Bankruptcy Proceedings May Affect Church
When money is thought of in the context of church, it's usually in very small quantities, like the coins slipped in a collection plate. Perhaps that's for the best.
For a congregation in Madison, Tennessee, one man's financial scheme-and subsequent bankruptcy - has apparently begotten a real mess.
Terry Kretz, a member of the Cornerstone Church, enticed several of his fellow parishioners to join him in a bogus investment plan five years ago, according to reports from the Nashville Post. The plan, which he claimed would offer 24% return on investments annually, was what's known as a "Ponzi scheme," meaning that each new investor's money pays the previous investor.
Ponzi schemes cannot sustain themselves very long, since there is little or no actual revenue being generated. All "returns" come from the funds invested by those most recently swindled.
Kretz's illegitimate company was called Hanover Corporation, and reportedly collected $18 million from the small-time investors who were led to believe they were making wise financial moves. In 2006, Hanover began to crumble, and Kretz was forced to declare personal bankruptcy in March, the Post reports.
By October of last year, Hanover's demise was complete and sources indicate that the company, too, had bet on filing bankruptcy. So far, this may seem like the ordinary tale of a failed business venture. But there's a twist.
Between 2002 and 2005, Hanover Corp. apparently made donations to Cornerstone church in the amount of $176,000, even though the company was not making any money during that time, according to financial records.
Now Hanover's bankruptcy trustee, Sam Crocker, has reportedly sued the church for the return of the funds donated. But, according to the Post, the church's pastor considers this an outrageous request. But it's really up to the bankruptcy laws.
Matters are complicated by the fact that the funds donated to the church were mostly "pass-through" amounts, meaning that they've already been given to charities or other organizations, sources say.
The pastor of the church, known for his outspoken and opinionated nature, has allegedly claimed that funds given to the church should be considered just as "spent" as those used to buy food, cars, or airline tickets.
Though he's reportedly willing to comply with whatever decision is made in the courtroom, the pastor has expressed his belief that singling out one destination of Hanover's funds is unfair. But Crocker has his reasons.
According to the Post, Crocker differentiates the donations made to the church from Hanover's other financial transactions because the company did not receive any benefit in return for its monetary contributions.
Despite the fraudulent nature of Kretz's company, no one involved with Hanover has yet been charged with a crime, according to reports.
Whether or not the church will have to return the funds is yet to be determined. But it seems like neither side is willing to give up without a fight.