CEF/DIL: The Non-Financial Impact

The dollar costs of the CEF / DIL collapse are pretty well known – the DIL investors got ~80% of their deposits back in “relatively” short order while the CEF depositors with less than $5K got all their money back and – on average – the larger depositors got ~18% of their funds back with the rest of the value of their deposits tied up in the Sage Properties / Prince of People businesses as Sage’s Board works to clean the place up, remediate its various environmental issues, catch up on needed maintenance, subdivide the land, and eventually get the assets sold.

For the DIL depositors the financial consequences are “comparatively” light – loss of access to their funds for a few years, the opportunity cost  where they couldn’t invest the money elsewhere to get a return, inability to use the funds for other things like health-care, personal financial support, and a ~20% loss on their deposits. The larger  CEF depositors with more than $5K in CEF deposits are still paying the price. To date they’ve been returned ~18% of their money and have been waiting for Sage to sell its various assets in order to get the balance of the depositor money returned.  And lets not forget the destruction of an asset base that District members accumulated over almost a century which has been permanently lost to the church.

People have been told “it’s all God’s money anyway, so why are you mad?” As odious and contrary to what we as Christians purport to believe (“do not steal” and “do not bear false witness” come to mind) – it also ignores the non-financial implications of this scandal. Specifically the cost in trust, faith, mental health, stress, and time dealing with a human-created scandal instead of living out a normal life. The question has to be going through people’s minds – what kind of church would do such things to its own members while publicly preaching and teaching the exact opposite? This is a question that LCC and its members will have to deal with if it ever wants to have any claim to authenticity going forward much less hope for mercy on Judgment Day.

Depositors and members alike have to deal with with the fact that a para-church’s actions have severely impacted its depositors’ ability to live their life. These people will have to work through being told depositor money was safe only to find out this same organization had been spending depositor money and trust in a futile effort to avoid the ultimate consequence of a funding decision that never should’ve been approved in the first place.

I really don’t know how to put that into words so I’ll turn to a secular example I found in the “Concrete Equities” scandal. This scandal came from an investment Concrete Equities sold in a Mexican real estate project that promised investors 500% returns on their money.  Concrete Equities later filed for bankruptcy(1).

The ASC investigated and prosecuted Concrete Equities’ actions and paragraph 25 of their sanction decision states (emphasis mine):

Much harm resulted from all of this misconduct. Prospective investors were given materially misleading information, and denied the prospectus disclosure and registrant involvement … to which they were entitled by law. Their ability to make sound, informed investment decisions thus impeded, a large number of investors handed over large sums – large in the aggregate but also, in the case of many of the witnesses from whom we heard, disastrously large in light of their own personal circumstances.  … We repeatedly heard – and we believed – testimony of individual investors distraught and traumatized by what they have endured as a result of their involvement with the Concrete Group. Moreover, the harm is not limited to identifiable investors and their families; it is plausible to believe that the harm extends to the Alberta capital market and its participants generally. Individuals who know Concrete Group investors or learn of their plight may themselves become suspicious and reluctant investors. Such diminished investor confidence impairs the ability of legitimate businesses to raise capital economically. ”

(In the second-to-last sentence one could swap “capital markets” with “church fund-raising efforts”).

Following are some comments by the people who were betrayed by the Concrete Equities executives.

From the Calgary Sun:

Johnston noted 92 victims filed court statements detailing the pain and suffering they went through as a result of Humeniuk’s fraudulent conduct.

“It’s a fraction of the victims involved, there was about 1,300,” he said.

Some detailed broken marriages, others describe episodes of depression, the prosecutor noted.

Humeniuk’s conduct left some “people who have no trust of other human beings.

“That’s said that that happened and it’s Mr. Humeniuk who did this to those people,” Johnston said.

Millar, too, noted the impact Humeniuk’s crime had on investors.

“Many have had their lifestyles permanently damaged,” he said.

From the CBC:

Many of his victims reported having to work more years before being able to retire. Some said they felt traumatized and some felt suicidal

From the Calgary Herald:

Several victim impact statements were read by Johnston in court, detailing the financial destitution, emotional and physical damage wrought by the ripoffs.

One victim in her 40s said she’d sold her home to use the money for the investment, only to lose it all.

“I invested my money in good faith with the best information I had,” she wrote. “I also had my confidence, trust and well-being stolen … (Aurora’s) responsible for making my life a living hell.”

Other investors said they lost their homes as a result of their losses, with one couple moving in with their adult daughter.

“I have no RSP, no extra cash flow, it’s all been lost to a greedy man … I have feelings of betrayal,” wrote investor Gordon Shaw. “I’m upset and unable to relax.”

Cameron Christianson wrote that his retirement nest egg has vanished and that “the loss of these funds has caused us to work longer than we’d planned.”

Here’s a graphic on the non-financial impact of fraud that I found on SaveAndInvest.org:p602452I expect that the CEF/DIL depositors share the experience suffered by the Concrete Equities investors, particularly since people rightly expect significantly better behavior from a church.

There’s also the Scriptural teaching on this subject:

…but whoever causes one of these little ones who believe in me to sin, it would be better for him to have a great millstone fastened around his neck and to be drowned in the depth of the sea. Matt 18:6

(1) Global News has a series of articles on the scandal here.

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