Victim of a bad economy or a house of cards?

"Victim of a bad economy or a house of cards?" Continued...

Issue: "New faces of New Orleans," Aug. 15, 2009

According to Huddleston, CMI also spent money extravagantly on first-class and private jet travel, memberships in a championship golf course, and $250,000 sponsorships of a Dallas marathon. The extravagant spending on one subsidiary's projects left insufficient funds to finance others, forcing delays in development of several low-income housing projects, the report said.

With bankruptcy proceedings underway, the remaining question is how many investors will pursue legal remedies. Citing mismanagement, conflicts of interest, and failure to disclose material information, the examiner's report has provided ammunition: "In light of the evidence described above, the examiner believes that bondholders have valid causes of action against broker-dealers, Cornerstone directors and others."

Still, one Atlanta-area attorney doesn't think it will be that easy to recover damages. Jason Doss, who specializes in securities arbitration and class action cases, said the report shows the difficulty average investors face in trying to recover cash. He advised one client against legal action for that reason. "Everyone who sold these [bonds] is insolvent or out of business," said Doss. "They don't have any money to repay these people. I couldn't find it an economically feasible [case] and I didn't want my client to throw good money after bad."

Another issue is whether Cornerstone's previous link to the PCA will harm the denomination. In Wilson's mind, it already has. Though not an investor, the retired pastor says he agonizes over the widows and retirees who lost money and the poor witness he said company officials presented. "All this was done in the name of the Lord Jesus Christ," Wilson said. "Their behavior will most certainly have a negative effect upon the witness of the PCA. Both people within and without the PCA will identify the PCA with Cornerstone."

But Roger Schultz, a former PCA ruling elder who is now dean of the college of arts and sciences at Liberty University and part of the Reformed Presbyterian Church, said he believes that many looked at CMI as a case where the effort of well-intentioned Christians collapsed because of a bad economy. Still, he said the case offers instruction to the church as a whole-to avoid mixing commerce too closely with Christian purposes. "The church should be committed to missions and [starting] churches," said Schultz, a specialist in U.S. religious history. "If the church starts to play by the role of a banker, it complicates that mission.


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