identified as the PCA Investors Fund.[16]

Eight years later, CMI declared Chapter 11 bankruptcy, leaving 618 stockholders with 908,982 shares with nothing, and leaving 3500 bond investors with US$142 million in investments to eventually receive possibly the lower of the 9 to 36 cents on the dollar as stated in the Creditors Committee Plan of Liquidation.[17]

In mid-2010, several CMI investors that had suffered significant losses from the CMI bankruptcy appealed to the PCA Metro Atlanta Presbytery (MAP) to institute church discipline against PCA TE the Rev. John T. Ottinger, Jr., for unrepentant violations of the Eighth Commandment, and for violations of two vows in the PCA Book of Church Order (BCO) section 21-5-6 where the TE promises “to be zealous and faithful in maintaining the truths of the Gospel and the purity and peace and unity of the Church”, and Section 21-5-7 where the TE promises to be “faithful and diligent in the exercise of all your duties as a Christian and a minister of the Gospel, whether personal or relational, private or public; and to endeavor by the grace of God to adorn the profession of the Gospel in your manner of life, and to walk with exemplary piety before the flock of which God shall make you overseer.” The appeal included references to relevant scriptural texts, relevant references from the Westminster Larger Catechism, CMI bankruptcy documents, and articles about the CMI bankruptcy in the secular media. The Metro Atlanta Presbytery chose not to pursue church discipline against TE Ottinger.

Prior to TE Ottinger’s late-2010 settlement with the bankruptcy court, several questionable real estate transactions were entered into by TE and Mrs. Ottinger following the filing by TE Ottinger for bankruptcy protection.

Additionally, PCA TE the Rev. Jayme S. Sickert, the former CMI executive VP Investor Relations, who along with the Ottingers and Jack R. Wehmiller were cited in the bankruptcy settlement for “…breach of fiduciary duty, fraud, securities fraud, negligent misrepresentation, and fraudulent transfer….”, and Sickert was cited in a 24 July 2010 letter opposing the proposed bankruptcy settlement with the Ottingers, Wehmiller, and Sickert that read: “Mr. Sickert misrepresented Cornerstone Ministries to me and Never [sic] changed a word he said during my association with Cornerstone, even up until the day of bankruptcy.” The letter later asked that the bankruptcy judge “consider Mr. Sickert’s lies when making His Decision [sic].”[18]

Since June 2010, former CMI executive the Rev. Jayme S. Sickert has been preaching weekly at the MAP’s Christ Presbyterian Church of Sharpsburg, Georgia.[19]

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2011 marks twenty years since the 1991 19^th PCA General Assembly commissioned a legal audit of the labyrinth of not-for-profit and for-profit corporations headquartered in the same Atlanta, Georgia, building as the PCA denominational headquarters, and the audit results remain to this day a secret to all but the few PCA insiders allowed by the PCA Administrative Committee to see the audit report. 2011 additionally marks seventeen years since then PCA TE’s and now late the Rev. Charles Wilson and fellow members of Concerned Presbyterians, and now late the Rev. Edwin Elliott and his publication the Christian Observer, openly and courageously questioned the unscriptural, un-confessional, and unethical goings-on at PCA headquarters, and both men, CP, and the Christian Observer were publically and officially rebuked and shown official contempt by majority vote of the 1994 22^nd PCA General Assembly.[20]

Following the 1994 22^nd PCA General Assembly, the PCA’s “company men”, TE’s and RE’s who valued their PCA Inc. “franchises” and remaining in good stead with PCA headquarters over “maintaining the truths of the Gospel and the purity and peace and unity of the Church, whatever persecution or opposition may arise unto you on that account?” (PCA BCO 21-5-6), continually vilified those who had dared to question the PCA Inc. party line, and worked hard to drive the Rev. Edwin Elliott out of the PCA and to destroy the Christian Observer.

Meanwhile, questions at the 1994 PCA 22^nd General Assembly about “Century Place-Gate” and its labyrinth of corporations, and US$2.8 million of mis-designated Mission to North America (MNA) funds, morphed over fourteen years into the CMI bankruptcy termed a “[US]$140 million Ponzi scheme” by the law firm that handled the bankruptcy claims of 3500 account holders that lost an average ninety-five percent of their CMI investments.[21] Yet still, the PCA Administrative Committee, the PCA Metro Atlanta Presbytery, and the many PCA Inc. “company men” and their fellow CMI enablers continue to refuse to acknowledge the more than two decades of corruption allowed to flourish in their denominational midst that resulted in 3500 persons, families, churches, and other entities who invested in the lie that was CMI to lose the vast majority of their CMI investments.

Is the PCA as a denomination culpable in the loss of 3500 investors of their retirement and other invested funds? Maybe. The evidence was available in the Legal Audit that there was mismanagement of funds occurring in 1991. The Stated Clerk and the Administrative Committee in 1994, by refusing to reveal the results of the Legal Audit, did not allow the General Assembly the option to properly discipline Brooks and Ottinger. They were allowed to continue with their credentials intact, eventually bilking 3500 investors who unknowingly thought these two men were making fiduciarily-responsible investments of their assets, but were in actuality running a US$142 million Ponzi scheme.

It is far past time for the individuals and the courts of the PCA to repent of their words, actions, and inactions which allowed the corruption which ultimately led to the CMI bankruptcy, to carry out their biblical and confessional responsibilities to make amends for their enablement and neglect in this matter, to hold those responsible for this decades-long malfeasance by calling them to account via true biblical and confessional discipline by the PCA courts, and when necessary to expel any guilty and unrepentant tares from the PCA until such time as true repentance is evident.

We would hope that the 39th General Assembly of the Presbyterian Church in America will begin to address this issue by removing from office all persons associated with the 1994 Stated Clerk’s office and Administrative Committee who are culpable in the Century Place-Gate Scandal and in the coverup of the Legal Audit commissioned by the 1991 19^th PCA General Assembly. Additionally, we would hope that the 39th General Assembly would compel the revelation of the Legal Audit so that any questionable activities found can be corrected, repented of, and apologized for by the PCA.  It is too late for those scammed by Brooks, Ottinger, and Sickert, but at the very least, these actions will move the PCA much closer to having addressed the situation biblically, confessionally, and properly according to the PCA BCO.

The peeling gold leaf described in retired PCA TE the Rev. Dr. Carl W. Bogue’s January, February, and March 1994 The Presbyterian Advocate article “How is the Gold Leaf Peeled Off”[22] has long since completely disappeared, leaving a tarnished and corroded mess of what once was the Godly vision of The National Presbyterian Church.[23]

This article is dedicated to PCA Teaching Elder the Rev. Charles Wilson, d. January 29, 2011. Charles grieved for both friends and those that did not consider him a friend, as well as churches that lost money in the CMI scandal, especially Linden PCA which was his first pastorate out of Reformed Theological Seminary of Jackson, Mississippi. We thank Charles for his wise and consistent counsel. Well done good and faithful servant.

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Bob Williams, Managing Editor of the Christian Observer, holds the Bachelor of Music degree from West Virginia University, the Master of Arts in Religion (MAR) degree from Liberty Baptist Theological Seminary, and is a Probationer and Licentiate in the Hanover Presbytery, Reformed Presbyterian Church.

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