pecusa legal expenses revised by the Anglican Curmudgeon

FRIDAY, MAY 29, 2015 What Is ECUSA Spending on Lawsuits? (Updated for General Convention 2015) [WARNING: the following post may be dangerous to one's mental health. The panoply of unbelievably large figures in it may also cause one's eyes to glaze over. For those who cannot wade through it all, here is the bottom line: The Episcopal Church (USA) has spent, and further committed (in its adopted budgets) to spend, a total of $42,675,466 on suing fellow Christians in the civil and ecclesiastical courts over the first eighteen years of this century. When one adds in the estimated additional amounts spent by individual dioceses on such litigation, the total amount exceeds Sixty Million Dollars. Can't believe it? Well, then, read on -- you have been warned.] Since September 2010, when I put up an analysis, based on ECUSA's monthly statements and their annual audited statements through 2009, I have kept track of how much ECUSA and its major dioceses has spent on attorneys' fees and other costs associated with all of the 90 or so lawsuits against former Episcopalians to which it (or one of its dioceses) has been a party. In 2010, it was only 60+ lawsuits, as catalogued here (see pgs. 23-26), but the Church continues to sue everyone who leaves it, whether the law is against it or not. In order to give as complete a picture as possible back then, I also included the latest ECUSA budget projection of legal expenses through the triennium 2010-2012. One has to realize that ECUSA does not make it easy to discover the amounts it spends on litigation -- the leadership at 815 Second Avenue would obviously prefer that those who sit in the pews every Sunday and contribute their pledges not be aware of just how many millions have been squandered on ECUSA's scorched-earth litigation policy. I am fully aware that those are fighting words to all those who support the current administration at 815 Second Avenue: "Prove it!" they say. Well, in the course of this post, I intend to do just that. So please suspend your judgment until you have digested the entire piece, and checked out all the links to my sources -- which are uniformly from ECUSA's own published financial statements and official minutes. I am a lifelong Episcopalian myself, and I am utterly ashamed and outraged by what the Presiding Bishop and her cohorts are doing in our Church's name. The amounts the Church spends due to its litigation policies come in a number of different categories. Not all the categories are shown in the same financial documents. For instance: The yearly audited financial statements, which are the most accurate source, do not break out "litigation expenses" as a separate category, but instead lump them in with all the other general operating costs of the organization. But what they do disclose are (a) the amount of moneys loaned (not granted outright) to rump dioceses; and (b) the amount of legal out-of-pocket expenses contributed to ECUSA by the Presiding Bishop's Chancellor's law firm, Goodwin Procter. (Note: While the IRS does not allow lawyers to deduct the value of their services rendered pro bono, it does allow them to deduct out-of-pocket expenses incurred in performing the services -- travel, hotel and meals; telephone, freight, postage and similar amounts. In order to keep track of ECUSA's full legal expenses, these contributed costs must be added back into the totals, or else those totals would appear artificially low in comparison to other corporations incurring similar legal services and related expenses. Moreover, ECUSA includes their amount in its income -- see the auditors' note -- so they have to be part of its expenses, as well.) The monthly statements of operations, though not audited, are the best source of information for (c) the cost of Title IV proceedings -- at least until recently -- and (d) the amounts paid to Goodwin and Procter over and above their donated services, as well as to local law firms retained in various states by ECUSA. The minutes of the Executive Council are the best source for (e) the amounts of grants and credit lines extended to the rump dioceses. (The audited financials show only the amounts actually borrowed against credit lines as of the year end; they do not disclose the total amount of credit lines extended.) The budgets adopted by General Convention and the Executive Council are the best detailed source for actual moneys spent in the past on particular line items, and they are the only source for (f) the future anticipated legal expenses of the Church. These are most often wildly understated, and Executive Council is constantly having to revise them upwards. In September 2010, I had concluded that ECUSA and its Dioceses of Virginia, Los Angeles and San Diego had committed to date a combined total of Twenty-one Million Six Hundred and Fifty Thousand Dollars ($21,650,000.00) on litigation for the years 2000-2012. Four years later, I revised the total spent by ECUSA alone (not including any of its dioceses) during that same period to $21,858,714. This number I broke down as follows: For the Griswold years (2000-2006), the total is somewhat higher than estimated previously, because I found an entry for "Legal Support to Dioceses" paid in calendar 2006 in the amount of $443,519. The new total is: TOTAL 2000-2006: $ 1,777,180.00 For the first triennium under Presiding Bishop Jefferts Schori (2007-2009): Title IV Expenses: $ 1,702,222 -- i.e., almost as much as PB Griswold spent on everything legal! Litigation Expenses (including contributed expenses): $ 8,392,584 Grants to Sustain Rump Dioceses: $1,200,000 TOTAL 2007-2009: $ 11,294,806.00 For the second Jefferts Schori triennium (2010-2012): Title IV Expenses: $ 992,921 Litigation Expenses (including contributed expenses): $ 4,933,807 Grants to Sustain Rump Dioceses: $ 575,000 Loans to Rump Dioceses: $ 2,285,000 TOTAL 2010-2012: $ 8,786,728.00 Jefferts Schori Actual Total, 2007-2012: $ 20,081,534 Plus: Griswold Total, 2000-2006: $ 1,777,180 GRAND TOTAL, 2000-2012: $ 21,858,714 That amazing number is now historical fact, and does not change. But the totals since 2012 do. At the time of my 2014 post, I did not have the final, year-end figures for 2013, but now I do. Actual 2013 legal expenses alone (not including contributed expenses) were reported (p.3) at $2,125,008 -- more than $1.1 million over the amount budgeted. (This item includes in-house legal staff support, such as the salary of the Presiding Bishop's Special Assistant for Litigation, Mary Kostel.) To this must be added the amounts of contributed legal expenses, which are disclosed only in the 2013 audited financial statements (p. 11): $386,000. (The Presiding Bishop's Chancellor's law firm, in return for being awarded all of ECUSA's litigation work, gives ECUSA "discounted hourly rates" -- isn't that fine?) The total thus for 2013, exclusive of grants, loans, and Title IV expenses (which the Treasurer no longer itemizes), comes to $ 2,511,008.00. Now include the $735,000 authorized in grants and loans to just the South Carolina rump diocese in 2013 (after a further $300,000 increase authorized in June), the $785,000 authorized for San Joaquin, plus amounts to other dioceses, and the $270,000 spent on Title IV (per the 2014 budget, line 277), and you reach: TOTAL LEGAL EXPENSES (ECUSA ALONE) FOR 2013: $4,601,008. For calendar 2014, ECUSA has reported legal expenses of $1,741,166 -- this time only $526,681 over budget. (Those darn legal expenses! Just cannot budget for them!). Contributed expenses are not known yet, but a safe estimate is $300,000. Add in the 2014 grants and loans to litigating dioceses: a general $500,000 line of credit approved in February 14 (FFM038); a separate loan of $785,000 to the Diocese of San Joaquin approved in June 2014 (FFM050), along with a further $775,000 to be drawn as necessary for the "maintenance of any recovered property"; and $270,245 budgeted for Title IV proceedings (line 277). The total then comes to: TOTAL LEGAL EXPENSES (ECUSA ALONE) FOR 2014: $4,371,411. For calendar 2015, we have budget amounts only thus far (which are notoriously underestimated). The budget for legal expenses in 2015 is $1,160,486 (line 346), and for Title IV expenses (line 277) $275,622. The number for legal expenses almost certainly needs to be increased (March 2015 already ran 50% over budget), and we do not have the figures for any of the other components yet in 2015. The safe thing to do is to estimate that the total for 2015 will be something like the average for 2013-2014: TOTAL LEGAL EXPENSES (ECUSA ALONE; ESTIMATED) FOR 2015: $4,486,210. This in turn allows us to estimate the total for the last triennium of Presiding Bishop Jefferts Schori's term: it comes to $ 13,458,629. Note that the total far exceeds either of the two preceding triennia ($11,294,806 for 2007-2009, and $8,786,728 for 2010-2012). And so, for 2000 through 2015, we have: Jefferts Schori Total, 2007-2015: $ 33,540,163 Plus: Griswold Total, 2000-2006: $ 1,777,180 Note the hugely disparate legal expenses under Jefferts Schori, as compared to Bishop Griswold's last six years (there were no litigation expenses during Griswold's first three years) -- an increase of nearly 1,900%. Now do you see what I mean by "scorched-earth litigation policy"? Together, the two are responsible for the Church's spending the following GRAND TOTAL, 2000-2015: $ 35,317,343 Just to put that number into perspective, take a look at line 362 in the (2014) budget. It is even larger than the amount as ECUSA budgeted to spend for ALL of its operations in calendar 2013! And we are not done yet. We have a budget proposed for General Convention to adopt for the next triennium, 2016-2018. There we see (line 346) $3,572,082 proposed for legal expenses, and (line 277) $888,305 for Title IV expenses. Given the inadequacy of the previous budgets to forecast actual amounts, it would be safe to increase the larger amount by 50%, so say: $5,358,123. Then to that total must still be added the (unbudgeted) estimates for loans to litigating dioceses, and for contributed expenses (will the new Presiding Bishop elected in 2015 continue to use David Booth Beers and his law firm, Goodwin Procter, to handle all of ECUSA's litigation?). A good estimate for those numbers, as we have seen, is a round $2 million. So the total spent and committed to be spent by the Episcopal Church (USA), all on its own, and for the first eighteen years of this century, comes to TOTAL LEGAL EXPENSES (ECUSA ALONE; ESTIMATED) FOR 2000-2018: $42,675,466. Note that this total now exceeds the amount budgeted by the Church for all of its operations in 2015 alone ($40.8 million). And we still are not done. We have to add in the amounts spent by individual dioceses -- Los Angeles, Fort Worth, San Diego, Ohio, Virginia, Tennessee, etc., etc. Starting with Virginia, we know the Diocese took out a $2 million line of credit, but that sufficed for only the first two years of its protracted litigation. Taking into account interest and the duration of the lawsuit, it is safe to estimate that Virginia alone spent $4 million litigating against former parishes. Los Angeles' total must be comparable. But Fort Worth's litigation is not yet over, and because it has hired several law firms, it is safe to say its budget is the highest of all -- around $6 million. Add another $6 million total for all the many other dioceses in litigation (see the bottom of this page) and you can easily see how, by the end of 2018, the total spent on litigation-related items within ECUSA will easily be WELL OVER SIXTY MILLION DOLLARS. In other words, the total estimated amount has trebled since I first estimated it five years ago, and increased by 50% over my estimate just last year. That is an unconscionable waste of non-profit resources. Even taking into account Bishop J. Jon Bruno's (he of the forkèd tongue) announced intention to sell the St. James property for $15 million -- rather than allow the parish for which the Diocese supposedly sued to recover its property to continue to use it -- the amounts recovered in property values to date pale into insignificance compared to the amounts being squandered in seeking to recover them. And the administration at 815 is becoming less and less transparent in disclosing the waste on this huge scale. No longer do they break out "legal aid to dioceses" or "Title IV expenses" as separate line items in their monthly statements. And why do they not publish the total amounts they expect to be repaid from the dioceses receiving the loans? Is it realistic, for example, to expect the rump Diocese of San Joaquin alone, which is unable to sustain itself on its own, to repay the more than $3 million ECUSA has loaned to it thus far? How does that represent "good stewardship"? Will no one at the forthcoming General Convention -- House of Bishops, House of Deputies, clergy, or laity -- hold them to account? Will the bishops and deputies not require each candidate for Presiding Bishop to state clearly his intentions regarding carrying on this waste of the Church's precious resources? Ultimately, the New York Attorney General is the officer who has the jurisdiction and power to look into the misuse of non-profit assets, and it is high time he did so. After all, at the request of both clergy and laity he invoked his jurisdiction over the scandal involving Treasurer Ellen Cooke, and that involved only a few million dollars: chump change in comparison to what is going on now. For almost ten years now, the Episcopal Church (USA) has had an out-of-control litigation budget. It is a scandal of ineffable magnitude. It must -- and hopefully soon will -- be brought to a halt. Posted by A. S. Haley at 9:50 AM