Did SWBTS trustees lose $25 million?


Just when you think Southwestern’s trustees have been asleep at the switch, you find out they may not have been on duty at all. If true, Southern Baptists would be better off if the seminary’s endowment had been managed by Bernie Madoff.

Let us explain.

For two decades after it opened in 1986, the 17th floor of the iconic Lipstick Building in Midtown Manhattan housed the offices of Bernard L. Madoff Investment Securities. That is until Dec. 11, 2008, when two federal agents arrested Madoff in his New York penthouse apartment. For years, Madoff had run a Ponzi scheme that racked up more than $50 billion in losses for investors. When all was said and done, Madoff was sentenced to 150 years in prison for his crimes and ordered to pay restitution of $170 billion.

Last November, the government authorized a third payout from the Madoff Victim Fund to more than 27,000 victims that included wealthy individuals, charitable foundations, schools, and pension funds. To date, victims have received $1.97 billion from that fund. A separate recovery supervised by New York attorney Irving Picard, a court-appointed trustee, has paid out another $13.3 billion. Notable victims include the late Elie Wiesel, actor Kevin Bacon, baseball Hall of Famer Sandy Koufax, numerous Jewish charities and universities, and the Baptist Foundation of Oklahoma. None of them will likely ever be made whole.

When news of the Madoff scandal broke, the president of the Oklahoma foundation reported that while the organization had no direct investments with Madoff, one of the fund’s managers had given the foundation “nominal exposure” in Madoff’s fund. The total loss was approximately $1.4 million out of $234 million in assets the foundation managed at the time, or less than 1 percent of its assets.

Understandably, the market collapse of 2008 made investors nervous. The temptation to pull out of the market, chalk up portfolio losses, and convert to cash was felt by ministers living on fixed incomes and large religious foundations alike. Nonetheless, Southern Baptists were cautioned by leadership at Guidestone Financial Resources to stay the course. Investors who “bail out of the stock market after a sharp downturn wind up missing out on the rebound that will help them recover their losses,” Guidestone’s president O.S. Hawkins warned.

Somebody forgot to tell Paige Patterson.

Just two years earlier on the upside of the housing bubble, Patterson attempted to move the seminary’s $90 million endowment away from the independently-managed Baptist Foundation of Texas to an internally-controlled corporation, The Southwestern Seminary Foundation. But after questions were raised about the move — including the potential exposure of the seminary’s portfolio to so-called sin stocks — the trustees delayed the transfer.

In time, however, Patterson got his way. He simply waited until the dust settled and made his move. The only problem: by the time Patterson decided to cash out of the market, the economy was in meltdown mode and the endowment value was falling. Yet at Patterson’s instruction, Southwestern Seminary officials arranged for a transfer of the endowment balance under management by the Baptist Foundation of Texas to the seminary’s own foundation, which is governed by a board separate from, though accountable to, the seminary’s trustees. The foundation board has been chaired by Texas pastor, Criswell College alumnus and former Southwestern trustee chairman, John Mark Caton.

The convention annuals, complete with publicly available IRS Form 990s, seem to paint an alarming picture of what happened next.

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Southwestern Seminary’s endowment and third-party managed investments went from a value of $130,997,365 in 2008 to $105,016,368 in 2009. a near 20 percent loss in a span of 12 months. And the losses didn’t stop there.

The next year, the seminary reported the endowment was down to $103,509,157. The following year, it dropped to $99,287,129. That was 2011, back when the Pattersons were closing out their multi-million purchase of bogus Dead Sea Scrolls and cancelling retirement benefits for seminary faculty and staff.

Between 2011 and 2014, the fund grew again from a fifteen year low to $125,516,127. Then it dipped down again, losing nearly $1 million in value between 2014-15 and taking a sharp decline to $116,817,879 in 2016.  Last year, the seminary reported its endowment held at $129,246,961.

So here’s the bottom line: The day Paige Patterson brought the endowment in-house was possibly the worst moment in the last thirty years to start tinkering with the seminary’s investment portfolio and converting securities to cash. When he did, thousands of seminary supporters through the years — including alumni, small church pastors, widows, and retired faculty — lost approximately $25 million.

That’s $10 million more than Yeshiva University lost to Bernie Madoff, and the money is gone forever. Indeed, the value of the seminary’s endowment has yet to return to its pre-2008 level despite meteoric growth of the market in the intervening years.

Today, the Southwestern Seminary Foundation is still under control a small group of hand-picked trustees. Of course, there is no explanation of what happened to the seminary’s endowment in the SBC Books of Reports, news releases from the seminary, or federally-mandated public disclosures. At least not that we’ve seen so far.

What we do know is this: tax-exempt non-profit organizations like the Southwestern Seminary Foundation are legally bound to make available for public inspection their annual returns, including any schedules, attachments, or supporting documents, as well as copies of the organizations conflict of interest policy, governing documents, and financial statements.

We put in that formal request to Southwestern yesterday.

Developing . . .

ARCHIVES: Bomb threat from a Baptist pastor


Pastor who protested at SBC arrested for bomb threat
By Dan Martin

ATLANTA (BP)–A Georgia pastor underwent psychiatric observation after charges of “making a terrorist threat and acts” were filed against him here.

Herschel Arnold Markham, 42, pastor of Mt. Vernon Baptist Church in Fairburn, Ga. was arrested in downtown Atlanta about 5:45 a. m., Friday (June 18) after holding police and FBI agents at bay for more than an hour when he claimed to have a bomb in an attache case.

Markham also caused a stir at the Southern Baptist Convention (SBC) in Norfolk, Va., Thursday (June 17) as he made a determined effort to have the convention hear him read from social studies curriculum materials for fourth and fifth graders now in use in public and private schools.

In Atlanta, Markham reportedly waved his arms and said, ‘I have in this briefcase a time bomb of information,'” police said.

Officials said he “raved incessantly about the world’s problems” as he waved the case.

Police quoted the pastor as saying; “Crime and violence are one of the bombs of the city.”

The officers said Markham spoke into the microphone of a cassette tape recorder as he stood on the downtown street. He was in front of the Internal Revenue Service (IRS) building, which is next door to a site where the old Georgia Baptist Convention building formerly stood. The convention offices are now in another part of the city.

One FBI agent squatted close to Markham and thumbed through a Bible as Markham spoke. When officers determined the case could not be detonated from the outside, they rushed the minister. It took six officers about two minutes to wrestle Markham to the ground. As he was subdued, Markham shouted, “It was a literary bomb in every school,” officers said.

As he was being led away, handcuffed, Markham shouted: “you made a fool of yourselves before God and the world.” Then he broke into a rendition of the” Doxology” and sang several other hymns, police said.

As he was put in the police car. He said “I’d like to get out of here by Sunday. We’re celebrating our 111th anniversary Sunday (at the Fairburn Church.”

Police took the case and suitcase to a special bomb trailer but said the “bomb” turned out to be “harmless papers.”

Markham’s bond was set at $1,000 and he was ordered to undergo psychiatric evaluation,

He was not with his church–about 25 miles south of Atlanta—on Sunday (June 20). A spokesperson at the church, where Markham has been pastor five years, told Baptist Press: “The church was shocked. We had a good service. It was homecoming day and it was planned far inadvance. Things were not normal, but we had a good service.”

She said Markham’s plight was not mentioned specifically except to tell the congregation that the pastor needed prayer.

“The church has mixed emotions about this,” she said. “Some think he’s sick but others think there may be other things involved. . . He’ s been in the fight over books … ”

Mrs. Markham, reportedly has said she attributed the incident to the fact her husband was exhausted, that he he’d been riding thE bus all night.

FBI agents confirmed that Markham arrived in Atlanta from Norfolk shortly before the incident.

At the convention, Markham set off a hostile debate over reports of the Southern Baptist Christian Life Commission (CLC) and the Baptist Joint Committee on Public Affairs (BJCPA) on social studies curriculum called , “MACOS (Man: A Course of Study).”

Markham called the materials, “luciferian, satanic, devil-filled” and wanted to read sections to messengers.

At one point, he stood in the Norfolk Scope convention center, shouting in defiance at convention officers on the platform.

He finally was allowed to speak to messengers after President Jaroy Weber of Lubbock Tex., was voted down by messengers as he attempted to adjourn the session.

Markham’s objection was to a section of the CLC report on the materials in the 1975 convention. Messengers referred the MACOS materials to the CLC and BJCPA for study.

Staff members of both agencies studied the materials and recommended neither endorsement nor condemnation. Markham accused the agencies of not fulfilling their assignments and of “speaking with a forked tongue.”

At one point in his attack, Markham threated to sue the Convention if he were not allowed to speak further.

He told a reporter he would take the matter all too way to the Supreme Court, if necessary.

Another reporter questioned him, but Markham said he would divulge no further details and to “talk to my attorney.” He refused, however, to reveal his lawyer’s name.

Messengers heard Markham for several minutes before a Cincinnati, Ohio, pastor, Johnny Tallent moved the CLC report be adopted, saying Markham had been given sufficient time to make his case but had failed to do so.

The motion passed overwhelmingly.

As the session adjourned, Markham patted Weber on the arm and said: “I love you brother.”