Magazine article The Christian Century

NCC Recovers $5 million(National Council of Churches)

Magazine article The Christian Century

NCC Recovers $5 million(National Council of Churches)

Article excerpt

THE NATIONAL Council of Churches announced March 20 that it has recovered $5 million of the $8 million it lost last year in a high-risk and apparently fraudulent investment scheme linked to a failed Czech bank. The council has filed suit in federal court in Boston against several parties to recover the remaining funds.

"We are very grateful that the money has come back to us," said Joan Brown Campbell, general secretary of the ecumenical organization made up of 32 mainline Protestant and Orthodox church bodies. "While funds on hand meant there would have been no [financial shortfall] for several years, the recovery of the funds secures our ability to serve our retired employees who depend on us for their health care."

The $8 million came from a new fund the NCC set up in 1993 to earn income for health care benefits provided to retired employees.

Richard Lawler, a New York City attorney from the firm Whitman, Breed, Abbott and Morgan who is heading up the recovery effort, said the NCC had filed suit in federal district court in Boston against a number of those involved in the transaction. He declined to provide details of the Boston action, saying not all of the defendants had yet been notified. "We expect to fully recover all the funds that were lost, plus damages," Lawler said.

In March 1994 council officials discovered an $8 million loss from a trust fund for retirees' health benefits that had been invested by NCC employees in a "prime bank guarantees" investment scheme. The guarantees, Lawler said, did not really exist. Although $1.2 billion in these instruments was reportedly printed in the name of the Banka Bohemia, Lawler said he knew of no individuals and no organization. except the NCC that had bought any. Prime bank guarantees were considered a hot investment instrument in the early 1990s. But today phony versions of the instruments are notorious investment frauds.

The yearlong investigation by Lawler and NCC officials included legal proceedings in England and the U.S. as well as a visit by U.S. church leaders to the Czech Republic. The church officials also received assistance in their recovery effort from Czech churches, Czech President Vaclav Havel and the U.S. Securities and Exchange Commission.

Some $4 million of the NCC funds were traced t6 Banka Bohemia, and 1 million to an account in a bank on the island of Jersey off the coast of Great Britain. "We don't know if this was a fraud orchestrated with the assistance of the [Czech] bank or whether [the bank] was an unwitting dupe," Lawler told a news conference. But he said senior officials of the bank were involved, including one who is now a fugitive. Banka Bohemia, once the seventh largest in the Czech Republic, was put into receivership by the Czech National Bank.

Campbell pointedly expressed the NCC's gratitude for the cooperation of the Czech churches--Roman Catholic and Protestant--in the council's effort to recover the money. "Had it not been for the intervention of the Czech churches, and in particular Nadeje Mandysova, secretary general of the Ecumenical Council of Churches in the Czech Republic, we probably would not have been able to get the money out of Prague," Campbell said. Campbell credited Czech church officials for pressing the Czech National Bank to transfer the disputed $4 million to an escrow account under court oversight in England. As a gesture of its appreciation, Campbell said, the NCC is making a gift of $25,000 to the Czech Ecumenical Council.

When asked whether new procedural safeguards had been put in place to ensure that such financial traumas would not reoccur, Campbell said that such procedures had been in effect at the time of the loss but had been sidestepped. "You can have the best safeguards in the world but people will discover ways of getting around them," Campbell said. Nevertheless, with the assistance of an interim financial officer, Frank Winner, chief financial officer for Burlington Industry, "new and even more stringent financial controls have been implemented," Campbell said. …

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