Nationwide and Arkansas Class Certified in Gospel for Asia RICO Case

In a major development in the RICO lawsuit filed against Gospel for Asia in the Western District of Arkansas, Judge Timothy Brooks certified a nationwide class of people eligible to pursue a RICO claim against Gospel for Asia. He also certified a subclass of Arkansas donors. The specifics are below:

The judge gave GFA until October 10, 2018 to come up with a suitable plan for alerting donors about this action. This will give donors a chance to opt out of the class if they wish. I will report that process when announced here as well. For now, GFA donors can anticipate being contacted.

This is a significant milestone in this case and opens this action up to all donors (with the exceptions as noted in the judge’s order) since 2009. An exception not noted here are former employees of GFA who signed an arbitration agreement with GFA while employees. In another case involving former employees, a federal appeals court ruled that former employees pressing a RICO claim must submit to arbitration if that was a part of their contract. However, for all other donors, the class certification is a major development.

Read Judge Brooks’ Order

In a related development, Judge Brooks appointed a Special Master to oversee the discovery process. This had been anticipated since Judge Brooks had sanctioned GFA over their lack of response to discovery requests from the plaintiffs.

The Special Master is attorney David R. Cohen of Cleveland, OH. He will have freedom to inspect GFA’s documents wherever he believes is necessary to determine compliance.

I expected that GFA would have made an effort to settle before a Special Master was appointed. I suspect this is causing significant stress in Wills Point, TX and somewhere in Kerala, India.

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Image Fair use, GFA Facebook page

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.

 

Gospel for Asia Defendants Must Produce Evidence in RICO Case or Admit They Can't

Admirer kissing the hand of K.P. Yohannan. From his 2017 birthday video.
Admirer kissing the hand of K.P. Yohannan. From his 2017 birthday video.

On November 21, Gospel for Asia CEO K.P. Yohannan and his fellow GFA defendants were dealt a legal setback in federal court when Judge Timothy Brooks ordered them to respond to plaintiffs discovery requests for information. GFA initially argued that plaintiffs had made too many requests. Furthermore, GFA said they couldn’t get answers because GFA doesn’t control the relevant entities in India. Later, GFA argued that those entities (e.g., Believers’ Church) had decided to turn over documentation of how funds were used and hoped to offset the order on that basis. However, Judge Brooks ruled in favor of the plaintiffs.
The background is further explained in the order:

The matter currently before the Court, however, concerns a discovery dispute that has arisen between the parties [the plaintiffs Garland and Phyllis Murphy v. GFA] regarding information central to this case: namely, information regarding where donated monies were sent and for what purposes they were used. As is obvious given the nature of this case, Plaintiffs’ theory of fraud is premised on demonstrating that Defendants and their international partners did not spend the donated money in accordance with their donors’ wishes and, in doing so, violated promises allegedly made to these donors to do exactly that.
In order to demonstrate that these donations were not spent in conformity with these alleged promises, Plaintiffs served two prior sets of discovery on Defendants. Both of these sets, which included interrogatories and, by the Court’s count, at least 75 requests for production, sought to obtain information and documents that would either establish or refute Plaintiffs’ theory about where the donated money went. Given the information provided under seal to the Court and discussed during the September telephone conference, it is clear that Plaintiffs’ prior attempts to discover this crucial information were only partially successful. In short, these interrogatories and requests for production provided a wealth of information that illustrated how much money was collected by Defendants. But, this discovery information did nothing to clear up the confusion as to how this accumulated money was subsequently spent.
As such, Plaintiffs now once again seek answers to the same questions that they have been asking for months: was this donated money diverted to other causes and do Defendants have information or documents that would prove how the money was spent? In an effort to come at the problem from a different angle, however, Plaintiffs now seek to serve on the Defendants what amounts to over 1000 RFAs. While startling upon first read, this sizable number of RFAs consists entirely of the same six RFAs repeated for each of 179 different codes representing different categories of donations (e.g. a code for pigs and a separate code for bicycles).2 Each of these sets of RFAs is accompanied by a Request for Production asking for any documents in the Defendants’ possession that would reflect how this earmarked money was spent.

GFA was initially able to verify how much money they collected but the response to the requests for information did not address where the funds had been spent. Therefore, the Murphys came back with additional requests for information which GFA was hoping to avoid. GFA’s reasons were outlined in the order:

In their  Response in Opposition, Defendants object to this proposed set of discovery on several grounds, including the sheer number of requests, the improper nature of these requests given the purpose of Rule 36 of the Federal Rules of Civil Procedure, and the lack of need for these requests now that Defendants’ field partners have recently committed to providing information relevant to Plaintiffs’ inquiries.

Judge Brooks did not agree with these reasons and the rest of the order lays out his justification for the ruling against GFA. Regarding the number of requests, Brooks said the complexity of the case and GFA’s prior inability to get the information justified the plaintiffs requests. He declared their requests to be proper. Furthermore, in light of prior statements by GFA that they had no control over field partners, the discovery order was needed to make sure the facts could be determined.

Can Gospel for Asia Prove Money Was Spent as Promised?

On that question, GFA appears to be claiming two contradictory messages. First, the adamantly claim they are spending all funds as promised. But second, they are telling the judge and plaintiffs that they haven’t got control of the entities spending the money and so they can’t provide proof about how the money is being spent. Judge Brooks appears to be on to this contradiction. On that point, this section of the order by Judge Brooks is key:

Finally, Defendants object to these RFAs because they argue that they have been rendered unnecessary by recent commitments by some of Defendants’ international field partners to provide information related to Plaintiffs’ questions and because they personally do not have control over what their international field partners do. These objections are also unpersuasive to the Court.
As an initial matter, the Court applauds the Defendants for acknowledging and committing to carry out their duty under Rule 26(e) to supplement their prior answers to the interrogatories that were served on them in Plaintiffs’ First and Second Discovery Sets. However, these discovery devices are not mutually exclusive. See, e.g., 88 Charles Alan Wright & Arthur R. Miller, Fed. Practice & Procedure Civ. § 2253 (3d ed. 2017) (“a party need not elect between Rule 36 and the other rules and it may use the various devices at the same time.”). Therefore, the fact that Defendants might now have the ability to provide a supplemented answer to the previously served interrogatories does not alter the Court’s view that these RFAs are proper given the information that has been submitted to it by the parties.
Moreover, Defendants contend that the requested information is largely in the hands of third parties over whom Defendants exercise no control. As the Court advised Defendants during the telephone conference, if, after reasonable inquiry, Defendants do not have within their possession information by which they could honestly admit or deny these RFAs, then that is the answer that should be provided.  See, e.g., Wright & Miller,
Fed. Practice and Procedure § 2261 (stating that where a party does not know whether the matter it is asked to admit is true or not, it may reply that “it cannot truthfully admit or deny the matter”). If, in fact , it turns out that Defendants are correct that they do not have the means by which to document how their international field partners spent the money, then the replies to Plaintiffs’ RFAs will be very similar and simple-further supporting the Court’s view that this request is not unduly burdensome in light of the nature of this case.

Let that sink in. If GFA cannot “truthfully admit or deny the matter,” then how can GFA make the claim that donated funds are being spent as promised? If GFA’s defendants really can’t document how the field partners spent the money, then their claims to use donated funds in accord with donor intent are unverifiable. To donors and staff, GFA leaders have said they know where it all goes. To Judge Brooks, they have been saying we don’t have the means to document it.
Seems to me that a lot more donors should be asking a lot more questions.

 
 

Gospel for Asia Again Fails to Produce Promised Evidence

In February 2016, it was learned that Gospel for Asia was removed from membership in the National Religious Broadcasters. NRB membership requires members to demonstrate good financial oversight and GFA had been evicted from the Evangelical Council for Financial Accountability in October of 2015. Thus, GFA was removed from NRB. In response, GFA spokesperson Johnnie Moore told the Christian Post:

Gospel for Asia is 100% focused on continuing its work around the world while working very hard to put an end to the false accusations being continually made against the ministry. Gospel for Asia can document the legal and ethical use of funds donated and clearly answer every question.

GFA’s leaders and spokespersons have repeatedly said they want to provide the information which will establish their innocence. Why haven’t they done so?
Over 2.5 years later, GFA’s leaders still are unable or unwilling to produce materials which could prove donated funds were spent as promised. In the federal fraud case brought by Garland and Phyllis Murphy, GFA’s lawyers recently filed a motion (October 6, 2017) to prevent discovery of the very information GFA’s leaders said in 2016 they wanted to reveal.
In the Murphy’s reply of October 16, 2017, attorney Marc Stanley asked the federal judge to require GFA to supply information which would establish whether or not donations went where GFA promised they would go. Murphy wrote:

In sum, there should be no further obstacles between whatever the truth is, and the parties and the Court. If the requests for admission will establish that Defendants do not have the evidence of how the donated funds were spent, Defendants should simply admit that. If they will establish that Defendants have such evidence, Defendants should furnish it. Deflections, inaccurate representations, and obfuscation will not substitute for the simple truth the Murphys have been attempting to discover.

The promises from GFA have not been kept. The Murphy motion lays out the promise with the failure to keep it. It seems obvious that GFA eitherPope KP2 doesn’t have the information to answer the charges or is withholding it. Since K.P. Yohannan controls both GFA in the U.S. and Believers’ Church in India, I believe the latter explanation is most likely.
From the motion to order GFA to produce evidence or declare they don’t have it:

The Court then specifically asked Defendants’ counsel about how the money is tracked:
THE COURT: All right. Mr. Mowrey, you apparently—your clients apparently track donations received by these different categories. Help me
understand the methods that they use to track their disbursements or their expenditures by purpose.
MR. MOWREY: All right, your Honor. Yes, and I will answer that question.
Transcript [Doc. 37] 18:25-19:4.
But the question was never answered. And, with the benefit of two weeks from the time of the conference to submit a written response, Defendants have come no closer to furnishing an answer. All of the verbiage in their response says nothing remotely definitive or clear about how they track expenditures by purpose, much less whether they have such evidence (or, if so, when they will produce it). Either Defendants have the information or they don’t—only they know the truth. If they don’t, they should simply say so.
As Your Honor observed in addressing Defendants’ counsel:
THE COURT: They have a right to acquire it independently; and to the extent that you don’t have the documentation and you do not control in any manner production of documents that have been requested, then I get it. You may not be in a position to provide documents that you don’t have access or control over; but if that’s the case, that’s your response.
Transcript [Doc. 37] 28:15-21.
Instead of giving that response—which the requests for admission would elicit— Defendants insinuate in their brief that they may now attempt to reconstruct some type of accounting from information they (maybe) receive from entities they (supposedly) do not control. But that is not relevant to whether Defendants in fact discharged their obligation to track the donated funds over the last several years (at least through the agreed-upon discovery period of 2009 to Q1 of 2016) and ensure that they were spent as donors designated.
In addressing the Court at the telephone conference, Defendants’ counsel reaffirmed (at least indirectly) that they can corroborate or verify how the donated funds were actually spent:
THE COURT: You’re describing for me somewhat of a shell game inasmuch as if a donor were ever to say, “How can I know that the money that I designated for ministry tools actually went to ministry tools,” and you’re saying, “Well, we can’t prove that. You’d have to ask the people that we gave it to,” who, by the way, are foreign companies or foreign entities or foreign individuals.
So if that’s what the response is, then are you telling me that there is no accounting or accountability mechanism from the people that you forward money to in Asia to corroborate or verify that they are spending the money in accordance with your donors’ intentions?
MR. MOWREY: No, your Honor, I’m not saying that….
Transcript [Doc. 37] 22:2-15.
But Defendants’ response sheds no light at all on what the mechanism is. It obliquely says that more documents may be coming (who knows when), but it also says that “the situation in the Field is complex,” suggesting otherwise. Interestingly, the main “complexity” Defendants cite is “to ensure that the Field partners’ FCRA status is not jeopardized.” Response [Doc. 39] at 6. (“FCRA” is the Indian law requiring registration of entities that receive foreign donations.).
Yet, on the very day Defendants filed their response, The Times of India reported: “The Believers Church, founded by K P Yohannan, and three NGOs associated with it have been barred from bringing in foreign funds to India with the Ministry of Home Affairs (MHA) cancelling their FCRA registrations.”
The Times of India report also quotes Believers Church spokesperson Fr. Sijo Panthapallil: “Our FCRA registrations are under revision for the last one year. They had sent us a letter asking for documents and we have submitted the required documents.” Fr Panthapallil said they had submitted a huge cache of documents, weighing 60kg, to MHA two months ago. “Then they demanded four further documents, which we had submitted on September 4, 2017,” he said. Might the 132 pounds of already-compiled documents (plus four further ones) sitting in the Indian Ministry of Home Affairs have any bearing on what happened to the donated funds? Or are they all completely irrelevant? Whatever the truth is, only Defendants know, but at least obtaining answers to questions like this won’t jeopardize the Field partners’ FCRA status, as the MHA had already suspended it.
In sum, there should be no further obstacles between whatever the truth is, and the parties and the Court. If the requests for admission will establish that Defendants do not have the evidence of how the donated funds were spent, Defendants should simply admit that. If they will establish that Defendants have such evidence, Defendants should furnish it. Deflections, inaccurate representations, and obfuscation will not substitute for the simple truth the Murphys have been attempting to discover.

For years GFA has promised the public to clear up the allegations of fraud and yet they don’t produce even an audited financial statement. Meanwhile donor dollars continue to be plowed into legal and public relations maneuvers to keep the evidence from seeing the light of day.