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Four years after sustaining injuries in an accident that killed her first husband, Kathy Woody-Deming of Clermont, Georgia, took early retirement due to physical problems.

However, she now plans to apply for substitute-teaching assignments to replace some of her income, lost when Cornerstone Ministries Investments (CMI) filed for Chapter 11 bankruptcy reorganization.

"It was the way I paid my bills," said Woody-Deming, who stopped receiving payments last January on the bond she purchased in 2005. "I am scratching out every kind of job I can get ahold of."

One of the 20 most invested of Cornerstone's more than 3,500 unsecured creditors, Woody-Deming isn't the only one suffering from the company's setback. The real estate downturn exposed how CMI adopted a riskier investment strategy, unbeknownst to some investors who thought the company's emphasis was church real estate, as it had been for many years.

Although Hays Financial Consulting, the firm overseeing CMI's communication, has posted a website for information, few people connected with the case are willing to comment. Interim president and CEO John Ottinger Jr. declined to speak with Christianity Today. The ministry's attorney and a trustee with Hays Financial did not return phone calls.

The Presbyterian Church in America (PCA) founded the Investors Fund for Building and Development in 1985, but divested itself in 1994. In 2000 the fund, renamed the Presbyterian Investors Fund, merged with then four-year-old Cornerstone, but retained many of its Presbyterian connections. Ottinger is a former PCA pastor, as is Cecil Brooks, who served as president until 2006.

Until 2001, most of Cornerstone's earnings came from financing church facilities, giving an appearance of safety to investors. Writing in 2005, John Ottinger III compared CMI to Jesus' parable of the talents: "This company allows you to get the five-fold return, all the while knowing that churches and ministries are getting much-needed funds for real estate development."

In last fall's quarterly report, though, CMI said in the last quarter of 2000 it earned revenue from investing in seniors and moderate-income housing projects. That later expanded to loaning money to for-profit sponsors of housing projects aimed at low-income buyers.

The filing revealed that the great majority of its loans were risky second mortgages, one reason it was able to charge up to 10.5 percent on new loans.

"With the soft real-estate market we're in, that's the source of their difficulties," said Robert McWhorter, the attorney who represents First Presbyterian of Gadsden, Alabama. The church is looking at the possible loss of a $200,000 fund for members' emergency medical care and other needs, along with a $20,000 scholarship fund. "Any real estate investment is speculative." Investors who thought they were buying low-risk securities are upset.

"Until [mid-April] their website indicated your money was going to churches and retirement villages," said Steve Deming, Kathy's husband. "I don't know what's going on, but it's contrary to what their website said for a long time."

An attorney with an Atlanta firm that represents investors in such cases — and has fielded inquiries about CMI — said examining SEC reports is crucial to judging a publicly held company's finances.

"If you look at the SEC filings, they started … to develop secular, residential development for baby boomers not affiliated with any churches," said Jason Doss of Page Perry, LLC. "That's somewhat different from what Cornerstone set out to do. Investing in churches appeals to a certain kind of investor."

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August 2008, Vol. 52, No. 8