Date: Sat, 14 Nov 1998 01:25:08 -0500 From: Darrell Todd Maurina Reply-To: Darrell128@aol.com Organization: Christian Renewal/United Reformed News Service Subject: NR 98115: CRC Officials Explain Lawsuit Against IRM NR #1998-115: Christian Reformed Officials Explain Lawsuit Against IRM How can the agencies of an evangelical Christian denomination file legal action against a corporation whose principals are all members of the denomination and until recent years were held in such high esteem that they served as board members of some of that denomination's largest agencies? That question has come into focus over the last year as the Concerned IRM Investors committee led a full-scale attack against the actions of the Christian Reformed Church on the IRM matter. It also led to the unearthing of a long-forgotten decision by Synod 1972 specifying "that synod declare that synodical committees and agencies shall not initiate or support a lawsuit against brothers of our common faith without the expressed prior approval of synod." NR #1998-115: For Immediate Release: Christian Reformed Officials Explain Lawsuit Against IRM ¥ Acts of Synod 1972: "Synodical committees and agencies shall not initiate or support a lawsuit against brothers of our common faith without the expressed prior approval of synod." ¥ Dr. Peter Borgdorff: "I would not consider that directive, even in retrospect now, as being applicable to the situation of an IRM for-profit investment corporate entity like that. And you're correct, the Board of Trustees functioning in its role of an authoritative body between synods did authorize the action." by Darrell Todd Maurina, Press Officer United Reformed News Service (November 13, 1998) URNS - How can the agencies of an evangelical Christian denomination file legal action against a corporation whose principals are all members of the denomination and until recent years were held in such high esteem that they served as board members of some of that denomination's largest agencies? That question has come into focus over the last year as the Concerned IRM Investors committee led a full-scale attack against the actions of the Christian Reformed Church on the IRM matter. It also led to the unearthing of a long-forgotten decision by Synod 1972 specifying "that synod declare that synodical committees and agencies shall not initiate or support a lawsuit against brothers of our common faith without the expressed prior approval of synod." The 1972 decision came in the context of another long-running Christian Reformed dispute that attracted widespread media attention after Timothy Christian School in the Chicago suburb of Cicero refused to admit black children from a nearby Christian Reformed congregation. The Synodical Committee on Race Relations "gave its moral and financial support to the suit" against the school by the Chicago West Side Christian School Association, an action that led to calls by three classes to reprimand SCORR for its action. In addition to its prohibition on synodical committees and agencies initiating or supporting a lawsuit without prior approval by synod, Synod 1972 voted to "express its regret that this deplorable situation and the accompanying division within the body of Christ occasioned a suit in a civil court." According to CRC Executive Director of Ministries Dr. Peter Borgdorff, nobody called that decision to the attention of the CRC Board of Trustees when it authorized the Back to God Hour, Christian Reformed Home Missions, and Calvin College to file a lawsuit against IRM in the Contra Costa County Superior Court. The suit, whose plaintiffs also included the CRC-related Barnabas Foundation and twenty individual IRM investors, accused IRM management of running a fraudulent "Ponzi scheme" and asked the court to replace the company's management. After IRM sought protection from the US Bankruptcy Court, the CRC agencies filed a petition for the appointment of a bankruptcy trustee to replace the IRM management. Borgdorff didn't learn of the Synod 1972 decision until later, but said that the decision would likely have been the same. "I would not consider that directive, even in retrospect now, as being applicable to the situation of an IRM for-profit investment corporate entity like that," said Borgdorff. "When I looked at the decision of Synod 1972, the context of it was clearly the Timothy Christian school issue and Westside Christian School Association and that whole highly charged environment of race relations at that time. That clearly was an issue within the Christian community and not only within the Christian Reformed Church. SCORR was involved in that discussion and that directive was given in that particular context which is generally stated but certainly has a very specific point of reference given in the Timothy Christian School case." Borgdorff also noted the process of denominational restructuring gave the CRC Board of Trustees much more authority than the former Synodical Interim Committee, and argued that the Synodical Board of Trustees could act on behalf of synod in giving the "prior approval" specified by Synod 1972. "You're correct, the Board of Trustees functioning in its role of an authoritative body between synods did authorize the action," said Borgdorff. "Now that's not to say that someone couldn't take another position on that decision of synod too, but I think that even if that decision had been called to our attention at the point that the decision was made, that it seems to me that the course of action would not have been different." Synod 1998 met from June 13 to June 19, including an extra day added to the end of synod to give further attention to the IRM matter. By July 9, the CRC's attorneys sent a letter to selected IRM investors encouraging participation in a lawsuit against IRM which was filed on July 16. "As we have discussed, several of the participating investors have agreed to be responsible for the costs of bringing this Complaint," wrote Thomas Sarb, attorney at the Grand Rapids-based "Miller, Johnson, Snell & Cummiskey law firm. "Although they would welcome your sharing in the cost on a proportionate basis determined by relative dollars invested, that is not a requirement to join in the complaint. If you are willing and able to participate in funding this action, please let me know." Why did the CRC agencies file a lawsuit less than a month after the adjournment of synod? "There was no game playing with synod, there was no discussion of anticipating a petition to the court," said Borgdorff. "Nothing was held from synod, nothing was assumed and not being explicitly stated. The decision to request the court for the appointment of a receiver was based on information entirely subsequent to synod. If there had been any discussion about the need to petition the court, there would have been discussion brought to synod on that." According to Borgdorff, the executive committee of the board of trustees authorized the agency decision to participate in the complaint. "The recommendation was made that the executive committee of the Board make the initial determination that was the right response, and as I recall it now without checking the paper or the minutes before me, I believe a mail communication was communicated to all the board members, who were then given the opportunity to respond," said Borgdorff. Of the total $24.6 million of investments represented by the Kool lawsuit, all but $1.3 million comes from CRC agencies and Barnabas, which means the CRC and Barnabas represent 94.7% of the value of the investments involved in the court action. Borgdorff confirmed that the denominational agencies were using general undesignated funds collected from donors and churches to pay for the lawsuit. "The agencies have participated in their proportional share of the legal costs; we are expected to function in our corporate environment as corporate citizens," said Borgdorff. "Yes it's expensive, yes it's unnecessary. The real costs did not begin to escalate until [IRM] broke the standstill agreement and signed the Eenhoorn deal. That's when trust was broken. We were forced into spending money." "Every one of its agencies has in its budget a line item for professional and legal expenses that we know that we incur on a regular basis," said Borgdorff. "Probably the agencies have exceeded that line item for 1998, so it does come out of their general operating revenue, they have to pay their bills. Unless ministry shares are designated, unless it is made for a specific designated purpose, it is used for any purpose, salaries, legal costs, light bills, or whatever." Borgdorff said the CRC action not only wasn't covered by the Synod 1972 decision, but also isn't covered by the biblical prohibitions on suing fellow Christians. "I wish there were a better name for it, because a suit normally means somebody's got something that I want and I'll sue them for it, or someone did something I didn't like, or was offended by, or was hurt by, and now I'm going to sue for damages," said Borgdorff. "That's normally what we mean by a suit. This was a request to the court, to which the court could have said 'no' and nothing would have happened, but a request to the court to bring some order into the IRM process which we had hoped to be able to achieve in an out of court setting, but that failed." "I always considered the petition to be a relatively low level legal action and not of the emotional, theological, biblical, overtones that others attached to it," said Borgdorff. "It's not a violation of the Scriptures. The authority of the court and state is also given by God, we ought not to be so quick to judge the motives and intentions when government assistance is solicited in a civil society as is everyone's right." The summer decision by the executive committee of the Board of Trustees wasn't the last vote pertaining to IRM. Four days after the lawsuit was filed in California, the council of the Baldwin Street CRC in Jenison - home church of Jay Mol, a Concerned IRM Investors leader who was later elected chairman of the court-appointed Creditors Committee - sent a letter to the board requesting it "to convene a special session of Synod to review the actions taken by said Board of Trustees in their legal action taken to place IRM into third party receivership." "We urgently request that this action be completely withdrawn with immediate effect," continued Baldwin Street CRC. "We request the Board of Trustees of the CRCNA to work in cooperation with the private investors to accomplish a Biblical and economic solution." As grounds for their request, Baldwin Street CRC said the lawsuit is "unbiblical," "detrimental to the financial well-being of members of the CRCNA," and "contrary to advice given by Synod 1998." Those grounds weren't persuasive to the CRC Board of Trustees, which on September 10 decided it "was not able to accede to this request inasmuch as it believed that the purpose identified for this special session did not warrant the time, cost, and human resources required to convene synod." Cross-References to Related Articles: #1998-006: Classis Chatham asks Top Christian Reformed Administrative Committee to Appoint Independent Investigators of $11.5 Million in Questionable Investments #1998-028: Classis Lake Erie Overtures Christian Reformed Synod to "Ensure the Editorial Freedom of the Banner" #1998-067: IRM Debate Extends Synodical Session #1998-068: Synod Responds to Possible Multimillion Dollar Fund Loss #1998-080: IRM Investment Debacle Leads to Litigation; Estimate of Funds at Risk Balloons from $11.4 to $228 Million #1998-083: IRM Declares Bankruptcy; CRC Files More Litigation Seeking Removal of IRM Management #1998-084: Bankruptcy Court Postpones Action on CRC Lawsuit to Remove IRM Management; "Concerned IRM Investors" Leader to Chair New Investors/Creditors Committee #1998-091: IRM Management Resigns as General Partners; John Barnard to Become CEO of Troubled California Real Estate Firm #1998-103: A Glimmer of Good News: Home Missions May Receive Partial Payment on $1.1 Million of $7.925 Million Invested in IRM California Real Estate Corporation #1998-104: San Francisco IRM Investor Files $45 Million Suit Against Attorneys Retained by CRC Agencies and Individual Investors #1998-109: Bankruptcy Court Appoints New CEO for IRM; Plans Announced to Drop Christian Reformed-Led Lawsuit #1998-114: Eenhoorn Announces November 15 Deadline; Paul Heule Expects to Withdraw Offer to Purchase IRM Assets Contact List: Dr. Peter Borgdorff, Executive Director of Ministries, Christian Reformed Church 2850 Kalamazoo Ave. SE, Grand Rapids, MI 49560 O: (616) 246-0832 ¥ H: (616) 957-3288 ¥ E-Mail: borgdorp@crcna.org David Buurma, Senior Vice President for Client Services, IRM Corporation Office: 2151 Salvio St., Suite 325, Concord CA 94520 Mailing: PO Box 3000, Concord, CA 94522-3000 O: (925) 676-1966 ¥ FAX: (925) 676-1744 Jay Mol, Chairman, Creditors Committee O: (616) 669-8960 ¥ FAX: (616) 669-5368 ¥ E-Mail: jcmol@aol.com ---------------------------------------------------------- file: /pub/resources/text/reformed/archive98: nr98-115.txt .