Luther Quest Author Asks: What’s Going on in Lutheran Church-Canada?

Every once in a while an author on another site will notice my little blog, comment on something I’ve written, and add a few thoughts of their own.

Recently Rick Strickert over on Luther Quest cited my article “LCC East District Board Meeting, March 12-13 2018“. What his article didn’t get quite right was to the timeline of the restructuring events and the current state of affairs. LQ doesn’t allow people with a gmail.com email addresses to register on its site and enable me to correct the record there. Instead I’ve written this article to provide a short overview of the sequence of events from the start of LCC’s restructuring process to the current point in time.

The source documents for this timeline include:

• After they entered CCAA protection, the ABC BOD formed a Task Force in an effort to find out “what happened?” Their initial report will infuriate you and/or make you sick at the way depositor funds were handled. (The Task Force was disbanded before it could produce its second and final report.)
• Deloitte is the court-appointed Monitor and serves as the court’s eyes and ears during the CCAA process. Over the past three years they’ve posted a lot of information to the insolvency web page they keep for ABC District.
• Once the ABC District CCAA protection is lifted, Higgerty Law will be proceeding with a representative action against people and organizations accused of contributing to the CEF collapse. Their statements of claim has a timeline and details the various alleged offences.
• The Canadian Lutheran’s web page of articles posted during the restructuring process.

And now for the timeline itself:

1. Sometimes in the 1900s, when churches and schools couldn’t source funds from commercial banks,  ABC District’s predecessor organization established a Church Extension Fund (CEF) for church members to finance the construction of churches and schools.
2. CEF operated that way until the 1990s when it’s Board of Directors (BOD) decided to get into seniors housing as form of ministry.  This action was against the CEF mandate to fund churches and schools. Rrisky real estate development projects was not part of CEF’s mandate to keep depositor money safe and only use it for funding churches and schools.
3. After the first seniors units was done, the Prince of Peace congregation proposed to build another facility to allow the seniors to age in place and move to a facility that could take care of them as they became more infirm and unable to care for themselves. This was the “Harbor” and the “Manor” businesses.
4. When a commercial loan could not be found to fund this project, CEF decided to fund the project itself and approved ~$25M. The project was almost immediately in trouble as the first three building foundations sank and drilling for water after the building was finished failed to find a potable water source.
5. By 2003 it was clear the project was in financial trouble and ABC District contemplated declaring bankruptcy. Instead of cutting their losses District decided to continue running the operation purportedly in the hopes of turning things around.
6. Over the years ABC District considered bankruptcy a few more times before being forced to seek CCAA protection in Jan 2015 because of a purported “perfect storm” of investor withdrawls , lack of projects, and the like.
7. According to the ABC District task force report and Higgerty Law’s statements of claim the facts of the matter were completely different. These reports provided substantive details on what actually happened, how depositors life savings were squandered on a number of high-risk real-estate investment projects and “loans” were made without the appropriate security to organizations that could never repay them.
8. Shortly after CEF declared bankruptcy, LCC Synod decided “We need to restructure!” They sold this idea to the various Districts that met in convention that year, and the District conventions all passed motions to that effect.
9. From the Canadian Lutheran “Discussion of the resolution had begun earlier on April 14 (2015), at which time LCC President Robert Bugbee, speaking in an advisory role, had encouraged adoption of the resolution, suggesting that the current structure of LCC and Districts is over governed and duplicating resources unnecessarily. He also suggested a new structure could help to foster unity in LCC.” (I would note that substantive analysis of the prospective savings was not released until June 2017 – ~26 months after Bugbee is reported to’ve made this statement and 20 months after restructuring officially started in Oct 2015.)
10. After the 2015 District convention season was over Synod’s narrative changed from “we’re driving this process” to “They all asked for the same thing at once! Isn’t that amazing?”
11. Synod then hired a governance consultant and began a massive cross-country consulting phase which resulted in the creation of the “Acts and Bylaws” to replace the current governing documents. Included in this process was a promise to the congregations that they would get a confirmation vote on whatever structure was approved by Synod in convention.
12. Opposition to the Acts and Bylaws arose from various quarters, but the only two organizations I know of that publicly made their concerns known were Christ Lutheran Harrrow and East District – Niagara Circuit.
13. A group of still-unnamed people allegedly got to the LCC Synod Board of Directors and convinced them that restructuring would be DOA at the convention as it currently stood.
14. Depending on your viewpoint, the BOD then “convinced” or “strong-armed” the CCMS to give up its Synodically-mandated sole responsibility / authority for structure and yield it to the BOD (article here). (Naturally it isn’t phrased that way but that is what I believe happened.)
15. This resulted in the creation of a four-member “Working Group” which tossed out the Acts and Bylaws and instead revised the Statutory Bylaws, Constitution, and Synodical Bylaws.
16. This revised set of documents was released on Sept 15, 2017 – a month before the Convention started and the last possible day for notice to be given. A pair of webinars were also offered where people could ask some questions but debate on the new documents was specifically disallowed. This left the membership with a extremely limited time to consider the documents and almost no opportunity to discuss the changes with their peers.
17. At the 2017 Convention Business Session 3 Synod went over the Statutory Bylaws, a substitute motion was lost, and the Statutory Bylaws were passed.
18. When Synod started talking about electing people under the new structure, questions arose from the floor about a promised confirmation vote by the congregations.
19. Synod explained that the new structure had already been passed w/out a confirmation vote except for the Constitution. This is because the Statutory and Synodical Bylaws took effect immediately after they were passed. Needless to say this caused a fair bit of consternation and concern among the delegates. One delegate asked “What are we supposed to tell the people that sent us?” The response was “Tell them this is your structure for the next four years, or if Synod calls a special convention to change it at a cost of several hundred thousand dollars.”
20. After the convention one of the major players in this effort revealed that the primary driver for restructuring was not finances or efficiency, but in order to get Director’s insurance for the Synod BOD. After ABC District resulted in multiple lawsuits, the only Director’s insurance Synod could get would not cover lawsuits filed as the result of actions by other organizations. Had a District gotten into trouble, gotten sued, and the Synod BOD named in the resulting lawsuit, then the District BOD members would be covered but Synod BOD members would not and have to fund their own defense. The only perceived solution was to amalgamate Synod and Districts into one body.
21. Sometime later in response to other questions on the Canadian Lutheran CCMS Chair Bill Ney wrote an email which detailed a substantially different narrative of events compared to what actually happened at convention.

In the past two decades LCC has suffered

• a massive loss of funds,
• a huge breach of trust with how ABC District managed depositor funds ,
• a breach of trust when Synod used a “deeper magic” tactic to get restructuring passed without giving the congregations an opportunity to make an “up” or “down” confirmation vote on the new structure.

All this leads to the conclusion that lines up with Mr Strickert’s observation “The LC-C should have some interesting times ahead.”

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Update 2018-07-07: The ASC has issued a Notice of Hearing alleging violations of securities laws with a detailed timeline of the alleged infractions. I have an article on the notice here.