After witnessing financial abuses for years, last summer I was inspired, after reading a newspaper article about then Attorney General Andrew Cuomo’s coming to Canandaigua, to present a letter to him.  It is not that I am a political supporter which, given his position on abortion and gay “marriage,” I never could be.  But, in all righteousness, the abuse of the NYS Religious Corporation Law should be called to his attention for just action.  As then AG, and now as governor, he is uniquely positioned to do something about financial travesty, especially in not-for-profits, which enjoy many benefits at taxpayer expense.  At least the law should be followed, and I also propose strengthening those laws.  

In this blog post  is the front page of  the newsletter It Really Matters, explaining to recipients what was given to Mr. Cuomo and why.  Next, in this post, is the text of the letter hand delivered to candidate Andrew Cuomo last August.  Certain red highlights are intended to help readers skim the content, but was black in the original letter.  In a future post will be the detail that was in the attachment regarding financial abuses at just one small country church, St. Mary Rushville, under the pastorate of Fr. Robert Ring. 

I hope to introduce some discussion about what more, as a group, Catholics might do in the interest of fairness to all who pay for the tax benefits enjoyed by churches, and especially what might better protect the sheep.  

I am NOT advocating losing tax-exempt status, but rather limiting any mis-use of the status at the cost to all.  I am NOT advocating government interference in the internal matters of the Church, but rather enforcing the laws already on the books and plugging the loopholes.

Hand delivered

August 18, 2010

Re: NYS Religious Corporation Law Reform, Strengthening and Enforcement

Mr. Andrew Cuomo [originally sent to campaign headquarters address, he may now be addressed at:  The Honorable Andrew M. Cuomo, Governor of New York State, NYS Capitol Building, Albany, NY 12224.]

I am very glad to have had the opportunity today to attend your public meeting in Canandaigua, and to deliver personally to you an area of suggestion for improvement in New York State, as I believe you are sincere in seeking ideas which would make our state a better place to live.  I would like to address an issue with broad applicability across the state; i.e. the issue of more financial accountability and stronger enforcement under the NYS Religious Corporation Law. 

At the onset, I would like to say that I am very sensitive to issues of separation of Church and State yet, as recent cases of pedophilic abuse have shown, there are times when government is required to intervene to relieve abuse, and to apply justice.  The need to do so, and the manner of acting, fits both rules of intervention set by the US Supreme Court (the Hierarchical/Congregational Rules or the Neutral Rule).  It is in that spirit of justice, rather than interference, in which I bring seven points to your attention. 

Your visit brings you to the Catholic Diocese of Rochester, which has been a place of significant injury spiritually and financially to many people of this Diocese.  However, lest you think this is only a local issue, egregious as it is, I can assure you that the same factors, to varying degrees, are present statewide.  That is why action in this area would have much wider impact than just in our local church.  Nevertheless, I will speak to just one local church situation to illustrate just one tiny example of the need for reform.

Application:  To clarify, I am sure that you are aware across the state and even across the country, that Catholic Churches are being closed and their patrimony (cash, value of properties, furnishings and other assets) are being distributed in a secretive manner.  Because of the hierarchical nature of the Catholic Church, such unpopular decisions, moving of funds, and questionable financial practices are easier to effect than, say, through a congregational model where a variety of parishioners or elders can provide oversight.  I’m sure that I don’t need to point out to you the potential state impact on matters ranging from tax deductibility of donations, property taxation and use taxes, disrespectful ignoring of the real intentions of donors to charitable trusts which are regulated by the State, and how those charitable trusts are administered.  For example, it is not unusual to see donations left to a church that is in the process of being closed.  Surely that was not the intention of most donors, yet there seem to be no guidelines to handle appropriately.  Moreover, there is serious opportunity for fraud in a situation which so lacks transparency.

Areas Sought for Reform:  I suggest seven areas to you which could benefit from a reform and strengthening of enforcement of the NYS Religious Corporation Law, especially as it pertains to the Catholic Church.  Yet, I would like to make clear, I am a faithful Catholic who staunchly resists any involvement of government in the area of religion, unless absolutely necessary for the protection of the innocent and to avoid their victimization.  Nevertheless, having now had first-hand experience of many abuses since 2003, in just a small local configuration of parishes, I fully realize that unless the state steps in, further abuse will be perpetrated. 

For each of the seven points, I offer examples in a small local parish in the attached “Case Study,” but I do so to illustrate to you how pervasive these abuses are when even very small parishes are so affected.  Please be assured that these small examples are just a tiny tip of an iceberg that begs for intervention.  Also, while some of the suggestions deal with laws already “on the books,” I do recognize that others may require legislative or regulatory action.  Therefore, I address these issues to you not only as State Attorney General but, more explicitly, as candidate for governor of New York State.  These issues are quite broad, involving almost all communities across the state, and people from all walks of life, in various faiths (especially hierarchical faiths), and of various degrees of affluence, ethnicity, age, etc.  Moreover, I believe if you explore this issue that you will find many Catholics in particular at a loss for how to protect themselves yet still be faithful to their Church.  In addition there would be application to other institutions incorporated under Religious Corporation Law, e.g. schools and hospitals, not further mentioned below.  

Seven Recommendations:

 1.      Taxation of “closed” church properties:  When parishes and schools which are tax-exempt are closed (i.e. effectively non-functioning for the purposes for which they are intended), property and other use taxes are lost to the public.  Massachusetts has recently had success in charging the Catholic Church property taxes on such properties, charged back to the time of closure, with some figures per property in the hundreds of thousands of dollars.  And that is just in Boston so far.  Income from rentals of such property should also be examined, as renting for profit is not part of the charter of most parishes.  Such rentals effectively keep the rented properties off the tax-rolls.

 2.      Public Disclosure of Audit Detail of each incorporated parish entity:  While some parishes provide annual financial detail, some do not.  There is no way for a person in the pew to verify if the data are right or wrong.  Even when an audit is requested (as I personally did in the case cited), the results are not available to the parishioners.  Therefore, there is no way to know if good financial practices are being followed or not, or if the financial report is true or not.  Moreover, errors like uncredited donations are caught one parishioner at a time, and others are not alerted to bad bookkeeping until they personally notice it in their own records.  One area for focus is expenses which are not “arms length” or free market, but charged back to parish corporations at egregiously inflated rates.  Examples would include insurance levies by the diocese, for example, or unfair sharing of expenses between incorporated parishes.  The discipline of releasing audit detail would bring more care to the way donations are accounted and errors corrected, and give more relevant information to donors.

3.      Restrictions on transfers between separate religious corporations, and required public reporting of such transfers:  It is believed that most parishes are individually incorporated and that closure of those parishes is either through “suppression” and amalgamation into a new parish with other parishes, pooling funds and liability risk, or (less often) by actually dissolving the corporation.  Some parishes may “stay on the books” for years, while no longer functioning as a parish.  Solvent parishes with more financial resources (all tax exempt donations) are dissolved and the funds “freed up” for other, undisclosed purposes.  A more financially solvent parish seems to be at more risk for having its treasury plundered than a parish which has less, yet is still solvent.  Moreover, there is no method by which a “clean” balance sheet parish can avoid being amalgamated with one having undisclosed liabilities or other risk.  In the Case cited, there is a “bleeding” of the treasury of a more solvent church prior to closing, preventing funds flow as the Catholic Church would require for a “personal parish.”

4. Mandatory reporting of the disbursements from sale of church properties and dissolution of parish assets:  Generations of donors have built up reserves, doubtless intended to be used in the parishes to which they were contributed.  However, by amalgamating parishes, liquidated assets of the closed churches are moved where they were not intended to go, and there is no readily available accounting for the transfer of those assets.  Moreover, it is feared that churches are being liquidated in order to pay off pedophilia and/or other lawsuits, claims or reparations, again kept secret from the original donors and from parishioners. 

It would seem, since original donors likely had no intent that their donations be used for covering the sins of the hierarchy or for “paying someone off,” that there should be restrictions under the NYS Religious Corporation Law for using funds for such purposes.  Consideration should be given for methods by which donations might be returned to estates when a bequest is to a church being liquidated.  Donors in good faith should not have to be savvy enough to restrict every check they write, noting for what it cannot be used.

5. Disclosure of Personal Benefits Increases:  If or when there are substantial increases to staff employees (including bishops and priests) in salaries, retirement funds, health care coverage and other benefits, including paying off lawsuits incurred by such employees’ behavior, since there isn’t an arms length or open deliberation about such uses possible in parishes, consideration should be given to full disclosure and to the recipient of such benefit having taxable income.  Moreover, it seems questionable that the use of donated funds of an incorporated parish, not a party to a lawsuit, should be used to pay off such suits.  The Case Study describes a levy against a parish, neither plaintiff nor defendant, to cover alleged expenses of a defamation lawsuit against a pastor.  All “enrichment” of individuals (hierarchy and staff) should be routinely disclosed in financial reports, so that parishioners can make informed decisions on future contributions.

 6. Criminal / Civil Prosecution of Trustees who betray the best interests of the parishes for which they are Trustees, and also prevention of interlocking trusteeships where a vote for one parish is automatically a vote against another for which the same person is a Trustee.  It is believed that when a priest is a Trustee of multiple parishes and one is targeted for closure, that he cannot exercise his fiduciary obligations to both.  Nor can a bishop who is a Trustee of all.  The intent of Trustee structure is open to significant abuse and is meaningless when three of the five Trustees are diocesan employees and lay Trustees are replaced when they disagree on matters of finance and property (not doctrine.)  Moreover, Trustees who contribute to one parish to the detriment of the one for which they are Trustee, or otherwise do not execute their fiduciary obligations, should be liable for such damage and prosecuted.  Several examples of abuse of Trusteeship and fiduciary duty are cited in the Case Study.

7. There should be a 10-year historic restatement regarding all the matters listed above, which will cover much of the period of closing of churches and questionable transfers of assets, with full disclosure of how the patrimony has been deployed, and prosecution and restitution where appropriate.  Perhaps the only way to restore confidence that the NYS Religious Corporation Law is sensitive to the rights of individuals is to require restatement for a decade on the sources and uses of cash over that period, with specific undisclosed payments being disclosed, and all certified by outside independent auditors.  One can contemplate the many benefits of the Sarbanes Oxley overhaul (painful as it was to live through) and the time to apply it to incorporated parishes, individually and collectively, is now.

Mr. Cuomo, it is my intent in citing a particular local Case to shed further light on the abuses associated with hierarchical churches exposed by their closings in particular, to make the issues more “real” to you, and to more fully describe the potential for abuse as well as the helplessness of the laity to deal with such matters under the current usage of NYS Religious Corporation Law.  The Case is from a small parish, but replicated across the state would be significant, just like price fixing milk sales by only a few pennies a gallon.  The actual Case recounted is a faithful representation of my personal experience at St. Mary in Rushville, NY, a parish located less than 10 miles from Canandaigua.  What is most startling is that so very many issues could have occurred in just one country parish, and it well illustrates the multiplicity of opportunities for financial abuse on a much wider geographic basis.  All is recounted truthfully, and to the best of my ability.

I realize that you, as Attorney General, have taken on many situations which most people would have feared to handle.  It would be a natural and normal response of most people to fear that taking on a church situation would mobilize many of the faithful against you.  However, if you explore the issue, I believe you will find a considerable number of Catholics very unhappy about the way bishops and pastors have shut their churches, and closed down or “amalgamated” their parishes, parishes often funded by their own parents and grandparents.  They need someone with more “clout” to see their agony and how they have been misused.  You will find a great level of disenchantment also at closed schools and a hierarchy unresponsive to parishioner wishes and to their protests.  You will also find a widespread feeling of helplessness; i.e. that they are powerless to do anything about the survival of institutions which do continue to be viable, but are disbanded for undisclosed reasons. 

The often articulated “too little money; too few priests” is not always true.  The example I will give is of a small parish of 60-70 households with about $125,000 of savings when the pastoral planning process began in earnest.  While the 2010 report has not been issued yet, it is believed that the balance is about $25,000-$30,000 and that the remainder will be drained off in the next year.  Parishes with cash, I believe you will find, are more likely to be targets of closure and movement of money.  Were you to take on the needed reformation of NYS Religious Corporation Law, especially as it pertains to Catholic Churches, I believe you would find many in the pew feeling “rescued” by the effort.  And, quite frankly, you are one of the very few people who could take on confronting this matter. 

Personal Note:  Mr. Cuomo, I am not writing as simply a parishioner disappointed to lose her church.  There are many such people with the same emotions and I feel for them too.  Rather, I am writing as a retired officer of a publicly held company…  from 1967-1996) and also as a person who has served on a NYSE Company Board for 16 years … including chairing its Audit and Finance Committee.  My background (MS from Rensselaer) is science, but I am well-versed in corporate governance, finance, contracts and strategic planning and presently own a company which consults in mergers and acquisitions, [resume background was enclosed in original letter] …. I can assure you that I consider personal credibility to be of exceptional importance, and I put it on the line in writing to you about this matter. 

I do hope this matter will pique your interest and concern, and that people of faith will receive better and fairer and more just treatment as a result.  While the following may sound outrageous to you, I personally believe that the yet-to-fully-emerge financial scandal in the Catholic Church has the potential to rival the sexual abuse scandal.  

Thank you for considering this matter.

Sincerely,

Diane C. Harris

Enc. Case Study:  St. Mary Rushville, Diocese of Rochester

Note: Case Study will be the subject of Part 3 blog post.