Faith Based Fraud

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Billions of dollars that American Christians give churches, ministries and nonprofits are stolen every year. In fact, one study estimated that in 2015 alone, $50 billion was squandered in fraud! How do we stop this shocking theft of God’s money? And how do we ensure that the money we give is spent the way we intended?

In this episode of The Roys Report, Julie talks with Warren Cole Smith, president of MinistryWatch, who shares riveting stories about some of the biggest conmen and Ponzi schemes the church has ever known. But Warren also gives the inside scoop on how these frauds were exposed, and how Christians can work for substantive change.

Warren Cole Smith

Senior Fellow, Colson Center

After several years of growing the Colson Center’s reach and impact by creating partnerships with key Christian leaders and strategic Christian organizations around the country, Warren is now the President of Ministry Watch. Warren previously served as Vice President of WORLD News Group, publisher of WORLD Magazine and has more than 30 years of experience as a writer, editor, marketing professional, and entrepreneur.

Show Transcript

SPEAKERS
WARREN COLE SMITH, JULIE ROYS

JULIE ROYS 00:00
American Christians are arguably the most generous people in the world, giving about 850 billion dollars a year to charity. Yet we may also be the most gullible and a huge amount of that money is squandered every year in fraud. In fact, in 2015 alone, it was estimated that $50 billion was stolen from the money that Christians gave to churches, ministries and other nonprofits. Welcome to the Roys Report, a podcast dedicated to reporting the truth and restoring the church. I’m Julie Roys. And joining me today is Warren Cole Smith, the author of Faith Based Fraud, a new book that documents decades of fraudulent activity by Christian organizations. It is an eye opening book and it exposes some of the worst hypocrisy and theft that’s happened in the name of Christ over the past three to four decades. And in some ways, I’ve got to admit, it can be a painful topic to explore. None of us, especially those of us who call ourselves Christians like to look at some of the absolute worst representatives of our faith. It’s embarrassing, and it can be demoralizing. But that’s not where Warren’s book leads us. Instead, it explores different solutions to the problem. And truly one of the solutions is for people like you and like me to be better informed and wiser donors. So thank you for joining us today. I think you’re going to be really glad that you did. And I think as a result of listening, you’re going to be better equipped to spot, and then to avoid, the charlatans that are out there. But before I introduce Warren, I’d like to thank the sponsors of the Roys Report, Judson University and Marquardt of Barrington. Judson University is a top ranked Christian university providing a caring community and excellent college experience. Judson has resumed in person classes for traditional, transfer and adult students. And you can choose from more than 60 majors and learn in a Christian community known for its spiritual values, leadership opportunities and strong financial aid. Judson is located on a beautiful 90 acre campus just 36 miles northwest of Chicago. Judson University is shaping lives that shaped the world. For more information, just go to Judsonu.edu/visit. Also, if you’re in the market for a car I highly recommend my friends at Marquardt of Barrington. Marquardt is a Buick GMC dealership where you can expect honesty, integrity and transparency. That’s because the owners there, Dan and Kurt Marquardt, are men of character. And I’m proud to partner with them for this podcast. To check them out, just go to buyacar123.com. Well, again, joining me today is Warren Cole Smith, author of the new book, Faith Based Fraud. He’s also the president of Ministry Watch, an organization dedicated to bringing transparency and accountability to the Christian ministry world. He served as vice president of the Colson Center for Christian Worldview, and as vice President and associate publisher at World Magazine. And once a month I get the privilege of joining Warren for a podcast he hosts and ministry watch. So this is kind of fun to reverse roles and interview Warren. So Warren, welcome, and thanks so much for joining me.

WARREN COLE SMITH 03:06
Well, thank you, Julie. It’s great to be with you.

JULIE ROYS 03:07
You’ve been reporting on corruption in the church for far longer than I have. And honestly, it was an incredible education to read your book, and some of the stories in there were brand new to me. But in your first chapter, you tell the story of the founder of Ministry Watch, Rusty Leonard, and I had the privilege last spring of meeting you and Rusty and just really enjoyed that and found him to be just a man without guile, but somebody who has sacrificed so much for the good of the church. And I think Rusty’s story is just so helpful because it shows how naive and sometimes overly trusting Christians can be about these Christian organizations. So can you tell us a little bit about Rusty’s story and how he discovered this problem of fraud in the church?

WARREN COLE SMITH 03:54
Well, I agree with you. Rusty Leonard is one of the heroes of the book and one of the heroes of my life as a matter of fact. Rusty and his wife, Carol, were financial people. Carol herself is a CPA. Rusty is what is known as a CFA, Chartered Financial Analyst, which is kind of the gold standard for examining the finances of large organizations. And he made a lot of money working for the legendary investor, Sir John Templeton. He managed literally billions of dollars for Sir John Templeton. And as Rusty was growing and advancing in his career and making a lot of money, He also became a donor, a philanthropist. He was a committed Christian. Felt like, of course, that it was important for him to be a good steward of those resources. And Rusty said to himself, you know, I look deeply into the financials of a company before I invest money in that company. Shouldn’t I look deeply into the financials of a ministry before I give money to that ministry? Seems pretty logical. So he started doing that, and discovered that lots of ministries didn’t like to be examined. They didn’t like it when Rusty asked tough questions. They didn’t like it, whenever Rusty asked to see their financial statements, either their form 990, or their audited financial statements. So that was a real eye opening experience for Rusty. And it was an experience that led him to form Ministry Watch. Ministry Watch was founded more than 20 years ago by Rusty and Carol, and it has a database of the largest Christian ministries in the country. We have about 650 of those ministries in our database now. Provides pretty sophisticated financial analysis so that others can do what Rusty and Carol did, which is to look deeply into the finances of those ministries. And of course, we also do investigative journalism, which is kind of my piece of it.

JULIE ROYS 05:51
Yeah. And I so appreciate what you do. And the work you do. And I found you guys to be just great partners and allies in ministry and in reporting what’s going on in the church. You know, I think one of the main questions people ask, especially Christians, when we address this topic is, why is this happening in the church? You know, of all people, we should be able to trust Christians and our brothers and sisters in Christ. Right? But clearly, there are deep issues going on. And early on in the book, you talk about a conversation that you had, I think, like 12 years ago, with Steven Furtick, who is the pastor of Elevation Church, which is one of the biggest churches in the country now. 25,000 people coming regularly, at least, you know, before COVID. Attending this church, and this conversation, I just thought it was really instructive as to why some of this happen. So can you tell me a little bit about that conversation with Stephen?

WARREN COLE SMITH 06:47
Yeah, you bet. Well, of course, I live in Charlotte, as well, as Elevation Church, as you mentioned, is based in Charlotte. So you know, when Elevation Church started blowing up, so to speak, and by that, I mean, getting bigger, I don’t mean imploding, but blowing up. You know, I said, hey, maybe I should do an interview with Steven. So I went down to his office and down in South East Charlotte, and we spent about an hour together that day. And I found Stephen to be a smart guy, a great communicator. You know, someone who was very earnest and sincere; he was very young at that time, because like you said, it was more than a dozen years ago, that I had that conversation with him. And one of the things that I asked Stephen then was, who provides accountability for him? Does he have deacons? Does he have elders? And he said something that stuck with me. He said, we’re a staff led church. He does not have deacons and elders, at least they didn’t at that time, I think that they have made some adjustments to the way they organize themselves since then. But even today, the bottom line is that there is very little accountability for someone like Steven Furtick. That experience opened my eyes to looking for that form of church government and church governance. So what the fancy word for that is church polity in other churches, and I found it, unfortunately, to be common in the evangelical world. Mars Hill Church in Seattle, Washington, or at least it was in Seattle. That church has since gone away. In part because of the problems that they had there, was also a staff led church. The elders in that church were actually the staff members of that church. So unfortunately, I think what we’re seeing today is a growth in mega churches, very large churches that are led by talented, gifted charismatic leaders like Steven Furtick, or, in the case of Mars Hill Church, Mark Driscoll, but men who have very little accountability. Folks who are not really in a position to say, Hey, dude, you need to do things differently here. Because the folks who are in a position to do that are usually people that are on the payroll of the church, and can be fired by that senior pastor. And of course, it makes them very reluctant to speak up.

JULIE ROYS 09:06
Well, I think it’s interesting with Steven Furtick. So your interview, I believe, was in 2008. In 2012, he built a 16,000 square foot, multi-million dollar home, that it seems like he kind of tried to keep secret by you know, putting in a trust, which is kind of the new thing that all these celebrities withinCchristendom do. And then it came out that his salary is secret, and that it’s set by five out of town pastors, not even the people who are giving the money, have control over it. It’s these five out of town pastors. Which I’m guessing we don’t know who they are, but they’re probably celebrity pastors making a huge amount of money. So again, I think it’s really what you’re putting your finger on are some really big issues within the church. And you talk about and I think both of us have been sounding this drum, that the two things that we have to have if we’re going to reform things in the church is one transparency right?

WARREN COLE SMITH 10:00
Yep.

JULIE ROYS 10:00
And accountability. And these boards need to be independent, truly independent. We need to have churches releasing and talking about how much money they have. I know you did a seminar recently, didn’t you, on how to read a 990, which is very helpful. Christian nonprofits, and nonprofits in general have to file these 990s, except churches don’t and a lot of these nonprofits are, you know, classifying as churches. So they don’t have to file 990s. So we really don’t have any transparencies with these mega churches do we?

WARREN COLE SMITH 10:31
No, we do not. And, you know, Julie, you’ve introduced two or three really important ideas: transparency and accountability are so important. They’re a theme of the book. I know, they’re a theme of your ministry and mine as well. One of the key tools that we use to make sure that ministries are transparent, is that form 990. It’s a form that all nonprofit organizations have to fill out. Because it’s kind of one of the ways they earned their nonprofit status, if you will, is they have to disclose a lot of information on the form 990. But as you also said, churches don’t have to do that. There is a church exemption. And one of the things that we’re seeing increasingly, is that ministries who are not churches are claiming the church exemption in order to not fill out that form 990. And as you already said, about churches like Elevation, they’ve been doing this for years. They are churches, so they don’t fill out those form 990s. And so the vast majority of the donors have no idea where the money’s going. And that’s really what we’re about at Ministry Watch, is to just make sure that donors know where the money is going so that they can be effective stewards of the money that God is entrusted to them. If they decide that they want to spend that money on big salaries, well, you know, that wouldn’t be my choice. But at least they know, and they’re making that decision intentionally.

JULIE ROYS 12:02
But I think a lot of people listening right now will be like, okay, we shouldn’t be having these problems, because now we have this self regulating organization called the Evangelical Council for Financial Accountability (ECFA). And I think they believe, a lot of Christians believe, that this is doing the job of providing because it’s in its name, right?, accountability. And yet you highlight in your book, two huge scandals that involve, and I think show, how ineffectual the ECFA is. So the first is the Jim Baker PTL scandal. And this is a scandal that probably most people have heard of. Tell us what happened with Jim Baker and the PTL scandal and why this became such huge news? And I think it was very, very disillusioning for a lot of Christians. Because this was kind of the first time you saw this big Christian ministry and not one that I was ever that keen on. But the first time you saw a Christian ministry like this involved in actual fraud,

WARREN COLE SMITH 13:00
Yeah, that’s right. Well, Jim, and Tammy Baker got their start in ministry in the 1970s. But by the 1980s, they were pretty well known. In fact, they were instrumental in the formation of several big television networks, the Trinity Broadcasting Network and the Christian Broadcasting Network. Well, they eventually formed a network of their own called the PTL Club and the PTL Network. PTL stands for praise the Lord. Though, some smart aleck people says that it also stood for pass the loot. But we we won’t go there right now, except to say that, for a number of years, because Jim and Tammy were fun to watch. They were winsome. They were in some way, sort of like the Regis and Kathie Lee, of Christian television. You know, they they built a big audience, and they decided that they wanted to build this facility right near Charlotte, North Carolina. Very near where I live right now, called Heritage USA. It was going to be a large conference center and hotels and amusement park. And in order to finance Heritage USA, they sold these memberships in Heritage USA where people would pay a certain amount of money, and that would give them benefits. They would be able to use the Heritage USA a certain number of days of the year. Well, obviously if you’re going to sell those kinds of memberships like a timeshare, you don’t want to sell more days than there are days in the year. And unfortunately, that’s what Jim and Tammy and Heritage USA ended up doing. So the real nature of the fraud was not that they built Heritage USA or that they built this amusement park. But what they were actually convicted of was over selling the memberships in Heritage USA. Jim Baker eventually went to prison. The PTL Network collapsed. Jerry Falwell, not Jerry Falwell, Jr., but Jerry Falwell, his father, tried to rescue it for a while. That attempt ended up failing. Today, Heritage USA still exists. It’s owned by Morningstar Ministries, which is another questionable ministry that I don’t talk about much in the book. But it just ended up being a very chaotic situation. Tens of thousands of people lost, in the aggregate, tens of millions of dollars in the PTL scandal.

JULIE ROYS 15:35
Hmm. So here’s my question. Where was the ECFA when all of this was happening? Pretty interesting story about how the ECFA is involved.

WARREN COLE SMITH 15:46
That’s a great question. And the truth of the matter is, is that during most of the time, that the scandalous behavior was happening at PTL and Heritage USA, they were members of the ECFA. The ECFA had been formed probably a few years earlier in 1979, I believe was the official founding date of the ECFA. And the ECFA was founded in response to some concerns that Congress was going to regulate the nonprofit sector. And many Christian leaders got together and said that, if we formed our own self regulating organization, maybe that would keep the government at bay. And it was successful at keeping the government at bay. It was not successful at actually creating any meaningful oversight of Christian ministries. And that’s why the PTL Network, and Jim and Tammy Baker, could be members of the ECFA, and not be held accountable at all by the ECFA for their scandalous activity. In fact, it was only after all of these scandalous activities, the fraud came to light, mostly because of reporting by the Charlotte Observer, the secular newspaper here in Charlotte, that the ECFA finally suspended the PTL Clubs and the Heritage USA’s membership in the ECFA.

JULIE ROYS 17:13
And we’ve seen this over and over again, haven’t we? With Gospel for Asia, the same thing happened, where they were accredited by ECFA. And that’s when the press reported everything about all the fraud going on that then Gospel for Asia lost its accreditation with ECFA. Same thing with Harvest Bible Chapel, which is what I’m most intimately associated with and know the best. But just an ongoing problem over and over again. Let’s turn to this New Era Foundation. Which again, I said at the beginning, this is something I had heard of it, it wasn’t completely new, but I really didn’t know what this was all about. And yet this scandal, you know, is a major Ponzi scheme, as you described, and it involved hundreds of millions of dollars, and some very prominent Christian organizations were duped. Like Wheaton College. Like Moody Bible Institute. I mean, it’s stunning what happened with this New Era Foundation that should be a huge warning to all of us how we can be duped by people who we think are our Christian brothers. Talk a little bit about this New Era Foundation, what the Ponzi scheme, you know, how it worked, and how it roped so many Christians into it.

WARREN COLE SMITH 18:21
Yeah, the Foundation for New Era Philanthropy was founded by a man named John Bennett. John Bennett was a guy that was pretty well known in evangelical circles. And John Bennett essentially claimed that he had an anonymous donor that would match the gifts of other donors to Christian ministries. So the way it would work, Julie, would be that I would give say, $5,000 to the Foundation for New Era Philanthropy. The Foundation for New Era Philanthropy would hold my money for 90 days, they said that they put it in escrow. They would take money from this anonymous donor, and my $5,000 became $10,000. And then that $10,000 gift would be made to the ultimate Christian ministry, whether it be Wheaton College or Moody Bible Institute, or, you know, some of the other organizations that were a part of this scheme. Well, that worked pretty well for a while. And a lot of Christians, especially evangelical Christians, kind of bought into the idea. They wanted to know who the anonymous donor was, but they also respected the fact that the anonymous donor wanted to remain anonymous. In fact, some even said that that’s pretty biblical, that your right hand should know what your left hand is doing. And the fact that this anonymous donor wanted to remain anonymous shouldn’t be a red flag. So because the anonymous donor was hidden, we didn’t know who he was. And because, at least for a couple of years, Bennett was able to make good on his promises. In other words, if I gave $5000, it would get matched and go to the ministry. Nobody got suspicious. But what, in fact, was happening was that there was no anonymous donor. And the reason Bennett was able to pay, say, the $10,000 to Wheaton, because of my $5,000 donation, was because lots and lots of other people were making donations as well. It was a complete fraud. The money was just coming in faster than it was going out. But that didn’t last for long. After a couple of years, the money started going out much faster than it was going in. And that’s when the whole scheme fell apart.

JULIE ROYS 20:42
And it fell apart because of a whistleblower. One man, that’s right, one man who took a look at the numbers and said, Hmm, this isn’t adding up. I don’t know why we’re doing this. They started asking questions. And you know, as Christian organizations are known to do, when he brought it to his supervisors, and to those above him, they really didn’t think he was on to something because they trusted Mr. Bennett. They trusted that he was doing the right thing. But it shows how one man, and then one reporter, brought this all to light. So describe what happened with that. It’s a really great story.

WARREN COLE SMITH 21:19
Well, it is a great story. And Albert Meyer is the man that you’re talking about. He was an accountant and a sort of a an adjunct part time professor at Spring Arbor College, a Christian college in Michigan. Because Albert Meyer was trained in accounting, and because he knew who Ponzi was – the originator of the Ponzi scheme – it just didn’t make sense to him. It didn’t add up. So he started paying attention, started doing some research. And as you said, he brought his concerns to the leadership of Spring Arbor College. But at the time, they didn’t want to hear because they were making money. It was working for them. And in fact, at one point, Albert Meyer thought that if he didn’t keep his mouth shut, he was probably going to lose his job. And it was a job that he really needed because he was a young man at that time. And he was, you know, supporting a, you know, a growing family. Wasn’t making a lot of money. But he kept at it. He kept feeding information to reporters. Finally, he got a reporter with The Wall Street Journal, Steve Stecklo, to get interested in the story. And as a consequence of that interest, a front page story on the Foundation for New Era Philanthropy was finally published in The Wall Street Journal. Published in large part because of the information that Albert Meyer was able to provide. And that was ultimately what brought down the Foundation for New Era Philanthropy. It’s a great story of the courage and the power of a single man, a whistleblower, who was willing to tell the truth, despite circumstances that would have caused a lesser person to buckle. And it’s also by the way, Julie, and this is where I take a lot of encouragement, and I think you should too, the power of journalism. The fact that even Albert Meyer might not have been able to make a difference if he was not able to get the attention of a newspaper. And it was the newspaper accounts made public that ultimately was the straw that broke the camel’s back.

JULIE ROYS 23:30
Absolutely. And almost always, isn’t it with stories we report, there’s usually a whistleblower, or a number of whistleblowers, who are working really in conjunction as our sources to feed us information. And you can’t do it without those people speaking up. But you’re right. We can’t bring these stories to light without a good and robust investigative journalism. And you write, and I love this, you say investigative journalism is vital to the maintenance of liberty and justice. These are not just Western ideals. These are biblical ideals.

WARREN COLE SMITH 24:01
That’s exactly right. You know, we see this throughout Scripture, that as Christians, we are children of the light. You shall know the truth and the truth shall make you free. I mean, these ideas of transparency and vulnerability and accountability are just woven through out scripture. Really from Genesis to Revelation. So I don’t think we as investigative journalists, or those of our listeners that might be concerned about being good stewards, should ever apologize for asking tough questions of folks that are involved in ministry. Because if those folks are doing good work, if the folks that we’re asking these questions of are doing good work, and they’re doing honorable work, our tough questions give them an opportunity to shine. It is only when they are behaving badly that our questions should ever create a problem.

JULIE ROYS 25:04
And I’m going to ask the question again, where was the ECFA when all this was going on at New Era?

WARREN COLE SMITH 25:11
Well, the ECFA was there. They were, the Foundation for New Era Philanthropy was a member of the ECFA. Many of the organizations that were victims of the scheme were members of the ECFA. The ECFA, unfortunately, once again, failed to act. Now, I should say this, Julie, in all fairness, that once the scandal broke, the ECFA did get involved. And they tried to work with their members to recover the funds that had been illegally taken and return them to their rightful owners. But Albert Meyer, the whistleblower, in this case, the hero of this story, really is very critical of the ECFA’s role because that money was illegally gained anyway. That the law would have required most of those ministries to give that money back in the first place. He said that the ECFA’s role was very minimal, very nominal. And in fact, they were a contributor to the problem developing and they shouldn’t take credit for solving the problem after it had been exposed.

JULIE ROYS 26:25
Well, and didn’t the ECFA claim that they had recouped, like 90% of the money that have been given through the New Era Foundation? And yet, they only recoup that 90% that hadn’t been spent yet. But millions and millions of those dollars have already been spent. So they weren’t able to be recouped.

WARREN COLE SMITH 26:42
That’s correct.

JULIE ROYS 26:43
Yeah. Well, this brings us to the evangelical industrial complex. This is a term that you and I both use a lot. I think it was actually Skye Jethani who first coined the term. But this is this web of Christian publishing mega churches, para churches, conferences. All these things that work together and depend on each other, to make money and to stay solvent. And so when someone powerful in the Christian community does something wrong, many Christian leaders and institutions, instead of bringing accountability, they look the other way because they depend on each other for their survival. And you give two examples of how this works. One, you’ve already mentioned Mark Driscoll. Now Mark Driscoll was involved in doing you know, a lot of bullying behavior. And I think when his elder board was about to remove him, it was more that behavior that they called him on. But yet the whole book-selling scheme, that much more shows us how the evangelical industrial complex was involved with Mark Driscoll. So tell us about, you know, that part of the story, and how publishers and radio networks and different organizations got behind him.

WARREN COLE SMITH 27:51
Mark Driscoll, his wife, Grace wrote a book called Real Marriage. And that book ended up on the New York Times bestseller list. Now, that’s an important goal for writers because if you get a book on the New York Times bestseller list, what happens is that bookstores all across the country will start carrying your book. In fact, you’ve probably walked into bookstores where, right near the front door, they’ll have a display of books that are on the New York Times bestseller list. So it becomes a huge accelerant to book sales, to get your book on the New York Times bestseller list. Also, you can say for the rest of your life, that you are a New York Times bestselling author. It becomes an important part of a lot of authors’ personal brand. So getting on the New York Times bestseller list is an important goal for many authors. So important, that they will stoop to unethical and maybe even illegal means to do so. And in the case of Mark Driscoll, he in effect, bought his way onto the New York Times bestseller list. The way he did that was by hiring a company called Result Source. Result Source is a company that was set up purely to put books on bestseller lists. They have a network of people scattered around the country. And they provide those people with debit cards and other kinds of ways to purchase books so that it doesn’t look like it’s a bulk purchase. That it looks like the book is being bought by thousands of people and thousands of locations all around the country. And it basically deceives the people who compiled the best seller list into thinking that these are organic sales and not orchestrated sales. Results Source was hired by Mars Hill Church and Mark Driscoll for the total cost, including the purchase of the books and the feeder Result Source, was nearly a quarter of a million dollars, and it was successful. The book did end up on the New York Times bestseller list and Result Source was used by many celebrity authors. I was able to identify at least a couple more in the book that used Result Source. And sort of the common thread for all of the authors that use Result Source was a literary agent named Sealy Yates. Sealy Yates was Mark Driscoll’s literary agent. And he was the literary agent for a number of other writers that ended up on the New York Times bestseller list. And he was also a friend of the president of Result Source.

JULIE ROYS 30:33
Mm hmm. Just an interesting nugget here. When I was working in radio, and I remember, I was saying I was at the point where we’re incorporating as a nonprofit, a radio executive said, Oh, well, hey, you got to talk to Sealy Yates. I’ll put you in touch blah, blah. I ended up talking to Sealy Yates, not realizing this. And then when I read this, I was like, man, I don’t want anything to do with with, with Sealy Yates, given his involvement in these things. But again, I got that name from a radio executive. Why? Because they’re all connected. Why? Because these publishers, as well, are connected. And we saw it, didn’t we, with with Driscoll, when this all came to light. You didn’t immediately see the whole complex bringing heat on Driscoll necessarily. They did eventually take some steps, right? But initially not.

WARREN COLE SMITH 31:27
Well, that’s exactly right. And the reason of course, is because, as you rightly said, they’re all connected. I mean, Sealy Yates, for example, is also the literary agent for David Jeremiah. And David Jeremiah, of course, has a very large radio and television ministry. That radio and television ministry buys time on Christian radio and television stations around the country. And when I say buy time, I mean, they spend 10, you know, as much as $10 million a year on buying time from Salem, and you know, other radio networks. So it becomes very, very difficult to criticize your largest customer. And the book publishers depend upon the radio stations to give their authors interviews. The radio stations depend upon the book publishers to do advertising. So it is just a complete incestuous kind of circle where one hand is feeding the other or I don’t know what metaphor to use here, Julie, but one hand is scratching somebody else’s back, and so on and so forth. So whatever metaphor you want to use. They’re all in this together, so to speak, and it becomes very difficult for folks that are in Christian media, even if they did have actual reporters. And by the way, Salem has very few real reporters on their staff. But even if they decided they didn’t want to investigate this, they probably wouldn’t be allowed to because of the financial conflicts of interest involved.

JULIE ROYS 32:55
And you mentioned Dr. David Jeremiah. He did the same thing with his books. Did he hire Result Source?

WARREN COLE SMITH 33:01
Well, he never said so explicitly. But he mentioned in one of the acknowledgments, in fact, a couple of the acknowledgments of his books, that he wanted to thank the mastermind behind his marketing of his books, Kevin Small. Well, Kevin Small is the president of Result Source. So while he never admitted explicitly that he paid Results Source, it is clear that he worked with Result Source and with Kevin Small. And by the way, I should say that Sealey Yates is both David Jeremiah’s literary agent and chairman of the board of David Jeremiah’s Turning Point Ministries.

JULIE ROYS 33:38
Oh, my goodness! Well, the web gets even more sticky with David Jeremiah, because he was part of National Religious Broadcasters. And he was with the ECFA. I mean, initially, because of this, ECFA was moving towards actually taking away his accreditation. He pulled out of the ECFA first, right, and out of NRB. Is that is that correct?

WARREN COLE SMITH 34:01
Yeah, that’s correct. And, you know, I gotta say, you know, Julie, you and I have been hard on the ECFA. And I think that there’s reason for that. I’m not apologizing for that. But I also want to say that I think the ECFA is a co-laborer in this process with us. I don’t think they do as much as they can, or should. I believe that the limitations of the ECFA are why organizations like Ministry Watch or The Roys Report exist. But I do want to say that the ECFA does a pretty good job of setting standards that ministries should live up to. Now, they don’t do a great job of policing the organizations to adhere to those standards. But I believe that the standards that they actually set are wise and prudent, and I think that they do a good service to the evangelical world.

JULIE ROYS 34:55
I would agree with you that the standards are good, I think where we would disagree maybe, is that I believe that by accrediting organizations, they’re giving a false sense of security to donors. And that, to me, is really dangerous. So that’s where I kind of feel like they’re not allies, because they’re giving this false sense of security to so many donors who think, well, ECFA has looked into it, it’s good.

WARREN COLE SMITH 35:20
I don’t disagree with that. I don’t fully agree with it either. Because as in the case of David Jeremiah, they were starting to take sanctions against David Jeremiah. I don’t think they do it often enough. I agree with you that they do give donors a false sense of security. Because when an organization joins the ECFA, they are almost never scrutinized after that. But in the case of David Jeremiah, I think things were actually working the way they should. David Jeremiah, in part because of this book buying scheme, and because of some other issues that were related to that ministry, Turning Point Ministries voluntarily resigned from the ECFA. But they voluntarily resigned, because they were being reviewed by the ECFA. It was probably going to be inevitable that they were going to be asked to leave. Now, that created a problem for David Jeremiah, and it created a problem for the National Religious Broadcasters, because the National Religious Broadcasters at that time, and this was about 10 years ago, had a standard that said that if you are going to be on the executive committee of the National Religious Broadcasters, you had to be a member in good standing of the ECFA. And so when David Jeremiah left the ECFA, it forced him to leave the NRB as well. So you had this strange situation, where you had one of the largest religious broadcasters in the country, who could not be a member of the National Religious Broadcasters, because he was no longer a member of the ECFA. Well, for the NRB, for the National Religious Broadcasters, that created an untenable situation. So they changed their standard to allow organizations to be members of the National Religious Broadcasters, without being members of the ECFA. They did have to join another organization. It was the Better Business Bureaus’ Wise Giving Alliance, which has very different standards altogether. So it basically became a workaround that the NRB created for organizations like David Jeremiah, and in some ways left the ECFA out in the cold.

JULIE ROYS 37:30
Yeah, yeah, it did. And the interesting thing is that recently, David, Jeremiah just got a big award from the NRB. So that kind of came around full circle.

WARREN COLE SMITH 37:40
That’s right. He was named to the National Religious Broadcasters’ Hall of Fame, which is ironic in the extreme. There’s no doubt about it.

JULIE ROYS 37:47
Well, and I think people should know, NRB and ECFA share board members. And so again, this whole evangelical industrial complex, it is all interconnected. And these board members are often presidents or chairman’s of different Christian organizations. So I think people need to really do due diligence, to find out who’s in charge and how these organizations are operating. Let’s turn to another possible fix of the problem, which would be government regulation. And I think as Christians, we’re loath to want government regulation. And yet, maybe there needs to be some. But there was some push by a senator, Senator Grassley, to bring some accountability, especially on some of these really, really outrageous prosperity preachers. And those prosperity preachers became known as the Grassley Six, and there was an investigation. A lot of people don’t know about this investigation. But it’s really I think what happened with it, is very important for us to know. Warren, tell us about the Grassley Six and what happened?

WARREN COLE SMITH 38:53
Yeah, well, I devoted an entire chapter to the Grassley Six, because I think you’re right. A lot of people think that there are two great hopes for accountability and transparency. One is the ECFA. And the other is the government. What I say in my book is that no, neither one of those fixes are going to work. The problem with depending upon the government, for a number of reasons. Number one, increased government regulation is going to add a layer of bureaucracy and cost to doing business as a Christian ministry. Then number two, the Grassley investigation ultimately resulted in absolutely no action or sanctions being imposed against the six ministries that were investigated. So even though millions of dollars, possibly tens of millions of dollars, were spent on the Grassley investigation, nothing happened. We can’t depend upon the government to police Christian ministries. They don’t have the investigative tools or the theological tools to really be able to discern what is going on with them a ministry and who sort of the good guys are and the bad guys are. So that’s the reason that I say neither the ECFA nor the government is the right answer and that we should be looking for third ways in order to create transparency and accountability in the ministry world.

JULIE ROYS 40:17
Right. And as the Grassley Six showed, you know, politicians will be political.

WARREN COLE SMITH 40:24
Right, right. Well, you can’t take there’s an old saying, Julie, you can’t take the politics out of politics. And that’s right, the political considerations are going to be too great. And in the case of Grassley, for example, the the financial crisis hit in 2008-2009. And in fact, I interviewed Senator Grassley for the book. And I said, Senator Grassley, did the Grassley Six, did the six televangelists get a get out of jail free card because of the financial crisis that you guys just got distracted by other things? Now, of course, Senator Grassley denied that. But I have a hard time, you know, thinking that maybe that’s not true.

JULIE ROYS 41:01
Yeah, I think one thing that all of America is aware of, especially after, you know, the last four years, is that evangelicals are a major voting bloc. And so it’s going to be hard to get the government to really police evangelical organizations. I just want to kind of land this plane, and talk about where the responsibility lies. Because we’ve said ECFA isn’t going to clean it up. The government isn’t going to clean it up. There has been and I will say, this is what motivates me to do my work and you do your work, is there’s been substantial change by whistleblowers and journalists speaking up and bringing light in these situations. But ultimately, we only highlight the worst, the biggest, and this is happening on a lot of levels and a lot of organizations from big to small. And it really is educating donors, isn’t it? It really is those listening, who need to take responsibility for this and need to be wiser in the way that they spend their money.

WARREN COLE SMITH 42:03
Well, that’s exactly right. And, you know, Julie, each individual donor, I mean, there might be somebody listening here that gives away millions of dollars a year and has, you know, a significant influence. But the vast majority of us are probably going to say, you know what, I give a few thousand dollars a year to my church and maybe a few hundred dollars a year to various Christian ministries. What kind of an impact can I have? And I would say that the answer to that question is you can have a tremendous impact, that if you ask tough questions before you give that money, and also if you aggregate your efforts with the efforts of dozens, of hundreds, of thousands. Dare I believe that maybe one day there might be millions of donors that are asking these kinds of questions? I believe it will have a tremendous impact. And as you mentioned, Julie, early in the program, Christians are incredibly generous. The 650 ministries that are in our Ministry Watch database, are responsible for $30 billion in giving every year. That’s the combined revenue of those 650 ministries. And those are just the 650 largest ministries in this country. There are hundreds of thousands, nearly a million others. If the donors to all of these ministries got together, or even acting individually, but knowing that others were also acting individually, and started asking tough questions before they gave money, I believe that it can have a very serious reformative effect on Christian ministries in this country. And on the way all of us do stewardship and giving. And so I really believe that the responsibility lies with each one of us individually. Every single one of us that are listening to this conversation, can ask tough questions before they give their money. And I believe that, in the aggregate, that will have a tremendous impact on Christian ministries in this country.

JULIE ROYS 43:59
Amen. I second everything you just said. Warren, fantastic book, Faith Based Fraud. If people want to get their hands on this, how did they get it?

WARREN COLE SMITH 44:08
Well, it’s gonna be tough because we were giving it away as a donor premium for folks who gave money to Ministry Watch, but we’re out of books. And so stay tuned. We’re probably not going to publish any more copies of the book until January. But after January, we are looking at maybe a publisher or doing an additional printing ourselves.

JULIE ROYS 44:27
Wow! So I have a valuable copyright here. It’s a limited edition.

WARREN COLE SMITH 44:31
You do! Yeah! Absolutely!

JULIE ROYS 44:33
Well, Warren, thank you so much for writing this book and for joining me on this podcast. And thanks so much for listening to The Roys Report, a podcast dedicated to reporting the truth and restoring the church. I’m Julie Roys. If you’d like to find me online, just go to Julieroys.com. Also, make sure you subscribe to The Roys Report on Apple podcasts or Google podcasts. That way you’ll never miss an episode. And while you’re at it, I’d really appreciate it if you’d help us spread the word about the podcast by leaving a review. And then, if you would, share the podcast on social media so more people can find out about this great content. Again, thanks so much for joining me today. Hope you have a great day and God bless.

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Faith Based Fraud

Guest Bios Show Transcript Billions of dollars that American Christians give churches, ministries and nonprofits are stolen every year. In fact, one

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2 thoughts on “Faith Based Fraud”

  1. This was a great interview, very enlightening, especially as I didn’t know about the book-buying practice. Also thought the suggestion for asking organizations for an accounting of how they spend donated money was a good idea. Thank you, too, for making the transcripts available. Very helpful.

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