Forty Million on Lawsuits: Will There Be No Reckoning?

By A.S. Haley
Stand Firm
February 14, 2014

http://www.standfirminfaith.com/?/sf/page/31140

In September 2010, I put up an analysis, based on ECUSA’s monthly statements and their annual audited statements through 2009, of how much ECUSA and its major dioceses had spent on attorneys’ fees and other costs associated with the (then) 60+ lawsuits as catalogued here (see pgs. 23-26). In order to give as complete a picture as possible, I also included the latest ECUSA budget projection of legal expenses through the triennium 2010-2012.

One has to realize that ECUSA does not make it easy to discover the amounts it spends on litigation—the leadership at 815 Second Avenue would obviously prefer that those who sit in the pews every Sunday and contribute their pledges not be aware of just how many millions have been squandered on ECUSA’s scorched-earth litigation policy.

I am fully aware that those are fighting words to all those who support the current administration at 815 Second Avenue: “Prove it!” they say. Well, in the course of this post, I intend to do just that. So please suspend your judgment until you have digested the entire piece, and checked out all the links to my sources—which are uniformly from ECUSA’s own published financial statements and official minutes. I am a lifelong Episcopalian myself, and I am utterly ashamed and outraged by what the Presiding Bishop and her cohorts are doing in our Church’s name.

In September 2010, I concluded that ECUSA and its Dioceses of Virginia, Los Angeles and San Diego had committed a combined total of Twenty-one Million Six Hundred and Fifty Thousand Dollars ($21,650,000.00) on litigation since the year 2000. This number I broke down as follows:

Amounts spent 2001-2006 (mostly during the term of Presiding Bishop Frank Griswold; amounts before 2005 estimated, as no longer available online):

$1,344,000

Amounts spent 2007-2009 (the first triennium of Presiding Bishop Jefferts Schori—including deposition costs under Title IV):

$10,525,584

This amazing total—nearly eight times (in just three years!) what the former Presiding Bishop had spent in six years)—was fully documented from ECUSA’s audited financial statements and monthly statements of account from January 2006 through the end of calendar 2009.

To that total I added the $3 million budgeted for legal expenses in the triennium 2010-2012; the $1,003,000 budgeted (incredibly precise!) for depositions and other Title IV proceedings in that same period; and the $1,775,000 in grants extended to rump dioceses to assist them in prosecuting lawsuits through just September 2010—bringing the total to $16,303,584.

Thus the administration of the Most Rev. Katharine Jefferts Schori alone was responsible for the commitment of more than Sixteen Million Dollars of ECUSA’s resources to suing her fellow Christians during just her first three years in office. What an unenviable—and completely unChristian—accomplishment!

But we still could not yet say we had taken everything into account. For the Diocese of Virginia had taken out a $2 million line of credit to cover the litigation against eleven CANA parishes which the Presiding Bishop insisted, as “the new sheriff in town”, that the Rt. Rev. Peter Lee undertake on ECUSA’s behalf. Out in Los Angeles and San Diego, where Bishops Bruno and Mathes had relentlessly pursued six departing congregations for nearly six years, I estimated that they, too, had spent approximately as much. And those amounts, plus the amounts then budgeted for future “legal assistance to dioceses”, brought the grand total to $21,650,000.00.

Well, that was then, and this is now—some three years and five months later. The figures budgeted in 2010-2012 have become actual figures expended, and we have a new budget for the triennium 2013-2015 (plus actual figures through November 2013). Moreover, the number of lawsuits has increased by 50%, as catalogued in this recent post. Accordingly, I have taken this occasion to go back through all my earlier figures and check them against the available sources: in some cases (even with the supposedly audited financials!) they have changed. Thus it is high time to do a new tally, from scratch.

The amounts the Church spends due to its litigation policies come in a number of different categories. Not all the categories are shown in the same financial documents. For instance:

The yearly audited financial statements, which are the most accurate source, do not break out “litigation expenses” as a separate category, but instead lump them in with all the other general operating costs of the organization. But what they do disclose are (a) the amount of moneys loaned (not granted outright) to rump dioceses; and (b) the amount of legal out-of-pocket expenses contributed to ECUSA by the Presiding Bishop’s Chancellor’s law firm, Goodwin Procter.

(Note: While the IRS does not allow lawyers to deduct the value of their services rendered pro bono, it does allow them to deduct out-of-pocket expenses incurred in performing the services—travel, hotel and meals; telephone, freight, postage and similar amounts. In order to keep track of ECUSA’s full legal expenses, these contributed costs must be added back into the totals, or else those totals would appear artificially low in comparison to other corporations incurring similar legal services and related expenses. Moreover, ECUSA includes their amount in its income—see the auditors’ note—so they have to be part of its expenses, as well.)

The monthly statements of operations, though not audited, are the best source of information for (c) the cost of Title IV proceedings—at least until recently—and (d) the amounts paid to Goodwin and Procter over and above their donated services, as well as to local law firms retained in various states by ECUSA.

The minutes of the Executive Council are the best source for (e) the amounts of grants and credit lines extended to the rump dioceses. (The audited financials show only the amounts actually borrowed against credit lines as of the year end; they do not disclose the total amount of credit lines extended.)

The budgets adopted by General Convention and the Executive Council are the best detailed source for actual moneys spent in the past on particular line items, and they are the only source for (f) the future anticipated legal expenses of the Church. These are most often wildly understated, and Executive Council is constantly having to revise them upwards.

Using those official ECUSA sources, therefore, I reckon that the accumulated total of moneys expended and committed to litigation and related events over the years 2000 through the end of calendar 2015 break out as follows.

For the Griswold years (2000-2006), the total is somewhat higher than estimated previously, because I found an entry for “Legal Support to Dioceses” paid in calendar 2006 in the amount of $443,519. The new total is:

TOTAL 2000-2006: $ 1,777,180.00

For the first triennium under Presiding Bishop Jefferts Schori (2007-2009):

Title IV Expenses: $ 1,702,222 —i.e., almost as much as PB Griswold spent on everything legal!

Litigation Expenses (including contributed expenses): $ 8,392,584

Grants to Sustain Rump Dioceses: $1,200,000

TOTAL 2007-2009: $ 11,294,806.00

For the second Jefferts Schori triennium (2010-2012):

Title IV Expenses: $ 992,921

Litigation Expenses (including contributed expenses): $ 4,933,807

Grants to Sustain Rump Dioceses: $ 575,000

Loans to Rump Dioceses: $ 2,285,000

TOTAL 2010-2012: $ 8,786,728.00

Jefferts Schori Actual Total, 2007-2012: $ 20,081,534

Plus: Griswold Total, 2000-2006: $ 1,777,180

GRAND TOTAL, 2000-2012: $ 21,858,714

(Compare that with the estimated total for the same period of $21,650,000 in my September 2010 post—which included estimated amounts spent by individual dioceses.)

We do not know yet the final, year-end figures for 2013 (the monthly statements have been posted thus far only through November). However, 2013 legal expenses alone (not including contributed expenses) total nearly $1.7 million for the first eleven months of 2013—almost $800,000 over budget. (This item includes in-house legal staff support, such as the salary of the Presiding Bishop’s Special Assistant for Litigation, Mary Kostel.) Add in estimated contributed expenses of $500,000 and the total thus for 2013, exclusive of grants, loans, and Title IV expenses (which the Treasurer no longer itemizes), and the total spent for all of 2013 will easily come to $ 2.4 million. Now include the $735,000 authorized in grants and loans to just the South Carolina rump diocese in 2013 (after a further $300,000 increase authorized in June), the $785,000 authorized for San Joaquin, plus amounts to other dioceses, and the $270,000 spent on Title IV (per the 2014 budget, line 277), and you easily reach $4.2 million for all of calendar 2013.

There is little reason to expect the 2014 totals to be any less. The Executive Council just authorized another $500,000 to the rump dioceses for this year, and spending on litigation will continue in South Carolina, San Joaquin, Quincy and Fort Worth.

If that level of spending continues through 2015, the total for the triennium will be on the order of $12.6 million. Thus, total ECUSA legal expenses from 2000 to 2015 will amount to (roughly):

GRAND TOTAL, 2000-2015: $ 34,500,000

Just to put that number into perspective, take a look at line 362 in the latest (2014) budget. It is the same amount as ECUSA expects to spend for ALL of its operations in calendar 2013! And we are not done yet.

Now add in the amounts spent by individual dioceses (Los Angeles, San Diego, Ohio, Virginia, Tennessee, etc.) and you can easily see how, just by the end of 2015, the total spent on litigation-related items within ECUSA will easily be WELL OVER FORTY MILLION DOLLARS.

In other words, the total estimated amount has nearly doubled since I first estimated it three years ago. That is an unconscionable waste of non-profit resources. The puny amounts recovered in property values to date pale into insignificance compared to the amounts being squandered in seeking to recover them.

And the administration at 815 is becoming less and less transparent in disclosing the waste on this huge scale. No longer do they break out “legal aid to dioceses” or “Title IV expenses” as separate line items in their monthly statements. Will no one in the Church—House of Bishops, House of Deputies, clergy, or laity—hold them to account?

In the next post I shall show how ECUSA’s budgeting process is an utter joke when it comes to getting a handle on these costs. If ECUSA were being run like a proper non-profit, and in full compliance with its own canons, the discrepancies between actual and budgeted legal expenses would be an accounting scandal, and would lead to firings all the way up the line.

Ultimately, the New York Attorney General is the officer who has the jurisdiction and power to look into this waste of non-profit assets, and it is high time he did so. After all, at the request of both clergy and laity he invoked his jurisdiction over the scandal involving Treasurer Ellen Cooke, and that involved only a few million dollars: chump change in comparison to what is going on now.

For over seven years now, the Episcopal Church (USA) has had an out-of-control litigation budget. It is a scandal of simply enormous magnitude. It must—and hopefully soon will—be brought to a halt.