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« on: October 18, 2008, 11:03:46 PM » |
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September 8, 2008
General Conference of Seventh-day Adventists USPS First Class Mail
Elder Jan Paulsen, President Fax and/or email
12501 Old Columbia Pike
Silver Spring, Maryland 20904
Dear Elder Paulsen,
I am writing regarding Three Angels Broadcasting Network (3ABN). I understand the General Conference and Adventist Layman’s Services and Industries have both endorsed 3ABN as a supporting ministry of the Seventh-day Adventist Church, so I feel it very important to let you know of my professional experience there as a volunteer. I have been a Certified Public Accountant (CPA) since 1987. I spent 4 years as an auditor with public accounting firm Arthur Andersen & Company where I audited a variety of organizations from large publicly traded companies to small non-profits. I was also employed by Hewlett-Packard Company for over 9 years, first as an internal auditor and later as a financial analyst. In 2005 I obtained the professional designation of Certified Fraud Examiner (CFE), and I am very close to completing a Master of Science in Economic Crime Management. I was raised in a wonderful Adventist home, although I am not currently involved with the church. But after surviving a near fatal car accident in January 2005, I felt compelled to do something to thank the Lord for His protection. I made a substantial donation to 3ABN in April 2005 and later wrote to then Director of Finance Larry Ewing offering to help out in the Accounting Department on a volunteer basis. I went to 3ABN with no agenda, other than how I might be able to help the ministry with the talents, training and experience God has given me. From January through mid-May 2006 I traveled from Nashville to West Frankfort nearly every other week, at my own expense, until personal complications changed my availability.
In January 2007, I was invited to attend 3ABN’s Annual Day of Prayer. At that meeting, I heard a good deal of discussion and fervent prayer regarding “this new enemy”. Since then I have been shocked at some of the allegations that have been made public, and I was reminded of some of the practices I observed there that were troublesome to me as an accountant. Later that year, I learned of the possibility of an IRS criminal investigation of 3ABN and confirmed it with Larry Ewing. I am aware of the recent reports by Pastor Doug Batchelor and others that the investigation has been completed with no adverse findings or fines. I would be thrilled if that were the case, but after my experiences there I must admit I am very skeptical as to the veracity of these claims. Given the dismal internal control structure and lack of board governance I observed, I would be very surprised if the IRS actually found nothing amiss at 3ABN. Additionally, I am sure you are aware of the recent investigations into the financial affairs of several televangelist ministries by United States Senator Chuck Grassley and the Senate Finance Committee. I have read the Senator’s letters requesting financial information from the 6 organizations initially under investigation and I see some grave similarities with 3ABN, albeit on a smaller scale. I believe it would be very unfortunate if the Senate Finance Committee decided to broaden their investigation to include 3ABN. If the claims of a completed IRS investigation are inaccurate or if Senator Grassley expands his investigation to include 3ABN, I am extremely concerned regarding the potential outcome and the impact it could have, not only on 3ABN but on the reputation of the Seventh-day Adventist Church.
Given my familiarity with the accounting processes and lack of internal controls at 3ABN coupled with the IRS criminal investigation, I felt compelled to formally sever my professional relationship with 3ABN in accordance with the standards set forth by the American Institute of Certified Public Accountants Code of Professional Conduct, § 102. I wrote a long letter to Larry Ewing and the 3ABN Board of Directors in February 2008 detailing my concerns and requesting a refund of my donation. I am disappointed that in my simple attempt to do something for my Lord I unknowingly walked into a situation involving alleged activities that violate IRS rules and regulations. My fingerprints can be found on many documents and general ledger entries at 3ABN, and if called upon I will make every attempt to tell the truth as I remember it. I recall Larry Ewing telling me on more than one occasion that internal controls were not a priority to him and that he “didn’t want to be tripped up by them.” With my background as a public accountant, internal auditor and fraud examiner, these declarations made me cringe inside. But as a volunteer it was not my place to insist otherwise, although I did share my concerns verbally in April 2006 with audit partner Alan Lovejoy from the Gray Hunter Stenn LLP CPA firm while he was at 3ABN working on the 2005 financial statement audit.
In my February letter to Larry Ewing, I pointed out that the North American Division of Seventh-day Adventists and Adventist Risk Management, Inc. have prepared a guidebook entitled “Trustees of the Lord’s Finances” which provides an excellent summary of policies and procedures an organization should take to ensure appropriate internal business controls and provide adequate safeguards against misappropriation of assets. I saw no evidence at 3ABN to indicate this valuable resource had even been consulted. The following is taken directly from page 25 of the Quick Reference Guide bearing the same name:
No one wants to admit that theft and cover-up exist in a Christian environment. Yet insider theft occurs at all levels throughout our churches and schools. Without effective controls, such illegal and destructive practices will continue. In order for such events to occur, two elements must be present:
Opportunity is provided when:
• Too much trust is placed in key individuals.
• Too few people share duties and responsibilities.
• Cash is easily accessible.
• Fiduciary controls don’t exist.
• Audits are performed too infrequently.
Motivation is provided when:
• A lack of standards or integrity exists within the organization.
• Employees or volunteers face personal financial challenges.
• Employees or volunteers rationalize that they’re only “borrowing” or that the organization “owes” them something.
• Employees or volunteers believe that non-profit organizations refrain from prosecuting theft cases.
Internal business controls are a vital component of a healthy business (or ministry) and materially accurate financial statements. The work I performed at 3ABN was not a forensic accounting engagement, and this letter is not intended to serve as a professional opinion as to the existence or absence of fraudulent activity. But I do believe that the situation in which 3ABN currently finds itself is a direct result of poor internal business controls, a lack of governance and oversight, and an uninformed Board of Directors – a dangerous combination that has served to create an accounting environment that is ripe for abuse. In my letter I also strongly recommended that 3ABN invest in a forensic accounting review and that they implement a system of internal business controls immediately. These combined actions would identify any previous abuses and create a controlled environment that would substantially reduce the possibility of future abuses, as well as to rebuild both public and IRS confidence in 3ABN. I also believe 3ABN should seriously consider a change of audit firms. I am not implying that Gray Hunter Stenn LLP is in any way at fault, but publicly traded companies are required to change audit firms periodically and this action would be in 3ABN’s best interest as well. Finally, I believe 3ABN could benefit substantially by opening their books and records to the General Conference Auditing Services. An external audit serves many purposes, but the value of a regular internal audit cannot be understated. The audit techniques and objectives employed by each are substantially different. An external audit is designed to test and opine on the reported financial statements of an organization while an internal audit is designed to test operational functions and internal business controls. It would be beneficial for 3ABN to obtain the services of both types of auditors in an effort to overcome the current financial management issues. If the General Conference intends to continue to endorse organizations outside of its legal umbrella, it would be prudent to require those organizations to submit to annual conference audits to ensure their financial operations are held to the same standards as conference entities.
The ministry of 3ABN can be a strong tool used by the Lord to bring the gospel to all far reaching corners of our condemned world, and at one time I was a firm supporter. However, I am very disappointed with the current state of affairs and some of the recent 3ABN decisions that have been made public. Based on the concerns I outlined in my letter of February 2008, I requested a refund of the $25,000 donation I made in 2005 as well as the $100 I was asked to pay for utilities while I was volunteering at 3ABN. I was told I had to wait for the next Board of Directors meeting, but in the meantime I was infuriated when certain 3ABN directors, including the chairman, attempted to interfere with and intimidate the ministry attempts of Linda Shelton in April. Shocked at their behavior, I wrote again and asked for the immediate return of my money. My request was denied, so I have consulted an attorney and filed a complaint with the Illinois Attorney General.
It was my 3ABN experience along with subsequent related developments that prompted my interest in the topic of my final graduate project entitled “Religious Organization Fraud and the Internal Business Control Environment”. I am also researching the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and I would not be surprised to one day see 3ABN listed as the enterprise element of a RICO claim under U.S.C. 18, § 1962. As disclosure of the details of my accounting concerns could be considered inappropriate by some, I am not enclosing a copy of my February 2008 letter to 3ABN. However, I am including copies of all the subsequent correspondence including various officer and director responses and my complaint to the Illinois Attorney General. I am not writing to you to elicit any action or even a response. I simply thought you should be aware of my experience with 3ABN and my professional concerns in light of 3ABN’s connection to the denomination. But please do feel free to contact me if I might be of service.
Desiring to do His Will,
Lynette Rhodes, CPA, CFE
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Cc: Lowell C. Cooper, General Vice President, General Conference of SDAs
Mark Finley, General Vice President, General Conference of SDAs
King-Yi Eugene Hsu, General Vice President, General Conference of SDAs
Gerry D. Karst, General Vice President, General Conference of SDAs
Armando Miranda, General Vice President, General Conference of SDAs
Pardon Kandanga Mwansa, General Vice President, General Conference of SDAs
Michael L. Ryan, General Vice President, General Conference of SDAs
Ella Simmons, General Vice President, General Conference of SDAs
Ted N.C. Wilson, General Vice President, General Conference of SDAs
Robert E. Kyte, General Counsel, General Conference of SDAs
John Graz, Public Affairs Director, General Conference of SDAs
Paul H. Douglas, Auditing Services Director, General Conference of SDAs
Ray Dabrowski, Communications Director, General Conference of SDAs
Dr. Erika F. Puni, Stewardship Director, General Conference of SDAs
Geoffrey G. Mbwana, President, East-Central Africa Division of SDAs
Ulrich W. Frikart, President, Euro-Africa Division of SDAs
Artur A. Stele, President, Euro-Asia Division of SDAs
Israel Leito, President, Inter-American Division of SDAs
Don Schneider, President, North American Division of SDAs
Jairyong Lee, President, Northern Asia-Pacific Division of SDAs
Erton Carlos Kohler, President, South American Division of SDAs
Barry D. Oliver, President, South Pacific Division of SDAs
Paul S. Ratsara, President, Southern Africa-Indian Ocean Division of SDAs
D. Ronald Watts, President, Southern Asia Division of SDAs
Alberto C. Gulfan Jr., President, Southern Asia-Pacific Division of SDAs
Bertil A. Wiklander, President, Trans-European Division of SDAs
Luka T. Daniel, President, West-Central Africa Division of SDAs
Donna McNeilus, President, Adventist Laymen’s Services and Industries
Robert L. Sweezey, President, Adventist Risk Management, Inc.
Doug Batchelor, President, Amazing Facts
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