In recent months, a growing number of Southern Baptists have begun raising questions about the wasteful spending at Southwestern Baptist Theological Seminary that has left the institution in a position of significant indebtedness, both to creditors and bondholders as well as its own restricted endowment funds.
The numbers are staggering by any measure; the hole so deep that major supporters and prominent alumni now question whether the school can dig itself out.
Between 2004 and 2018, for instance, it appears Southwestern Seminary reported to the convention more than $166 million in aggregate interfund borrowing. According to the the SBC Annuals from those years, the seminary lent itself money from temporary and permanently restricted funds on an annual basis, beginning with a $1.59 million hole the first year of Paige Patterson’s presidency. Last year (which would be the reporting year ending on July 31, 2017), the seminary owed the endowment nearly $26 million.
To put that into perspective, this year the Cooperative Program distribution to Southwestern Seminary — which accounts for 18.9 percent of its income — is $7.55 million. In other words, it seems the seminary would have to apply every dollar of its Cooperative Program receipts for nearly 3.5 years just to pay off the amount borrowed against its endowment. To get an idea of the rate at which the seminary has been siphoning off its own endowment funds, examine the chart below:
Not since the Donner Party has there been such ravenous institutional cannibalism. At the very least, it seems that Paige Patterson was operating a Ponzi Scheme at Southwestern Seminary, using restricted assets, convention resources, and the seminary’s sizable endowment to cover the rising costs of his lavish lifestyle and vanity projects on campus. Add to that the cost of a top-heavy administrative structure, duplicative schools and deanships, and a massive staff supporting Pecan Manor, and you can see how things went South.
Of course, the only people who’ve acted surprised about the seminary’s condition are the school’s own trustees. In a statement released May 23, 2018, the seminary trustees noted there were “challenges facing the institution, including those of enrollment, financial, leadership, and institutional identity.”
So basically for fifteen years, trustees were signing off onto audit reports, approving budgets, authorizing expenditures, and okay-ing institutional indebtedness, but it was Paige Patterson who took the fall? Forgive us while we let that sink in for a moment.
The Roman poet Juvenal coined a phrase for it: “Quis custodies ipsos custodes?”
Who watches the watchman? Roughly translated so the point is clear: “What the hell were the trustees doing for fifteen years?” But we digress.
Anyone who’s had half a brain for the last quarter century has known that Paige and Dorothy Patterson played fast and loose with the convention’s checkbook.
On Oct. 1, 1999, Mr. Jack Wilkerson, then the vice president of business and finance for the SBC Executive Committee in Nashville, Tenn. wrote to his counterpart at Southeastern Seminary in Wake Forest, N.C., Mr. Paul Fletcher. At the time, Paige Patterson had made a habit of “unusually frequent requests” for loan approval from Executive Committee’s Business and Financial Plan Workgroup.
In the detailed letter, Mr. Wilkerson explained the governing documents of SBC entities and how they require authorization from the Executive Committee before any institution creates any liability or indebtedness that cannot be paid out of anticipated receipts with a three year period. Wilkerson, on behalf of the Executive Committee, further explained:
“The workgroup has indicated a desire to see a business plan for SEBTS that shows how the individual loan requests, construction phases, and loan amortizations all fit together. Some suggested areas to better explain are: overall plan for student housing; the current construction schedule; financial data and cash flow to amortize the loans; data on how many units will be built; and any risk analysis showing plans if student enrollment should decline unexpectedly.” (emphasis added)
The workgroup, according to Wilkerson, was concerned that Patterson’s borrowing spree had demonstrated “a number of destabilizing factors” that “undermine the credibility normally extended to entities submitting routine information.” Among these were:
- That the funds from the previous year had not been spent
- The seminary was requesting an additional loan ahead of trustee approval
- There was a high probability that the seminary would request additional authorizations the following year; and
- The loans already approved were allowed by SEBTS trustees on the same general information delivered to the Executive Committee.
To read Wilkerson’s letter in full, click the following: Page 1, Page 2, Page 3.
Nearly 20 years ago, Paige Patterson was trying to take Southeastern Seminary into deep indebtedness without providing either his own trustees or the Executive Committee with adequate information to responsibly authorize the loans. He was doing so at a time when funds from previous loans had not yet been spent, a pattern that had been nurtured over a period of years.
Add to that reality that within two months of the Wilkerson letter, Patterson received an internal seminary memorandum from the business office detailing housing losses in excess of $385,000 at a time when “the working capital of the Seminary [had] dwindled to zero.” Twice that same year, SEBTS “had to dip into . . . Temporary Restricted funds to meet monthly payroll.”
To read the SEBTS memo detailing the seminary’s precarious financial position in Dec. 1999, click here.
There’s a saying we learned growing up in East Texas: “A cow that jumps the fence will always jump the fence.” The prophet Jeremiah put it this way: “Can the Ethiopian change his skin, or the leopard change his spots?”
The answer, of course, is no.
Neither can those who are accustomed to fiscal negligence start spending wisely, nor trustees who relinquish their oversight responsibilities be counted on to protect the convention’s assets.
Stay tuned . . .