Privacy Laws Prevent Financial Transparency, Hurt Efforts to Investigate Religious Fraud

In the name of privacy, laws often protect devious administrators working inside religious non-profit organizations and churches. Journalists and concerned donors are denied access to critical government information.

Let’s look at three examples.

  • Money Trail Not Available

During the Great Depression, religious book publisher Zondervan launched a small Christian bookstore. The little retail business went through several name changes and grew into America’s largest religious bookstore chain, Family Christian Stores.

Marketplace changes, brought about by digital song downloads from Apple and book sales through Amazon, resulted in Family Christian’s sales declining.

In 2013, as Family Christian Stores reorganized to form a non-profit organization, Family Christian TR, LLC was registered in the island nation of Saint Kitts and Nevis, famous for its offshore banking. Two years later, Family Christian filed for bankruptcy and the financial trust ceased operation.

Family Christian’s bankruptcy hurt numerous publishers of books, CDs and DVDs as the organization failed to pay distributors for product.

Is it possible that some revenues, which would have compensated distributers, were embezzled and then transferred to the aforementioned account as a tax haven?

Meanwhile, unconfirmed allegations of money laundering by deceased televangelists also persist.

There may exist a paper trail providing evidence of financial crimes. Banks are required to report customers making deposits of $10,000 or more in cash. However, these Suspicious Activity Reports (SAR) are protected by the Bank Secrecy Act and cannot be obtained by Freedom of Information Act requests.

Congress could amend the Bank Secrecy Act to allow journalists to submit FOIA requests to the Treasury Department for SAR of deceased individuals and companies no longer in operation.

  • Secret IRS Penalties?

The Word Network, America’s fourth largest religious TV network according to Trinity Foundation estimates, has been incredibly successful in avoiding critical news coverage of its financial abuses.

The Word Network, based in Southfield, Michigan, broadcasts prosperity gospel preachers to a largely black audience. Kevin Adell, the cable TV network’s president, enriched himself extravagantly from donor funds.

In a four-year period, the network’s parent organization, World Religious Relief generated $90 million in revenue and spent $0 on relief. Instead, the non-profit organization diverted over $70 million to two companies controlled by Adell.

During those four years, Adell received $1.6 million from World Religious Relief and $21.5 million from related companies that handled the production and broadcasting of The Word Network.

For informed donors, there were a significant number of red flags in publicly available documents because World Religious Relief annually filed a Form 990 disclosing total revenue, total expenses, and compensation for the network’s one employee—Adell.

Following an audit, the IRS revoked the tax-exempt status of World Religious Relief in March 2015.

Unfortunately, the IRS announcement of the revocation in the IRS Bulletin  went unnoticed and unreported by religion reporters.

After learning of the revocation, Trinity Foundation investigators wondered if The Word Network or Adell was required to pay any tax penalties for abusing the tax code.

Trinity Foundation questioned an IRS official about the process for obtaining revocation letters which the IRS rarely sends to churches and ministries after performing an audit or investigation and were told the letters are subject to the Privacy Act of 1974.

The IRS is prohibited by law from revealing the contents of revocation letters.

Shouldn’t it be a matter of public interest for donors and journalists to learn if an organization was required to pay tax penalties? Trinity Foundation is now advocating for an expansion of public interest guidelines to allow the public release of revocation letters.

Adell’s TV network continues to operate with less transparency.

As World Religious Relief was being audited, Adell created a non-profit organization named Church of the Word which became the new parent organization of The Word Network. Because the organization claims to be a church, the entire television network is exempt from the requirement to file a Form 990 with the IRS!

  • Status of IRS Investigations

After whistleblowers contacted Trinity Foundation in 2016 regarding a pastor committing tax evasion, the foundation submitted an investigative report to the IRS.

According to one whistleblower, the pastor doesn’t believe the Bible and has said so in private conversations. Yet the pastor preaches the prosperity gospel as a scam.

When the informant asked the pastor, “Do you pray for all these prayer requests? “, the pastor responded, “Hell no, I don’t even pray.”

Boxes of receipts and additional documentation showed more than tax evasion. The pastor was embezzling funds and committing reimbursement fraud while receiving a million dollars in compensation.

Was there an audit or criminal investigation? Did the IRS require the pastor to pay tax penalties for unreported income?

Trinity Foundation investigators attempt to submit three to four investigative reports annually to the IRS recommending audits or criminal investigations of churches and ministries.

The IRS acknowledges receiving the investigative reports with a form letter saying, “… Therefore, we can’t disclose whether we have initiated an investigation based on the information you submitted, and we can’t disclose the status of any investigation.”

A referral committee or high-ranking officials within the IRS determine if an audit or criminal investigation is warranted.

Because the process is not transparent, informants will not know if any action was taken on their complaints unless criminal charges are filed, or informants reveal the audit.

Trinity Foundation hopes that Congress will revise the Privacy Act with a clause allowing for the release of additional information in the public interest, making it possible for the IRS to disclose five different status updates:

  • No action taken
  • Audit in progress
  • Audit completed
  • Criminal investigation in progress
  • Criminal investigation completed

There is an old wise saying that “sunlight is the best disinfectant.” With changes to privacy rules, more light can illuminate the religious world and expose corruption.