Edmonton

Finances of Lutheran Church district now overseen by monitor

The move buys the district time, allowing the church to restructure its investment funds without filing for bankruptcy or being sued.
Investors met at St. Matthew Lutheran Church in Stony Plain on January 15, one of many meetings held in Alberta and B.C. in January. (CBC)

The finances of the Alberta-B.C district of Lutheran Church-Canada are now being overseen by a court-appointed monitor.

The district was granted an order from the Court of Queen’s Bench of Alberta under the federal Companies’ Creditors Arrangement Act.

The move protects the district for 30 days, allowing the church to restructure its investment funds without filing for bankruptcy or being sued during that time period.

Investors with the church, some of whom handed over their life savings, were made aware of the financial crisis in early January.

At that point, they were told their accounts were frozen and that the Church Extension Fund (CEF) was not able to fully repay the $95 million owed to investors, the majority of whom are more than 70 years old. 

Documents filed with the Court of Queen’s Bench of Alberta In Bankruptcy And Insolvency paint a much more troubling picture, which now includes a second investment fund called District Investments Ltd. (DIL) and outlines the $91-million loan due to the CEF from the Prince of Peace development, east of Calgary.

The Prince of Peace Village development is located just east of Calgary. (CBC)
The documents show the Prince of Peace development is insolvent, meaning it doesn’t have enough assets to satisfy its outstanding liabilities in a liquidations scenario; one of the options currently being considered by investors.

Like the CEF, the second fund is now frozen as well. More than 900 investors are not able to withdraw money, which includes RRSPs, RRIFs and TFSAs.

In a sworn affidavit, Kurtis Robinson, the President of DIL said there is not enough cash and marketable securities in the fund to pay back all depositors. The deposits as of Nov.30, 2014, were $37 million.

After the news of the trouble with CEF broke and letters were sent to investors, it appears that investors who had money in DIL tried to get their money out. As of Jan.19, DIL had requests for transfers totaling $7.8 million.

"It is anticipated that the 'run on the bank' will continue to escalate,” Robinson said in a sworn affidavit.

The district’s president, Don Schiemann, was not available for comment. But in a Jan.26 letter sent to investors he said the “unprecedented number of transfer requests created a significant issue.”

“We continue to pray for God’s guidance and direction and would ask you also to join us in this prayer,” he said in closing.

An emergency fund will remain in place for investors who rely upon monthly withdrawals from the fund to pay rent or purchase food. That maximum total that could be paid out would be $75,000 per month. So far, eleven people have applied for access to the emergency fund.

In the affidavit, Robinson also raises concerns that some pastors won't be paid because of the moratorium placed on the investment funds, as some congregations were using monthly interest payments to pay pastors' salaries.

Under the court ordered arrangement, the district will continue to pay employees, but is allowed to lay staff off if it believes such a move is warranted.

Two staff at the district office have been laid off, though one left before being given a layoff notice. In a previous interview, Schiemann said he isn’t ruling out more layoffs, saying “that’s on the table, if need be, we’re fully prepared to do that.”

Deloitte Restructuring Inc. will be responsible for reviewing the operations of the district and determining a way forward.

An update on the financial situation facing the local district of the Lutheran Church is expected in about 30 days.

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