Within five years, a businessman tithed about 0,000 to a Michigan megachurch. But after a grand jury indicted David McQueen in 2012 for running a .5 million Ponzi scheme, the federal government asked Resurrection Life Church for the money back.
In February, the 8,000-member congregation in suburban Grand Rapids said no. “[We] had no knowledge of the source of the funds,” finance pastor Bernard Blauwkamp wrote to the US Attorneys Office. Regardless, the money—donated from 2005 to 2009—was spent, he said.
Cases like this arise every year, said attorney Bruce Van Heukelem. He defended a Christian camp in Wisconsin that, along with World Vision and Trinity Evangelical Divinity School, argued against such repayments before a federal appeals court in 1995 and lost.
Given that precedent, ministries don’t have much of a choice but to reimburse the feds.
Receivers—those appointed by courts to collect the stolen funds—begin by asking for the money back. If the church or charity declines, the receiver can come back with a lawsuit.
Some states offer exemptions on so-called “clawbacks.” After Tom Petters’s $3.7 billion Ponzi scheme was exposed in Minnesota, the state passed a 2012 law that put a two-year statute of limitations on donations—essentially exempting nonprofits from returning the money.
That didn’t stop a judge from ruling in June that the University of Northwestern in St. Paul had to return about $5 million it received from Petters’s partner. But the Council for Christian Colleges and Universities member school no longer has the money, having given the funds to charities.
If higher courts agree that Northwestern needs to repay the cash, the school will be forced to pursue litigation against the charities or ask students to write larger tuition checks.
“We would never have taken that money if we knew it was dishonest,” said Northwestern president Alan Cureton. “But we live in a fallen world.”
“It’s a moral question: Who should absorb the loss of this crook?” said Frank Sommerville, an attorney who counsels churches to prevent litigation. Churches and charities are generally better able to absorb a large financial loss than an individual, he said.
It’s difficult for churches to say, “We didn’t do anything wrong,” when they are holding somebody else’s rightful property, Van Heukelem said. “But in the practical world, it becomes difficult. What are charities supposed to do? They can’t possibly monitor the source of a donations.”
Resurrection Life’s lead pastor told his congregation in April that since McQueen’s dollars were spent, the church would set up a special fund for repayment.
Judges will rarely ask for the entire amount to be refunded, said Sommerville. “In my experience, they’re not here to put the church into bankruptcy.”
Giving back 100 percent of the stolen funds would be the ideal Christian response, said Van Heukelem. Asking donors for extra money, closing down programs, or taking out a second mortgage are all ways to pay back more, he said.
Paying it all back is great but not morally necessary, said Denver Seminary professor Craig Blomberg, who published a 2000 book on a “biblical theology of possessions.” “Herculean efforts that cause more problems for the church probably aren’t ethically mandated, once the law has been satisfied.”
Churches should return what is “possible” and “reasonable,” said National Association of Evangelicals president Leith Anderson. “The investor [in the Ponzi scheme] clearly is a victim. But the nonprofit or church has also been victimized. There are multiple victims; therefore, accountability and responsibility should be shared.”
The moral questions get trickier once the law steps out. A faithful donor who loses his job and asks for his donation back should probably get it, said Sommerville. So should a donor whose spouse gave property without permission.
Personal hardship might merit a repayment, in order to “value the relationship,” he said. But other reasons—such as anger with the pastor—would not.
“The church shouldn’t knee-jerk give money back just because somebody asks for it,” said Sommerville. “That’s why they need counsel, so they can measure the risks and make a decision.”
