This article is part of the series from the Higgerty Law statement of claim. You can read what a statement of claim and a Quistclose Trust is in the first article in this series.
This portion of the statement talks about the representative plaintiffs, how they came to be CEF depositors, and their experience after CEF entered the CCAA process.
Please note that these are allegations only and this case has not been adjudicated in a court of law. As always, if you have any legal questions or need legal advice please consult appropriate legal counsel.
From Higgerty Law Statement of Claim
K. The Plaintiffs
(i) The Plaintiff Georg Beinert
117. Georg Beinert is 57 years of age and currently resides near Fairview, Alberta.
118. Mr. Beinert was baptized a member of the Trinity Lutheran Church in Fairview, Alberta on Nov. 22, 1959 and later became a communicant member of that church through the solemn rite of Confirmation. He is currently a member of Bethel Lutheran Church in Sherwood Park, Alberta.
119. During the early years of his membership at Bethel Lutheran Church, Mr. Beinert was introduced to the ABC District’s Church Extension Program. He understood that money deposited in the CEF would be used to build churches for the purpose of gospel ministry.
120. Mr. Beinert was encouraged in church and ABC District bulletins to deposit money in the CEF and DIL trusts. Many congregations had a member who was a CEF representative. The CEF representative also encouraged deposits.
121. In February of 2001, Mr. Beinert inquired about ABC District options, and how safe they were. The Officers of the ABC District represented to Mr. Beinert that:
a. The CEF deposits were not insured, but that they were very safe because they were backed by the entire assets of the ABC District.
b. The CEF had been in existence for 80 years and no one had ever lost a penny.
c. The CEF deposits were “more certain than the guarantee of a government.”
122. Relying on these representations, and his understanding of the purpose of the CEF, Mr. Beinert began to place deposits in the CEF in February of 2001.
123. Mr. Beinert received regular marketing materials thereafter, such as “7 for 7 for 7” indicating an increasing need for more deposits to “Share the Gospel of Jesus Christ.”
124. In February of 2013, Mr. Beinert and his wife sold a parcel of agricultural land for $300,000.00 net of real estate commissions. After the completion of the sale, they met with the Defendant Harold Schmidt, who was the realtor they had selected to handle the real estate negotiations.
125. During the course of their meeting with Harold Schmidt. Mr. Beinert learned that the Defendant Schmidt was a member of the King of Kings Lutheran Church in St. Albert, Alberta. The Defendant Schmidt advised Mr. Beinert that he was also a long-term member of the Board of Directors of the ABC District.
126. Mr. Beinert advised the Defendant Schmidt that he held deposits in the CEF, and inquired where the best place would be for him to place the $300,000.00 from the sale of the land. Mr. Beinert was eager to learn about the health of the CEF since he was speaking with a member of the Board of Directors of the ABC District.
127. The Defendant Schmidt advised Mr. Beinert that the CEF was “an excellent investment” and that his deposits in the CEF were “totally safe.”
128. On the basis of the Defendant Schmidt’s representations, and the marketing materials provided to him by the ABC District, Mr. Beinert proceded to deposit the sum of $300,000.00 with the CEF. On February 19, 2013, Mr. Beinert spoke with the Defendant Candace Rivet of the ABC District to make arrangements for the deposit, and was given no indication that there were any problems or risks with the CEF Fund. After speaking with the Defendant Rivet, Mr. Beinert then mailed a cheque in the sum of $300,000.00 to the Church Extension Fund of the ABC District.
129. In January of 2014, Mr. Beinert received a newsletter/marketing flyer from the ABC District with an entire article about the CEF entitled “A Partner in Ministry … How and Why it Works.” There were no indications that the CEF was in financial difficulty, or that the ABC District had suffered losses on its mortgages, loans or other investments.
130. As of December 31, 2014, Mr. Beinert’s CEF account balance was approximately
131. On the morning of January 15, 2015, Mr. Beinert learned over CBC radio news that the ABC District was insolvent.
132. By letter dated January 5, 2015, which Mr. Beinert received later in the day of January 15, 2015, the ABC District advised Mr. Beinert that it was “facing some hardships” because “a number of congregations and other ministries have been unable to pay their mortgages…” Mr. Beinert was further advised that a moratorium was being placed on withdrawals from and deposits to the Church Extension Fund.
133. The current value of his deposits is not currently known, but is substantially less than the book value.
(ii) The Plaintiff Sharon Sherman
134. Sharon Sherman is 65 years of age and resides in Edmonton, Alberta. She is a Christian but is not a member of a Lutheran Church.
135. In 2007, Sharon Sherman and her mother Ruby Sherman made inquiries about Ruby Sherman becoming a resident of the Prince of Peace Manor. Ruby Sherman had been married to a pastor in another Christian denomination, who was now deceased. Ruby Sherman wanted to spend her remaining days living in a Christian environment. Sharon Sherman and Ruby Sherman understood that the Prince of Peace Manor was owned or operated by the Lutheran Church, and made inquiries about Ruby becoming a resident of the Prince of Peace Manor.
136. Sharon and Ruby Sherman were advised by representatives of the Prince of Peace Manor that interest earned on deposits to the CEF would be used to help pay for Ruby Sherman’s accommodation charge at the Prince of Peace Manor. Reduced rent was promoted by the Prince of Peace Manor as an inducement to encourage residency and contributions to the CEF.
137. When inquiring about the safety of CEF deposits, they were told by representative of the POP Manor:
a. The CEF had operated for over 80 years and had never lost a penny.
b. The CEF works with congregations to ensure that the congregations are able to meet their repayment obligations, and
c. “If you can’t trust the Lutheran Church, who can you trust”
138. Relying on these representations, Ruby Sherman placed two CEF deposits with the CEF. The first, in the amount of $75,000.00, was placed in July, 2007. In October, 2007, she deposited a further $220,286.00.
139. Ruby Sherman, moved into the Prince of Peace Manor on August 1, 2007. Ruby Sherman was 86 years of age at the time. The monthly charge for accommodation, meals, weekly laundry services and weekly housekeeping was initially $2,650.00 per month. There were subsequent increases.
140. In October, 2008, Sharon Sherman became a joint owner of Ruby Sherman’s two CEF accounts for the purpose of allowing her to assist her mother in handling her financial affairs.
141. As of December 31, 2014, the balance in the first CEF account was $75,000.00. The balance in the second CEF account was $220,286.00.
142. By letter dated January 5, 2015, the ABC District advised Ruby Sherman that it was “facing some hardships” because “a number of congregations and other ministries have been unable to pay their mortgages …” Ruby Sherman was further advised that a moratorium was being placed on withdrawals from and deposits to the Church Extension Fund.
143. Since January, 2015, Ruby Sherman received no interest on her deposits. The current value of her deposits is not currently known, but is substantially less than the book value.
144. Mrs. Ruby Sherman passed away on October 22, 2016. Sharon Sherman is the personal administrator of the estate of Ruby Sherman.
144.1 The Plaintiffs, Glen Mitchell and Wiley Hertlein, have shared similar experiences to those of the other Plaintiffs as outlines above. The Plaintiffs, Glen Mitchell and Wiley Hertlein have at all material times have been members of the Lutheran- Church Canada and were depositors to the CEF accounts and sustained losses from those deposits of principal and interest to which they are entitled due to the acts and omissions of the Defendants. Furthermore, the Plaintiffs, Glen Mitchell and Wiley Hertlein, have been qualified to be members of and have become members of the “District Subcommittee” in the CCAA Proceedings.
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