Faith is not enough…

It looks like I made an error. My apologies for that. It used to be enough to know that the church was the fellowship of all believers and that the only bond that made synod and districts was a fraternal bond of faith. Apparently LCC has made a permanent change to its articles of faith: from now on please include legal and corporate status.


The Board of Directors of ABC District has directed its people to use a critical eye when perusing the documents alleging wrongdoing by District leaders and the institution itself. It’s good advice. Let’s do that.

The District appears concerned that the people of ABC District will unfairly judge the actions of its leadership. We can now group the current board and its letter into the great dumpster fire that is ABC District.

What follows are statements lifted out of the Alberta Securities Commission notice of hearing.

Let’s see what the Alberta Securities Commission has said to District, and the people of Alberta on the whole – this is the public record after all.

The Alberta Securities Commission is concerned about how ABC District sold CEF to investors. (comments in italics)

Under “Promotional Practices and Statements,” we read…

  • Church Extension has been operating for over 80 years and no one has ever lost a penny in Church Extension. (oops)
  • The guarantee of the Church is much more certain than the guarantee of the government whose indebtedness is among the 30 Countries in the world with the highest debt ratio per captia. (to paraphrase: CEF is more secure than Canada Savings Bonds?)
  • Church Extension investments are used to provide loans to congregations. No congregation has ever defaulted on its loan. If a congregation is struggling to make its payments, the ABC District works with it to ensure that the loan is paid off. (Mortgages and property right disputes arising from CEF ended up in court. At least one congregation defaulted and lost its property)
  • Is my investment safe? Your investment in Church extension is probably safer than in any commercial financial institution. Church Extension has been in operation since 1921 and no one has ever lost a penny. Your investment is guaranteed by the Church. (right up to the moment the church goes bankrupt)

Under the heading of “Exposing Investor Funds to Increased Risk” we read…

  • Over the next several years, the District and DIL placed increasing amounts of investors’ funds into the Prince of Peace Development, such that by late 2014 approximately 90% of investors’ funds in the CEF, and approximately 75% of investors’ funds in both the CEF and DIL combined, were invested in this project.
  • 17 steps District took which increasingly exposed investors to more and more risk are outlined (including loans, transfers, and loan guarantees)
  • District became increasingly involved in the management and operation of POP and especially Encharis, including transfer of District staff, and that “key decisions about Encharis were effectively made or imposed by the District’s management and board of directors.” (yep, the Alberta Securities Commission believes District called most if not all the shots)
  • As a result of such involvement, the District increasingly acted in a serious conflict of interest with respect to the Prince of Peace Development and Encharis, lacking objectivity and independence with respect to financial decisions and compounding risk to investors. (Rev. Don Schiemann, Rev. Mark Ruf, and Board Chair Jim Kentel were on both the District board and the Encharis board – “neither a borrower AND a lender be”).

The heading of “The Respondents’ Knowledge and Awareness of Risks” is what observers call “scary.” It follows a section that includes statements like:

“While engaged as an officer or director, or both, of the District and DIL, each of Schiemann, Robinson, Kentel, Ruf and Schmidt was aware of the District and DIL’s operations described above, directed or supported them, and oversaw their operation in conjunction with other members of the District’s management and board of directors.”

The bucks stops at District Office.

Here’s what else the section says:

  • In or about 1998, the auditor for the District and DIL raised significant concerns to management and the board of directors of the District about the accounting and governance practices followed by the District, and the significant volume and complexity of its financial activities.
  • In 2004 the District’s management and board of directors were made aware that the Prince of Peace Development was losing money every month. Significant financial concerns were highlighted, including insufficient occupancy and monthly operating and financial losses.
  • In or about 2005, the District’s management and board of director’s expressly considered whether to disclose to investors about the “sizeable investment” in the Prince of Peace Development. No such disclosure was made.
  • Staff of the District were made aware that Encharis was still not able to pay contractually – required principal repayments of $2 million for each of 2007, 2008, and 2009.
  • The Executive Director of Encharis provided a written report to the District’s management and board of directors, including all of the individual Respondents, highlighting dire financial circumstances and estimated the District would lose over $10 million of the District “abandoned ship” with respect to Encharis loans at that time.

Do we need to continue? Yes. I’m afraid we do. 

  • The respondents knew or ought to have known that
    • over 80% of District loans were in favour of Encharis;
    • Encahris was in default respecting principal payments to the District;
    • ECHS – the property-holding arm of Encharis – had no financial statements.
    • Encharis was not properly reporting to the District or following the District’s guidelines; and
    • the Encharis assets were not sufficient to pay its liabilities.
  • In 2012 the Executive Director of Encharis advised the Encharis board of directors, which included Schiemann, Kentel, and Ruf, as well as Robinson in his seconded/advisory role, that the existing Encharis operation could not generate enough profit to pay the District interest payments, and that timely development or the sale of property was imperative.
  • In 2013, the District’s management and board of directors considered a third-party development proposal in respect of the Prince of Peace Development, including an opinion that liquidation at the time would result in a $20 million loss. By the end of 2013, the District’s management and board of directors still had not approved financial statements for the fiscal year ending January 31, 2013.
  • In or about July 2014, the District’s management and board of directors were advised by financial consultants that the District and DIL were “insolvent”.

By now you’re probably panting and trying to catch your breath. It’s a lot to take in. Remember, these are just allegations – the boxes of evidence for them is locked in an office somewhere in Calgary.

Break time is over. Now comes the next logical chapter: “The Respondent’s Failure to Disclose,” which is to say, District and five senior leaders knew District was insolvent but said nothing. Yeah, not super good. 

Here are a few more snippits the District’s Board of Directors would like you to peruse: 

  • Adequate or reasonable security had not been obtained respecting the majority of funds loaned by the District.
  • The Prince of Peace Development and Encharis were consistently and materially in default on their interest and principal obligations to the District and DIL.
  • The only realistic prospect for the District to recover the full amount owing from Encharis was through real estate development of lands within or near the Prince of Peace Development, or through the sale of such lands.
  • The District’s management and board of directors had repeatedly been cautioned not to provide additional funding to Encharis without improved repayment security.
  • The District’s management and board of directors frequently did not adhere to internal District policies or guidelines on advancing funds, setting interest rates, or addressing delinquent loans. After 2010, the District’s management and board of directors did not adhere to the written CEF Investment Policy Statement.
  • There was substantial overlap in management, ownership and other relationships between the District and DIL, on the one hand, and Encharis on the other hand, that resulted in a stark lender-borrower conflict of interest situation.
  • As of January 23, 2015, CEF had a total of 2,674 investors—1,694 from Alberta and 980 from British Columbia—with a total amount (principal and interest) owing to investors of approximately $96.7 million. Approximately 60% of these investors were over 70 years old.
  • As at the date of this Notice of Hearing, and based on the reports of the Monitor in the CCAA Proceedings, the CCAA restructuring process appears to have provided CEF investors with total cash disbursements of less than $20 million, plus restricted securities in a new corporate entity known as Sage Properties Corp. The value of the securities in Sage Properties Corp. remains uncertain and is disputed by some affected parties.

My personal favourite observation by the Alberta Securities Commission on the ABC District of Lutheran Church Canada is that; “District’s management and board of directors frequently did not adhere to internal District policies or guidelines on advancing funds, setting interest rates, or addressing delinquent loans.” In short, it appears the Alberta Securities Commission believes District Office leaders and the Board of Directors that oversees them didn’t follow their own rules – and possibly the law.

ABC District would rather you think of it as a benevolent church administration, when in fact it has been primarily self-serving religious corporation that doubles-down on poor decision making and/or inaction.

There’s a real chance we’re going to wake up one day next year and face a stark reality: For years, ABC District may have been a criminal operation. It sounds like hyperbole, but if the path District is on continues, we’re looking at possible ponzi charges and more. 

The District Board’s open letter didn’t quite come out and say, “fake news,” but it may as well have. The District BoD would rather you park your critical faculties. You can do that right up until next summer. If you think it’s cold in September with snow in Edmonton, you’ll may need to bring a parka to any eventual sentencing hearings.

A Study in Contrast

The ABC District Board of Directors has continued its long-standing tradition of being self-centered and inward looking by ignoring any thought or mention of the people harmed in the CEF/DIL debcale. Instead, it has written an open letter to itself. (insert blank stare and light eye twitching)

Rather than reading my take, I recommend you read the District Board of Directors document first. It’s only one page. Mostly small words. Definitely vetted by a lawyer.

Then click the second link and read that, because that’s the two-month old document the ABC District is referring to. It’s the ASC Notice of Hearing, including ten pages of allegations against the District itself.

ABC District Board of Director’s Open Letter – August 2018

Alberta Securities Commission – Notice of Hearing (ABC District et al)

The allegations are just allegations at the moment. That’s not in question. Neither is the amount of damage to faith done by the District and its leaders. But they don’t mention that. Ever.

Sure, drink the ABC District BoD Kool-Aid(tm), but it’s bitter when you take it with the ASC’s giant grain of salt.

The Future Drags On

That bit of unpleasantness is the future for LCC (since it’s all going to be one big happy family soon).

That’s thirty-two (32) court dates. Six weeks worth of information and arguments that will say, among other things, ABC District mislead investors. CTV Calgary kinda puts the finest of points on the accusations when it reported, “A hearing will take place in May 2019 for a religious institution accused of lying to investors.”

LCC doesn’t even get mention as a “church body.” It’s labeled “a religious institution.” That’s a kick in the nards, eh? You know what comes and goes and no one much notices or cares about? Institutions. Have anyone in LCC given much thought to Concordia since it passed into the great secular sea? Nah. 

A hearing will take place in May 2019 for a religious institution accused of lying to investors.”   – CTV Calgary News

Once again we ask in the Lutheran way…

Q: What does this mean?

A: It’s going to be a long, air-conditioned spring in Calgary in May and June 2019.