Liberty U. Weathers Debt Crisis; Falwell’s‘Worst Year’

Jerry Falwell has never been one to back down from a fight, whether it has been trading jabs with the American Civil Liberties Union or sparring with theological liberals. In the past, the 58-year-old pastor of Thomas Road Baptist Church has taken credit for key Religious Right victories, celebrated election wins by Ronald Reagan and George Bush, and sounded the cry against abortion.

But last December, the punch-toughened Falwell almost suffered his greatest defeat when Liberty University, which he founded in 1971 as Liberty Baptist College, faced financial ruin. The universities regional accrediting agency placed Liberty on probation, pending investigation into the rapid growth of the school’s extension program. And a three-year audit by the Internal Revenue Service into all of Falwell’s ministries was being conducted.

Falwell, however, rallied his supporters, and in January he told CHRISTIANITY TODAY the worst year of his life was behind him and that Liberty’s debt problem was all but solved.

Tax-Free Fight

In September 1989, Falwell, chancellor at the $200 million Liberty campus, announced a plan to refinance the school’s short-term debt by issuing $61 million in tax-free bonds. Rapid enrollment growth had made extensive construction necessary, according to Falwell. Liberty’s campus today includes about 5,000 acres, 64 buildings, and 12,000 students.

When three local Lynchburg, Virginia, men opposed the bond proposal as a violation of constitutional separation of church and state, the issue went to circuit court (CT, Feb. 19, 1990, p. 36). There a judge found that Falwell’s school met the state’s criteria for issuing tax-free bonds: Liberty was an accredited, liberal arts school whose primary purpose was not to train pastors (only 10 percent of Liberty’s students are formally studying for the pastorate). But two of the men, joined by Americans United for the Separation of Church and State, appealed to the Virginia Supreme Court, which in November 1990 reversed the circuit court decision.

Falwell believes his high-profile convictions made him an easy target. In response, he and the Rutherford Institute, a constitutional-rights group based in Charlottesville, Virginia, wanted to appeal to the U.S. Supreme Court. But by then Liberty’s debt problem was reaching a crisis stage, Falwell says, so he decided not to appeal and turned his attention to finding other sources of funds for the school.

During the fight to obtain tax-free bonds, Liberty had been negotiating with Chicago-based Kemper Securities Group, Inc., on a back-up plan to issue $61 million in taxable bonds. So when the tax-free bonds fell through, Falwell turned his attention in November 1990 to closing the Kemper deal.

At the last minute, however, top Kemper officials canceled the deal. And suddenly, without any source of funds, Falwell says, the school was teetering on the edge of bankruptcy. According to Falwell, Kemper had promised him and his creditors in writing that the bond issue was set. “They firmly committed to extend that financing on November 15, 1990,” he says. “They reneged.”

Admittedly angry, Falwell sued Kemper, breaking an agreement with Kemper not to speak publicly about their negotiations. An arbitration panel is scheduled to decide on the case by late February.

Court documents indicate that Kemper incorrectly predicted the salability of the bonds for Liberty, according to reports in the Lynchburg News & Advance. Kemper said Falwell had an image problem.

“The investors … had reacted negatively to the rather controversial nature of the issuer, and to Jerry Falwell specifically, and were not inclined to buy the bonds at any price,” Kemper said in court documents.

But Falwell counters that Kemper executives entered the deal with their eyes open. He says he asked Kemper officials early in their discussions, “Do you know that I started and recently dismantled the Moral Majority? I’m blamed for electing Ronald Reagan and George Bush, and I’m a conservative person. I oppose abortion. I lead many of the moral fights. Is that a problem?”

“We don’t believe they ever made any genuine efforts to market the bonds at all,” Falwell says. “They have internal problems, and their decision was to get out of the investment banking business.”

Kemper officials declined to comment to CT, citing the pending arbitration.

Falwell On:

The Religious Right

Some would say that you really disbanded the Moral Majority because of debt problems on the home front.

That is not true. I tried to disband it earlier. Hundreds of other organizations, like Concerned Women for America and the Rutherford Institute, and many smaller but very effective organizations, had spun off from the Moral Majority all over the country.I saw no need as early as January 1986 for the organization to continue. It took me a year to get our board and all of our people to agree to my dismantling it in 1987. We shut it down officially in 1989. The fact is, I stayed in eight years, a couple of years longer than I had hoped.

At the ACLU’s last national meeting, two speakers said a new Religious Right is emerging. Do you see a new thrust?

I don’t think a new thrust is needed. Our evangelical public out there no longer needs a general. They know where they are, and they vote not party label but principle, and they vote almost unanimously on issues like prolife and profamily concerns, a strong national defense, and support for the State of Israel. We’re in place now. We’ll be voting on those principles and issues locally, statewide, and nationally forever.

Televangelism

In the wake of the recent “PrimeTime Live” exposé (CT, Jan. 13, p. 42), what is the future of televangelism?

Let me say first of all that I am not a televangelist. Billy Graham is an evangelist who uses television to preach his message—that’s a televangelist. The press just refuses to use his name as a televangelist because they know he’s a man of integrity, and the word televangelist for them is meant to be pejorative. Charles Stanley, Jerry Falwell, James Kennedy—I could list a dozen more—are not televangelists. They are pastors of local churches that allow cameras to look in on their local church services. I would say these “telepastors” are here to stay because they are personally above reproach, and they pastor local churches where they have very, very strong accountability.

Televangelists in the truest sense of the word include Robert Tilton, Kenneth Copeland, Richard Roberts, Ernest Angley, W. V. Grant, Larry Lea—the list is long. Most of them, in my opinion, are defrauding the public. They are preaching that it is God’s will for everyone to be healthy and wealthy. That is antiscriptural.

But when they fall, as they were shown on “PrimeTime Live,” then it has an effect on you. It did in 1987.

In 1987, the American public didn’t know charismatic from Calvinistic, pastor from evangelist. They didn’t know healers from pastors like Stanley and Kennedy and so on. Today—and the media and broadcasters get credit for it—the American people look at everyone individually.

You cut back your network affiliates from about 200 to 80. Now do you plan to add back those dropped affiliates?

We cut off some networks because we thought at one point it was a negative thing even to have your face on the camera. Until this thing was flushed out of the American psyche, it was really negative to be on the air. We did cut back about 16 months ago because we had not gotten our funding. And we found we got the same amount of funds coming in without spending the million dollars a month on air time.

But after a certain period of time, it becomes a case of “out of sight, out of mind.” We’ve sustained about all the positive cash flow and advantage we can. But we are not ministering to the people as we should be. So we’re going back slowly, until each station becomes self-supporting.

Liberty University

What is the future of the university?

Liberty has the inside track on becoming for evangelical young people what Brigham Young is for Mormon kids and Notre Dame is for Roman Catholic kids: a world-class university. With the extension program, we could have 50,000 students in the next century.

The Future Of Jerry Falwell

It sounds as though you enjoy working with the university. How much time do you put into being a chancellor, compared to being a pastor?

Two-thirds of my time is with the university, one-third with the church. I preach two to three services on Sunday, one on Wednesday night, and I still do most funerals and weddings. This is where the rest of my life will be.

I preached the funeral of one of the members of our church several years ago. He was 115. Well, I’m going to live to be 115. And I’ll be giving the ACLU the devil when I’m 100. So just mark it down. I’m here to stay.

Creditors Calling

Without the bond issue, Liberty was forced to auction its 50-acre north campus as collateral for a $6 million note the school had used for interim financing. The north campus had been the headquarters for the School of Life-Long Learning, the college’s extension program, which at one point claimed 15,000 students. The financial crisis and the accreditation review forced it to scale back to about 7,000.

With creditors calling for their money, Falwell sent out a letter to his supporters, saying the university needed “a $10 million miracle.” That was the amount needed for operating expenses over and above Liberty’s $100 million yearly revenues to keep the school afloat until some kind of financing could be arranged.

Falwell told CT in early January that donors had been responding to the appeal. In addition, he said, debt financing under “new restructuring” was being arranged with several smaller companies. Falwell’s attorney, Roy Grutman, is optimistic that the Kemper arbitration case will go their way, awarding Liberty as much as $ 100 million in damages.

Falwell is now considering plans to launch a 36-month “clear and free” campaign in an effort to eliminate all the university’s debt. An estimated $36 million indebtedness attached to Falwell’s other ministries, the “Old Time Gospel Hour” and Liberty Broadcasting Network, is also being reduced,he reports. Both ministries are currently being moved onto the university’s campus in an effort to consolidate space and overhead.

The picture also brightened for Falwell with recent news that the Southern Association of Colleges and Schools lifted Liberty from probationary accreditation status after concerns about the School of LifeLong Learning were answered. Falwell says the results of the audits of the university and Liberty Broadcasting Network are positive and affirm their tax-exempt status, and an audit of the “Old Time Gospel Hour” is nearing completion.

“Nothing is done until it’s done,” Falwell says, but he is optimistic that the restructuring will be complete by spring. With the financial clouds clearing, Falwell is now relishing the role of university chancellor, pointing with pride to the school’s two-year-old, 12,000-seat football stadium, and the growing number of former Liberty athletes now playing in the pros.

By Joe Maxwell.

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