Compare Gospel for Asia’s Image with Reality

In 2019, Gospel for Asia is celebrating 40 years in business. This comes the same year GFA settled a fraud lawsuit (Murphy v. GFA) for $37-million. The settlement was just finalized with about 26,000 claimants seeking just over $109-million. Not everybody will get what they donated but this shows that donors weren’t happy.

On their Patheos blog, an unnamed staff member wrote a glowing vanity piece about GFA founder K.P. Yohannan. I would like readers to compare that piece with an email from David Carroll to Yohannan from 2015. This email came to light during discovery in Murphy v. GFA. At issue in the case was the use of donor funds. Plaintiffs Garland and Phyllis Murphy contended that GFA didn’t use all donor funds as donors intended. As a part of fund raising, GFA made representations that the funds were all going to mission work and were urgently needed. The discovery process pulled back the curtain on GFA’s claims and found that the reality wasn’t always what they claimed.

The narcissism in this article is obvious. The blog is GFA’s and the person writing it is an anonymous GFA staffer and yet readers are expected to take the following statements at face value:

They, and others like them, can look back and stand in awe of how an Almighty God has blessed their ministries abundantly and beyond imagination.

I know a man exactly like that. His name is Dr. K.P. Yohannan. He is one of the humblest and most dedicated men I have ever known. Forty years ago, he responded to God’s call to minister to the millions of people in Asia. Little did he know that in 2019 he would be able to look back at the remarkable things the Lord did over the past 40 years.

By any objective assessment, GFA has not had such a good record since 2014. The organization has been embroiled in scandal, membership in the Evangelical Council for Financial Accountability was removed, they lost other symbols of financial integrity, they lost their registration as a charity in India, at least one of their schools in India closed due to financial problems, and they have to pay a $37-million settlement to donors. Yes, K.P. is a remarkable CEO.

Leaving aside the fact that GFA hasn’t had a great record of late, the picture presented is that GFA is taking all of that money using it to help the poor and needy. Since all of this is done for the Lord, surely there wouldn’t be any deception or double talk.

Now let’s pull back the curtain a bit.

In the fraud lawsuit, an email from Chief Operating Officer David Carroll to CEO K.P. Yohannan surfaced which presents a different picture. Here is the email. 

Sir, I need to share with you where I am over this situation. I will try to summarize for brevity sake. We have a saying in our country: The numbers don’t lie. The published FC-6 reports show westerners that we have either sent money to the field raised for National Ministries and Bridge of Hope to fund the hospital and the corpus fund, or our FC-6 filings are filed wrong. Either way, this is a huge problem. It appears to those reading these that we might have been dishonest to the donors (fraud), or been dishonest to the Indian government, (a PR nightmare at least). Sister Siny’s report below will, in my opinion, do little to satisfy those who are printing out and analyzing our FC-6 reports. I am sorry for not expressing more confidence than this. I think we may have used money raised for National Ministries and Bridge of Hope for the hospital.

I think that India feels that we raise money and send it. I think that India feels that we raised money and sent it to them and they can legally use it any way they deem fit. I hope that I am wrong, but I am doubtful. I also don’t think that it is an intentional wrong, but if I am correct, it is a huge wrong. We’ve spoken at hundreds of churches with tears asking for the National Ministries and Bridge of Hope support, and the FC-6 that is public says that we sent much of that money for the hospital and the reserve corpus funds.”

“It doesn’t matter that we have now moved the money out of the corpus fund because according to the public FC-6 reports, we have been building them up for years. Moving the money only serves to confirm the feelings of guilt to outsiders.”

“I think the only way for us to handle the inquiries raised by Bruce and others is to refer them to our Indian office. Mr. Throckmorton (unless a miracle happens) will get this information and may even begin an investigation of us. We can say all we want that we don’t have anything to do with the Believers Church or the field and that you are only the
spiritual head of the church and that finances are handled by others but you, but as a practical matter, that will not hold up. Can the field find a way out of this situation? I too am very nervous. I have always believed in total accountability of the field, yet the FC-6 reports provide numbers that, as a former auditor, I cannot just explain away with a simple explanation. I, and the world, will need numerical proof now, and I do not have the ability to get it from the USA end. Only the field can explain it, and I am in the hot seat in this crisis and I feel a lot of pressure.

If I say, well, it is not my problem, it’s a field problem, it’s as good as saying we are guilty of misappropriation, If I say “The FC-6 reports are filed inaccurately on purpose, due to the hostile environments we work in, it gets the field in trouble and turns the attention to them. I get the feeling that, although we are not financially dishonest, we are financially reckless — the stockpiling of money in the RBC [Royal Bank of India] account
and then the hurried transferring of it to the field, the Hong Kong account, et cetera. Sir, may I please have my name taken off of the RBC account as soon as possible?”

There is much in this email which is inside baseball. One would need to follow this story closely to understand all of what Carroll is worried about. But note this: He is worried. He is worried because GFA was caught in misrepresentations and feared that Bruce Morrison from Canada and/or I would investigate the matter further to expose it all. And we did.

For the purpose of this post, I want to highlight one misrepresentation. K.P. Yohannan told people that he had nothing to do with finances in India, that he didn’t control anything financially there. However, here is what David Carroll said about that.

We can say all we want that we don’t have anything to do with the Believers Church or the field and that you are only the spiritual head of the church and that finances are handled by others but you, but as a practical matter, that will not hold up.

Yohannan told the the Evangelical Council for Financial Accountability and his staff the story that he had no power over finances in India. However, in this email, David Carroll acknowledged that Yohannan’s story would “not hold up.” Click this link to hear the audio of the staff meeting in 2014 when he and Carroll told the staff about a $20-million gift from India which was used to complete the GFA headquarters in Wills Point, TX. The transcript can be read here.

Carroll could see there was a problem with donor funds going into a corpus fund (a kind of rainy day fund) and being spent on a medical center and other projects instead of on what donors intended. Yet, GFA was officially denying all of this. Eventually, the ECFA removed GFA from membership when these discrepancies could not be cleared up.

GFA still hasn’t admitted publicly that anything was ever wrong. They haven’t been readmitted to ECFA membership. They were sanctioned by a federal judge for delaying discovery during their fraud trial. There isn’t an indication that anything has changed. For all we know, reality is still much different from what they are presenting.

One aspect of the fraud case settlement which might serve to bring GFA into the light is the addition of two new board members to GFA’s board. Plaintiff Garland Murphy and an unnamed person will be added. Provided GFA honors the intent of the settlement, there may be some light at the end of this tunnel. For now, the public would do well to discern reality from image.

 

 

Questions for Superstar Francis Chan About Gospel for Asia

Francis Chan is a superstar pastor who has a franchise called Crazy Love™.  There is a Crazy Love book, study guide, website, ministries (plural) and store where you can “shop now” for all of Chan’s books. Like all superstars, he also has a church planting network. We used to call them denominations. His is called We Are Church. He is pretty cool.

Anyway, he is also a board member of Gospel for Asia. That has always confused me because GFA hasn’t had such a cool recent history. But Francis Chan thinks everything is fine. In fact, he is out saying that GFA hasn’t done anything wrong, telling Christian Post that he researched the matter with a trusted friend and found nothing wrong with GFA’s finances.

I have written Francis Chan in the past and he first had his Crazy Love assistant Chaz answer me. When Chaz didn’t actually answer the question I asked, I wrote back but Crazy Love stopped responding.

In response to Francis Chan’s statement about GFA, I still have some questions. Maybe someone at We Are Church or Crazy Love will tell someone who will tell someone who can ask Francis Chan about it.

Dear Francis Chan:

One, if there were no financial problems at GFA, then why did Evangelical Council for Financial Accountability take the rare step of evicting the organization from membership? In case you didn’t read the report, you can read all about it here. Chaz can print out a copy for you.

Two, why did a federal judge appoint a special master to oversee GFA during Murphy v. GFA? I think you know the answer. GFA couldn’t verify their expenses and the judge had given the leaders months to do so. Being sanctioned by a federal judge isn’t a sign of an honest broker.

Three, why does His Eminence The Most Reverence Metropolitan Dr. K.P. Yohannan need to have a personal fortune when he is the supreme Metropolitan of Believers’ Church in Asia? You looked at his tax returns in the U.S. but did you consider the vast wealth of Believers’ Church in Asia? How does being the patron of a state of the art medical center and medical college in India figure into one’s empire? Why does the church need a soccer team? What needs or wants are not met when the church supplies everything due to your position as supreme temporal and spiritual authority?

Four, why did GFA cover up the transfer of $20-million from Canada to India to the U.S. for the completion of the Texas headquarters? I assume you’ve been to the compound. I hear it is pretty nice. You probably wouldn’t need a big income if you have everything you need provided for you by donors who think their money is going to evangelism and poor children in Asia.

Five, why hasn’t GFA told donors that Believers’ Church and GFA lost registration as a charity in India? When Compassion International lost their registration, it made the New York Times. When it happened to GFA, GFA told several different false stories. It still isn’t clear how funds are getting into India, if they are getting in at all.

I have more questions but that should do for now. As a board member, you will be busy meeting your two new colleagues, Garland Murphy and whoever he helps chose to take Gisela’s place. Also, you all are going to have to raise the $37-million for the settlement. Since a lien will be on the Texas headquarters, you will be really busy raising money to pay the $11-million you can’t get from “the field.” Probably, raising $11-million to pay a court settlement is really going to keep the board busy. Donors might be a little skeptical of an organization raising money to pay former donors who settled a RICO suit.

Crazy.

Love, The Blogger

P.S. In case you haven’t read the Murphy v. GFA settlement, it is here.

Was Gospel for Asia Vindicated by the RICO Settlement?

Reading the Gospel for Asia press release about the settlement of Murphy v. GFA (RICO lawsuit), one might think GFA came away vindicated. In the settlement document, GFA proclaimed their innocence and both parties agreed that all funds given by donors “to the field” went “to the field.”

Read the Murphy v. GFA Settlement

However, GFA still isn’t being transparent with the public on multiple counts. The “field” is a big place and just because funds get to Asia doesn’t mean they were spent as designated by donors. The plaintiffs did not stipulate to that nor did the settlement document attest to that.

In the past, I have provided evidence that GFA has collected funds to send to Asia but used them for purposes other than intended by donors.  A tax court in India also asserted the same thing. Then, there is the matter of $20-million which came back from Asia to help finance the Texas headquarters. Donors did not give $20-million to finance a compound in Wills Point, but at least some of those funds first went to the field before they came back to Texas.

Furthermore, GFA still isn’t being transparent with donors about the charity registration situation in India. GFA and Believers Church in India lost their registration status in India and cannot directly take foreign contributions. No doubt GFA is sending funds to shell organizations in India but this flaunts the law there. I and others have repeatedly asked GFA how Bridge of Hope and flood relief funds are getting to Indian recipients, but they have given false answers. If GFA is actually going to try to get membership again in the Evangelical Council for Financial Accountability, the organizational leaders will have to be accountable to the public.

Although most of the GFA board remains intact, Garland Murphy and one more outsider will join the board soon. In addition, a subcommittee of the board –which does not include Yohannan or his son — will report to the federal judge for three years. All of this should make the board more transparent. When GFA will not answer questions or provide answers, I know two board members who will have no incentive to keep any secrets.

More than transparency, I hope the board becomes independent. The board will be required to learn about fiduciary responsibility and act accordingly. Given the precarious place K.P. Yohannan has taken GFA in recent years (loss of ECFA and NRB memberships, loss of recognition with federal government’s giving campaign, RICO lawsuit, etc.), I have to believe any reasonable board would have to look at his status as CEO. The track record isn’t good. Perhaps it is time for the board to act in the interest of GFA.

In short, GFA lives on but has not yet been vindicated.

Gospel for Asia Suing Insurance Company over Attorney Fees in RICO Case

Gospel for Asia has retained Locke Lord to defend them against the allegations of fraud by Garland and Phyllis Murphy. One of their attorneys is Harriet Miers, former White House counsel to President George W. Bush. Furthermore, GFA has to pay the costs of a Special Master since they were sanctioned by federal judge Timothy Brooks. No doubt the costs are high for all of that.

According to a suit filed by GFA in March, GFA’s leaders (K.P. Yohannan, David Carroll, Pat Emerick, etc.)  hoped to recover those legal fees via an insurance claim with Philadelphia Indemnity Insurance Company. Although details are sealed, it appears the insurance company declined to fully pay GFA’s claim. Here is a brief statement of the dispute from a recent court document.

1.1 GFA Parties bring this action for Philadelphia’s breaches of its common law duty of good faith and fair dealing and the Texas Insurance Code for unfair settlement practices and for failing to promptly pay covered claims as a result of its wrongful denials and/or wrongful delays in providing defenses in lawsuits against them.

1.2. Philadelphia denies that any reasonable defense fees or expenses remain unpaid and contends that, accordingly, this case should be dismissed. Additionally, Philadelphia denies that it breached its common law duty of good faith and fair dealing or the Texas Insurance Code. Philadelphia contends that it had a reasonable basis for the coverage positions that it has taken and liability was not reasonably clear.

For more detail, see GFA’s original petition.

One crucial court document is sealed and Philadelphia Insurance declined to speak to me. In plain language, it appears that the insurance company has found a reason why they believe they are not liable to pay the claim GFA made. It may be that Locke Lord’s fees are beyond reasonable or that Philadelphia believes GFA is at fault in some way. In any case, the trial is to be by jury in late 2019, probably after the RICO trial.

GFA and Lawsuits

For a Christian ministry, GFA here and abroad, is involved in many legal battles. Aside from the RICO suit, and now the action against their insurance company, GFA has sued the Church of South India for defamation. Back in 2015, GFA threatened Patheos with legal action when I published audio of a staff meeting. I wonder how many donor designate their funds for the legal defense fund.

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Image Fair use, GFA Facebook page

K.P. Yohannan’s Believers’ Church to Halt New Admissions to Caarmel Engineering College Amid Financial Crisis

According to the Indian newspaper The Hindu, Believers’ Church Caarmel Engineering College is closing amid a financial crisis. The news provoked a demonstration at the college on Monday. According to video posted on YouTube earlier this week (and embedded below), the college maintains the school is halting new admissions due to a financial crisis but that current students will be able to finish their programs. There were no promises made going forward. Thus, the future of the school is uncertain.

The Hindu report said students and parents were in a panic because the “college management said that they were unable to run the institution further due to financial crisis.”

Although I am not sure of the significance of this, the protest was triggered by the institution being excluded from the yearly allotment list published earlier this week.

Foreign Donations Helped Fund the Engineering School

Caarmel has been the recipient of Gospel for Asia -U.S. donations in the past. According to a filing in an Indian tax court, Gospel for Asia – India and Believers’ Church acknowledged that they used foreign donations for expenses at Believers’ Church Medical Center and Carmel Educational Trust (the trust which manages the engineering school). The quote below comes that court filing. Shri Venkitachalam represented GFA/BC:

On the contrary, Shri Venkitachalam, the ld.representative for the assessee submitted that both the assessees advanced funds to other registered trusts which have similar objects. According to the ld.representative, the assessee advanced funds to BCMET for construction of hospital building. BCMET is also a registered trust u/s 12AA of the Act. The ld.representative further submitted that Carmel Education Trust also a registered charitable trust u/s 12A of the Act was given funds by the assessee to carry out their charitable activities.

GFA/BC hoped to avoid paying taxes on the deflected income. The tax court had this to say about the income redirected to Caarmel and the medical college:

We have considered the rival submissions on either side and also perused the material available on record.It is not in dispute that substantial income of the assessee trust was not used by both the assessees for the purposes for which they were formed. (emphasis added)

This case in itself should help address issues in Murphy v. GFA. In that case, the Murphys assert that GFA didn’t use donations as donors intended. GFA acknowledged as much in their defense against the tax assessor. However, in all of the literature I have read about GFA, I have never read an appeal for donations to the Believers’ Church Medical College or the Caarmel Engineering College. These facilities charge medical fees and tuition. I suspect most GFA donors would be surprised to learn they exist.

In any case, it appears that Caarmel Engineering College is in some jeopardy. This video shows a vigorous protest and upset crowd over the situation.

UPDATE: If I am understanding the English of the speakers in this video, the closure may only be for one class year. The financial crisis may cause the school to fail to begin a class while they may be able to complete the work of classes underway. The situation does seem to be uncertain which has triggered a lack of trust in management.

At one point near the end of the video, a student asks why a financial crisis in Believers’ Church should effect the school since the school generates revenue through tuition.

With a little more digging, I found this video. At 53:53, a man who appears to represent Believers’ Church stands to read a statement which says essentially that Caarmel will not take new students during the 2018-2019 school year due to a “financial crisis” but the current students will be able to continue their studies.

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K.P. Yohannan at Global Anglican Future Conference as a Delegate

Always the colorfully dressed Metropolitan, leader of Believers’ Eastern Church and CEO of Gospel for Asia K.P. Yohannan served as a delegate at the recent GAFCON 2018.

IMG_9465

GAFCON stands for Global Anglican Future Conference and was initiated after the U.S. Episcopal Church consecrated gay man Gene Robinson as a bishop in 2003.

K.P. was featured in an article about the fashion on display at GAFCON.

The extravagantly-coiffured are not limited to the ladies – a couple of Anglican males would give the sisters a run for their shekels. It has been whispered that there will be a competition for the most outstanding beard – a tip that came three months late for me. Seemingly set for any time, any day, any place, the Indian Metropolitan, the Most Rev. K.P. Yohannan, from Believers Eastern Church in Kerala, on the Indian eastern seaboard, would be hard to beat, being imperial in both attire and beard. Yohannan’s bright red cassock, white mane, and genteel character make him an instant attraction for those seeking trip-defining photos to take home.

Apparently, Believers’ Eastern Church is considered to be an Anglican church. GFA has always portrayed their work as evangelical and Believers’ Church as evangelical.

GFA recently had a petition for writ of mandamus denied by the 8th District Court of Appeals in their fraud case Murphy v. GFA. The practical impact of the Court of Appeal’s action is that a special master will be appointed to open GFA’s records and oversee discovery in the case. GFA had been sanctioned by the federal judge in the case for abusing the discovery process and failing to provide documentation of how donations had been spent in keeping with donor intent.

For more on Gospel for Asia see this link: Gospel for Asia

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Images: GAFCON logo – GAFCON.com; K.P. Yohannan – Embedded via Flickr

8th District Court of Appeals Denies Gospel for Asia’s Petition for Writ of Mandamus

Today, the 8th District Court of Appeals denied the petition from Gospel for Asia a writ of mandamus which would have vacated Judge Timothy Brooks order for sanctions and the appointment of a special master to oversee discovery in the fraud case against GFA.

The denial in full is as follows:

UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
___________________
No: 18-2322
___________________
In re: Gospel for ASIA, Inc.; Gospel for Asia-International; K.P. Yohannan; Gisela Punnose; Daniel Punnose; David Carroll; Pat Emerick
Petitioners
___________________________________________
Appeal from U.S. District Court for the Western District of Arkansas – Fayetteville
(5:17-cv-05035-TLB)
___________________________________________
JUDGMENT
Before BENTON, KELLY and GRASZ, Circuit Judges.
Petition for writ of mandamus has been considered by the court and is denied. The petitioners’ motion to seal appendix is denied. Mandate shall issue forthwith.

June 26, 2018

This will allow the sanctions from Judge Brooks to go forward and is a victory for the Murphys. If Judge Brooks follows through, then a special master will be appointed with full access to the records of GFA thus allowing discovery to proceed.

Gospel for Asia will have to absorb the cost of the special master and should alert donors to this reality. A federal district judge and now a Court of Appeals (along with the Evangelical Council for Financial Accountability) have taken the position that GFA is not being forthcoming with information.

We may be getting closer to learning if there is any evidence to validate GFA’s claims that they have spent money as donors intend. The plaintiffs contend GFA’s leaders conspired to divert donations from intended causes such mission work or helping the poor to for profit enterprises or other purposes which donors didn’t intend. Now that the Court of Appeals has cleared the way for discovery to proceed, the plaintiffs and eventually the donor public may get to see exactly what GFA has done with millions in donations.

 

ECFA Report: Gospel for Asia Made Inaccurate Statements and Withheld Information

In a 2015 Evangelical Council for Financial Accountability report to Gospel for Asia founder and CEO K.P. Yohannan, ECFA Vice President John C. Van Drunen delineated a devastating list of findings from a lengthy and in depth investigation of Gospel for Asia’s financial practices. The end result of the investigation was the eviction of GFA from the  ECFA. Due to the relevance of the investigation conducted by the ECFA to the current RICO and fraud lawsuit against GFA (Murphy v. GFA), I am highlighting pertinent parts of the report in a series of blog posts. Yesterday, I pointed out that GFA admitted that field partners didn’t track expenditures as precisely as they took donations. Today, I show that ECFA accused GFA of making false statements and withholding information.

Toward the end of the report, Van Drunen made an observation about the process of collecting information.

Certain information provided to ECFA by GFA that was crucial to our review was, at least initially, inaccurate.

Our review process has covered nearly four months. Certain pertinent information about the compliance issues was not revealed to ECFA by GFA until late in the review process.

We have learned significant information from sources unrelated to GFA that we should have learned directly from GFA.

Although I have been critical of the ECFA in the past, I must credit them in this case. Mr. Van Drunen and his staff deserve credit for persisting through initial deflection and distraction. Also, I am aware that information published here (“unrelated to GFA”) made it possible for the investigation to ask certain questions which might have come up otherwise.

I want to point out that GFA didn’t fully answer all of the questions nor was the ECFA able to verify all claims. Take this issue for instance:

16. Claims of inappropriate use of funds under an Indian tax assessment. ECFA received concerns that an Indian Tax Court case indicates that GFA India misused funds for purposes other than what they were intended. ECFA reviewed this matter for compliance with ECFA Standard 4. On July 27, GFA’s staff indicated that this matter was a false charge that was later remanded and that GFA India was absolved of any wrongdoing in this matter. GFA’s staff was not able to provide any documentation other than reports from field partners on this matter.

This concern was brought to light by my blog post from July 17, 2015. It appears from the court record that GFA was to pay a tax which they probably did. However, that doesn’t change the finding that GFA inappropriately used funds. GFA has never produced a court record absolving them of wrongdoing. They had a chance to do that to ECFA but did not do so.

GFA and Accountability: A Pattern

As Van Drunen’s reaction demonstrates, Judge Brooks is not the first observer to express frustration with GFA’s answers to questions about accountability. In one Court order, Brooks expressed his frustration with GFA’s response to discovery requests, writing at the time:

I feel like when I read the defendants’ answers and when I read their response that it is as if this Court had not already addressed and ruled on some of these same issues at least twice, if not more and, yet, here we are again.

Eventually, GFA’s delays led Brooks to sanction GFA and signal his intention to appoint an attorney (special master) to oversee discovery.  Given the history, going back before Murphy v. GFA, oversight seems like a good idea.

 

ECFA Report: Gospel for Asia Solicited Funds for Narrower Purposes Than the Eventual Expenditure of Funds

Since 2015, I have investigated the mission giant Gospel for Asia. First privately and then publicly, former employees of GFA sounded alarms about financial and personnel management. A former donor alerted me to the situation and eventually numerous insiders in India and the U.S. came forward with information about the second largest mission organization in the U.S.

At present, former and current leaders of GFA are defendants in two lawsuits which allege that they conspired to defraud donors by using donations in ways contrary what donors intended. One case is stalled in federal court but the other — Murphy v. GFA — is moving forward.

At the heart of Murphy v. GFA is the allegation that GFA didn’t use donations as donors intended. The judge in the case, Timothy Brooks, ordered GFA to produce documentation which could address this basic allegation. Because GFA has not produced documentation responsive to Brooks’ requests, he signaled his intention to appoint a Special Master to oversee the discovery process.

Although the federal suit is potentially more serious, GFA has been investigated on these allegations before. In 2015, the Evangelical Council for Financial Accountability investigated GFA’s financial dealings and eventually evicted GFA from membership due to multiple violations of ECFA standards.

The ECFA Investigated GFA’s Financial Accountability

Prior to removing GFA, the ECFA prepared a report of their investigation which was provided to GFA board members. The report was written in the form of a letter dated September 2, 2015 to GFA founder and president K.P. Yohannan. Former board member Gayle Erwin provided it to me after his resignation from GFA’s board.

Periodically over the next few weeks, I am going to highlight aspects of the ECFA report which are relevant to issues raised in Murphy v. GFA. This is especially relevant to the decision of GFA attorneys to ask the 8th District Court of Appeals to force Judge Brooks to withdraw his sanctions and not appoint an attorney to oversee the discovery process.

Since the key issue in the case is about how GFA spent donor funds, I will start with what the ECFA found on this question. On page 4 of the letter, ECFA’s representative wrote:

6. GFA solicits funds for narrower purposes than the eventual expenditure of the funds.

During ECFA’s review on August 12, GFA staff provided a document to demonstrate the flow of funds from GFA to field partners. ECFA learned that donor-restricted donations are appropriately tracked by particular revenue classifications. However, we also discovered, and it was confirmed by GFA staff, that the disbursement of the gifts are tracked in much broader categories. For example, donations were received and tracked for 38 different specific items including kerosene lanterns, bio sand filters, chickens, manual sewing machines, blankets, bicycle rickshaws, and others, but related expenses were only tracked as “community development.” In other words, donations were raised for 38 specific items, with the donations pooled for expenditure purposes instead of expending them specifically for the purposes raised.

ECFA did not find any evidence that donors to the 38 different giving categories had awareness that their gifts were grouped and used in a broader category than the specific categories in which the gifts were raised. ECFA’s staff raised concerns regarding GFA’s compliance with ECFA Standard 4, 7.1, and 7.2 in raising funds for a particular purpose but then failing to document the actual use of those funds by the particular donor-restricted purpose.

Subsequent to this conversation, on August 16, GFA staff indicated that GFA field partners will begin tracking expenditures by specific item accounts to provide adequate transparency as to the use of designated funds.

The Murphys donated $34, 911 to GFA between 2009 and 2014. According to the information provided by GFA to the ECFA, expenditures were not tracked by specific item accounts until at least after August 2015. GFA led donors to believe their donations would go for one of 38 items, but GFA did not track the way those funds were spent to know if the funds were spent as intended. “Community Development” is a label which could obscure many activities and allow GFA’s field partners to spend money on things not contemplated by donors. This admission by GFA staff, some of whom are defendants in Murphy v. GFA, seems particularly relevant to the discovery process but has not been disclosed to the Court by GFA’s attorneys.

Thus, I am left wondering which account is true – the one in the ECFA report or the one offered by GFA attorneys in various Court pleadings. To the ECFA, GFA staff claimed field partners in India didn’t track expenditures by specific items accounts. In their filings, GFA attorneys have indicated that documents in exist in India.  In the recent writ of mandamus to the 8th District Court of Appeals, GFA attorneys wrote:

There are millions of such documents spread over 12,000 locations in almost every part of India. SASA00718-SA00720. Plaintiffs have made no effort to inspect those documents. Petitioners also secured and produced over 60,000 pages of bank statements, ledgers, and summaries from the field. (p. 16)

Presumably, when this case gets to trial, the ECFA report will be entered into evidence. It might be that ECFA staff who were involved will be deposed. Eventually, the admissions made by GFA staff regarding the same questions at issue in this trial will come out.

 

Gospel for Asia Asks 8th District Court of Appeals to Withdraw Sanctions

Gospel for Asia’s Writ of Mandamus Contradicts Investigation Filed by Evangelical Council for Financial Accountability

On June 18, Gospel for Asia’s legal team took the extraordinary step of petitioning the 8th Circuit Court of Appeals for writ of mandamus which, if granted, would vacate Judge Timothy Brooks’ sanction of GFA and his order for a Special Master to oversee discovery in the fraud case against GFA brought by Garland and Phyliss Murphy.  Earlier this month, Brooks found that GFA had willfully delayed discovery and failed to comply with court orders. In response, he sanctioned GFA and signaled his intention to give an attorney access to GFA’s records as a means to speed up GFA compliance with court ordered discovery of information in the case.

Despite being a nonprofit organization, GFA has faced repeated questions and frustration from Judge Brooks over the inability to produce sufficient responses to discovery requests. Now, with the prospect of additional transparency, GFA is seeking to have the action reversed through the Court of Appeals.

GFA’s Case

In their June 18 filing, GFA defendants claim that Judge Brooks should not have sanctioned them because they have done their best to produce documents showing how they spent donor funds. Judge Brooks recently ruled that GFA had not done enough and abused the discovery process. As a result, he sanctioned the mission group.

GFA now counters by claiming that Judge Brooks erred by assuming GFA leaders in the U.S., namely K.P. Yohannan, have more control over operations in India than they actually do. GFA attorneys claim Brooks presented no evidence that Yohannan has the power to compel the production of necessary documents.

GFA also claims that Judge Brooks did not adequately take into consideration the burden of discovery as compared to the claims raised by the case. Specifically, the Murphys donated nearly $35,000 but the discovery requests involved over $360-million in donations.

GFA’s 100% Claim

As a part of GFA’s prayer to the appeals court, they make some claims that are at odds with other information in the public record. GFA’s attorney’s state:

As explained in opposition to Plaintiffs’ certification motion, GFA encouraged donors to participate in the good works GFA was sponsoring in Asia, but it’s the representations it made to donors varied. ECF73. For example, GFA told many donors that “100% of what you give toward sponsorship goes to the field,” ECF1, ¶17, but donations must be made “without restrictions” with GFA retaining discretion to use donations to best fulfill its mission. ECF71 at 4. There was no guarantee that each of the $376 million donated would be used for its exact designated purpose.

There is little dispute that GFA frequently touted their claim to spend 100% of donations on the field. This became a point of contention after concerns about their spending practices in India became public. After that, GFA made some changes which allowed them more flexibility.

In 2015, when interviewed by the Evangelical Council for Financial Accountability, GFA representatives acknowledged the claim that they sent 100% to the field. On page 5 of the ECFA report to GFA, this admission is clear:

Use of funds restricted for the field for other purposes. On June 3, ECFA discussed GFA’s claim that 100 percent of field funds are sent and used in the field. GFA staff confirmed that this was accurate.

On August 24, ECFA was informed that GFA India made a gift to GFA of $19,778,613 in 2013 to complete GFA’s new office. On August 27, GFA’s staff confirmed that the funds relating to this donation were originally received by GFA as gifts restricted for the field and GFA transferred to field partners to fulfill donor restrictions.

It appears to me that the attorneys for all sides might want to interview the people who conducted and participated in this report. Here we have an admission that nearly $20-million was donated for field work but then was sent back to the U.S. for completion of the Texas headquarters. The ECFA report continues:

Reallocating gifts donated for field purposes contradicts GFA’s claim that 100 percent of funds are sent to the field. In fact, a significant amount of donations restricted for the field made a circuitous trip back to GFA and were used for the headquarters construction, as though they had never gone to the field. This appears to be a violation of Standard 7.1.

GFA claimed that the field partner (presumably Believers’ Church) took out a loan to pay back the $20-million and then used field generated money to pay back the loan. If that is the case, then it should be a simple matter to produce the documents.

In May 2015, defendant David Carroll told me via email:

Our field office is also audited by an independent accounting firm, to ensure compliance with regulations governing the recognition and spending according to donor designations of monies received.

While I don’t know if these audits have been offered as a part of the discovery process, I have to wonder if they actually exist.

GFA’s Claim About Control over the Field

GFA’s attorneys claim Judge Brooks used the wrong definition of control in reference to the GFA defendants. Furthermore, they claim no evidence was presented to support any theory of control. From the writ:

Plaintiffs did not introduce evidence to prove that Petitioners had control over the documents in India. Instead, the court’s decision relied on what it termed “the power of the pursestrings.” A00262, A00360. Because GFA made large donations to third parties in India, the court assumed that Petitioners could compel the third parties to produce the documents Plaintiffs wanted. The court’s assumptions are no evidence of control, regardless of which standard is applied.

The district court also assumed that control existed because Petitioner K.P. Yohannan held a prominent position in BEC, and his family members were allegedly involved in related entities. A00011. Of course, there is a significant difference between being an ecumenical leader in a church and having the legal right to compel production from over 12,700 churches all over India on demand. And involvement in transferring funds does not equate to the legal ability to compel production of documents (and bank records have already been produced). Plaintiffs offered no evidence to connect Yohannan’s family members with particular entities from whom documents were requested, nor do Plaintiffs show that Yohannan could compel these unnamed family members to use their alleged positions to obtain documents from any, much less, all of the 12,000 locations in India where documents are located. The district court’s reasoning is all based on assumptions of control, not evidence.7

Note here that GFA does not offer any evidence that Yohannan is without authority in India. Instead of asserting something, the attorneys simply cast doubt.

Why has GFA not produced documents describing Yohannan’s role in India?  The only Constitution which can be found designates him as the supreme authority over all matters temporal and spiritual. He doesn’t just hold a “prominent position;” Yohannan is the supreme leader.

Yohannan’s son-in-law Daniel Johnson is on the board of Believer’s Church as is Yohannan’s niece Siny Punnose. Yohannan sits on multiple boards of the hospitals, schools, Bridge of Hope, and other entities in India and around the world. Yohannan’s name is on all of the deeds of property owned by the church.

This notion of no control in India was doubted in 2015 by the ECFA as well due to the church Constitution of 2003 which is the copy given to ECFA by GFA. In that Constitution, Yohannan is referred to in this way:

By virtue of the ecclesiastical position, the Metropolitan Bishop is the legal authority on everything that belongs to the Church.

Based on their review of documents and GFA’s statements about Yohannan, ECFA came to the following conclusion:

Based on this level of oversight and control as well observed during our review, ECFA staff questions whether GFA has a sound basis to disclaim any control over the activities of field partners.

In some respects, the ECFA investigation was a preview of the Murphy case. If the RICO case turns out like the ECFA investigation, GFA might want to consider a new legal strategy.