The Orange County Register, CA, continues to expose the TBN pervasive violations of fiduciary and financial duties.
May 15, 2012
Extravagant meal, hotel and limousine costs — along with personal expenses
charged to the company — continued to be “a pervasive issue” for the Trinity
Christian Center of Santa Ana, according to an internal review by an
accountant that was never meant for outsiders’ eyes.
“As stated earlier, control parties of a church are considered to work in a
fiduciary capacity on behalf of their congregants and donors,” said the March
3, 2011 compliance review by Guinn, Smith & Co of
Irving, TX. “The fiduciary duty carries with it the implication that
funds will not be spent in an extravagant or unreasonable manner. In the 2009
review of credit card and travel expenses, extravagant meal, hotel and
limousine costs were noted, and personal costs which were not reimbursed by the
employee were also noted on hotel bills. This continues to be a pervasive issue
for control parties of TBN.”
“Control parties,” translated, means exactly what you think it means: The
bigwigs of the Crouch family, who control the world’s largest
Christian broadcasting empire and its nearly $200 million
annual budget, as well as net assets of nearly $1 billion.
SWANK HOTELS
The review was signed by Donald E. Guinn , a certified
public accountant with Guinn, Smith & Co., founded in 1975 “with the goal
of providing complete financial, accounting and taxation services for
ministries, non-profits and general business clients,” its web site says.
“We’re very familiar with issues and questions unique to religious nonprofit
organizations and ministers’ personal tax and housing allowance issues.”
Some of Trinity’s eyebrow-raising expenses, as identified by Guinn,
included stays at the Ritz Carlton in New York: “One
control party’s room dated 11/27/09 incurred $10,616.52 in
charges for a 3 night stay at an average of $1538/night
in charges. Another control party’s room dated 6/20/10 incurred $16,432.42
in
There was also a stay at the W Hotel in New York, where
lodging and in room charges were $984.67 per day for a three-day
stay (the Internal Revenue Service‘s per-diem for business
travelers in New York City is $360 per day, Guinn points out);
and there were excessive hotel phone bills at the Portofino Hotel
Orlando on many occasions. “While the calls may have had a business
purpose, a cell phone should likely have been used to avoid this excessive
expense,” Guinn wrote.
EXPENSIVE EATS
Spending on meals was also a bone of contention. ”As in prior years, we
noted several charges where meals were shared several nights in a row with only
family members, in the vicinity of TBN offices,” Guinn wrote. “Although a
general business purpose was listed on the receipt, the IRS could easily
question the validity of a business purpose when the meal consisted of all
family members eating near their homes and near the office at the expense of
the exempt organization. ”
He also provided this chart as “a small sample representative of expenditures
that might be considered extravagant:”
OTHER ISSUES
Guinn’s compliance review of Trinity – substantially less extensive than an
audit — is part of a
declaration filed by Crouch granddaughter Brittany Koper in Orange County
Superior Court in support of Joseph McVeigh, her
uncle by marriage. McVeigh and Trinity are battling over a loan he received
through Trinity companies.
Trinity maintains that this, and other documents in the Koper declaration,
were stolen or altered, and is trying to keep them out of the public eye. The
assertions in the Koper filing are “untrue, defamatory, and attempts to use
documents that appear to be stolen,” Trinity attorney Colby May told
us by email (more on that below).
Koper’s attorney, Tymothy MacLeod, said the documents are
what they are, that Koper signed no confidentiality agreement in her last
position with Trinity, and has stolen nothing.
Guinn’s review identified numerous other areas of exposure that could
jeopardize Trinity’s nonprofit status in the eyes of Uncle Sam, including:
- How
Trinity compensates its big wigs. “The organization’s board should approve total
compensation packages for anyone who has served on the board of directors
within the last five years nd their immediate family members,” Guinn
wrote. “The minutes for 2008/2009 did not include authorization for these
individuals’ compensation packages. I recommend the board annually review
and approve all elements of compensation …and consider an outside
compensation committee for recommendation to the board for review and
approval.”
- How
it accounts for more than $1 million in vehicles it owns or leases. “Automobiles owned by the organization, but
partially used for personal activity is an issue that again came to my
attention. Any personal use of the organization’s vehicle, whether owned
or leased, should have this use valued according to the methods prescribed
by the IRS. The appropriate amount should be included on the employee’s
form W-2. It is important to note that when an employee does not document
to the organization the business use of the vehicle provided to them, all
use must be considered personal. We only received vehicle logs for a
Suburban and a Red Ford Pick Up which are used at the Santa Ana
production facility. The fixed asset ledger indicated $1,342,420.32
in cost for vehicles owned by TBN as of 12/31/09. I suggest that an
attempt to document the vehicles at each location be made as soon as
possible. In addition, a usage log should be kept with each vehicle. “
- Undocumented
charges. ”While
no system is perfect and employees may not turn in 100%
of their receipts, the missing receipts from 2008 to 2009 seemed to
increase dramatically. For instance, during a 3 month period, one of the American
Express cardholders charged items for over $60,000
and no receipts for these 57 charges were included in the
documentation to the approved bill. Obviously, TBN accepts as true that these
items had an ordinary and necessary ministry purpose since the charges
were not disputed, but the IRS would treat them as inurring to the benefit
of the purchaser considering them ‘nonexempt’ expenditures.”
- Provision
of health benefits. “During the course of the credit card review, we noted that Paul and
Jan’s vitamins, prescriptions and other medical related expenses were paid
with ministry credit cards, and were not reimbursed by them. Such expenses
should be included in the W-2 income for Paul and Jan and should be
recorded as taxable fringe benefit.
- Guest
houses. “As in
prior years, the documentation of the business use of TBN guest houses is
not complete or sufficient. Given the potential for personal use on a
residential property, it is imperative that the organization maintain
accurate and complete logs documenting the use of these properties….We
asked to view the Shiloh Ranch property …. During this tour, it came to my
attention that one of the guest houses used predominately by a control
party has ATV’s on the property which were purchased by TBN. ATV’s at a
guest house generally used by control parties would likely be considered
inherently personal in use and I believe the IRS would disallow them as
ministry assets. I suggest that the control party purchase them from TBN
at the price originally paid or that they are included in the W-2 or 1099
Misc of the control party as taxable earnings.”
Guinn goes on to remind Trinity that an exempt organization must use its
funds “in the most reasonable and prudent manner because of its fiduciary
responsibility,” and that a substantial amount of “nonexempt expenditures, or a
pattern of such, may jeopardize the Church’s exempt status.”
It could also incur “prohibitive” taxes on excess benefits paid out.
“Areas with the greatest exposure include: Unreasonable Compensation,
Personal Use of the Organization’s Assets, Use of the church’s credit card for
personal expenses, Excessive Spending,” the review concludes.
On the up side, no personal flights appeared to be listed in the flight log
for the two planes in the company airline.
TRINITY SAYS
We’ve been telling you how Koper accused
the world’s largest Christian broadcaster of unlawfully distributing charitable
assets worth more than $50 million to its principals — and of
firing her as its finance director, and beginning a campaign of “malicious
retaliation” against her and her family, for refusing to go along with the
scheme.
Trinity paints a very different picture — saying it was Koper and her
husband who committed financial misdeeds. It maintains that the couple
embezzled money, forged documents and misappropriated funds to the tune of some
$400,000. An earlier suit on these allegations was dismissed,
but a new suit revives them.
The declaration filed last week by Koper, which included Guinn’s review, is
currently under wraps. We at The Watchdog got hold of the
records during a 24-hour window when they were public. Trinity
asked that the records be sealed until a hearing can determine whether they are
stolen or forgeries.
“(T)here is a Minute Order and pending seal order in the case regarding
this very document – which is untrue, defamatory, and attempts to use documents
that appear to be stolen. Public disclosure could violate that order,” Trinity
attorney May told us.
“It is nothing more than a desperate attempt by “uncle McVeigh” and his
lawyer to avoid having to pay Trinity’s (and all defendants) lawyer’s fees and
costs in defending against this contrived suit, and in filing an anti-SLAPP
Motion for dismissal of the McVeigh case. The anti-SLAPP Motion made plain
that, as a matter of California law, McVeigh’s claim of malicious prosecution,
etc., is utterly baseless and he is responsible to therefore pay the legal fees
and costs of Trinity, et al. The dismissal of the case will not alter this
responsibility.
“…(S)everal of the documents appear to have been fabricated or altered by
Koper. That is a very serious concern, and until I can determine authenticity,
let me properly reiterate what I have said previously: Trinity takes its
financial stewardship seriously, and this is why it conducts two separate comprehensive
and independent annual reviews. The first review covers all financial
procedures, transactions, and record keeping in order to insure GAAP and FASB
(Financial Accounting Standards Board) compliance. The second covers IRS
compliance. Trinity properly responds to these audits every year.”
Confused? Hold on.
McVeigh’s complaint against Trinity and its lawyers — of malicious
prosecution in connection with a $63,000 loan he received
through Trinity companies — is one of a swirl of suits and countersuits between
the parties. Tymothy MacLeod, attorney for both Koper and
McVeigh, said McVeigh had indeed dismissed his complaint against Trinity in Orange
County Superior Court, as May maintains, but only in an attempt to
consolidate numerous suits in federal court. McVeigh’s complaint will be
proceeding in state court nonetheless.
More from the now-under-wraps documents, from Koper’s POV, soon.
(Note: The
bolding of names and numbers is our style here on Watchdog; this type does not
appear in the original documents. )
More nonprofits:
- Suit
alleges TBN covered up rape of 13-year-old
- From
beloved granddaughter to exiled accuser: Brittany Koper and TBN
- Settlement
reached in TBN age discrimination case
- TBN suit:
Senior workers ‘too old, too sick, and too lazy'
- Mystery
math: How much do CSU bigwigs make?
- Relatives
threatened to ‘destroy' Crouch granddaughter
- TBN
extravagance? Read internal memos for yourself
- TBN to
judge: Stop Watchdog blogger
- Extravagant
spending a pervasive issue for Trinity, internal review says
- Confidential
memo: ‘TBN practices ... violate the IRS Code'
