Bankruptcy

Atlanta Journal-Constitution Article Discusses Fall Of Cornerstone Ministries

By Scott Riddle

The Atlanta Journal Constitution has an article today entitled "Cornerstone Ministries betrayed them by straying from mission, investors say," by Christopher Quinn.  You can read a little more about the Cornerstone Chapter 11 case by clicking here.   

Cornerstone filed for Chapter 11 protection in 2008 and is beginning to liquidate assets. Meanwhile, the state has launched an investigation into the company...

After the denomination closed the program in 1996, the ministers who ran it, the Rev. Cecil Brooks and the Rev. John Ottinger, took the organization public and called it Cornerstone.

The examiner's report says they raised money through bond sales and loans, and they lent the money to churches from various denominations. The company morphed into financing general developments under 'a tangled web of non-profit and for-profit corporations and limited liability companies,' where the ministers made 'substantial income over and above the salaries disclosed in the … filings with the U.S. Securities and Exchange Commission,' the report says.

John A. Thomson Jr., Ottinger's attorney, said the report is full of 'incorrect' conclusions 'based on only half the truth or taking certain facts out of the context of Cornerstone's investment transactions.'  Thomson noted in a written response to The Atlanta Journal-Constitution that Ottinger and his family lost $1.4 million in Cornerstone investments...

Court documents show the company knew it had $128 million in 'significant credit risks' months before filing for bankruptcy. More than 3,600 investors held $142 million in bonds. The examiner's report by Marietta attorney Pat Huddleston characterizes Brooks and Ottinger as 'self-dealing' in their business transactions while they touted the company's spiritual mission. It says company letterhead in 2000 read, 'Using God's money for God's Kingdom.' Huddleston wrote, 'It is difficult to conclude that Cornerstone had any interest in financing churches between 1999 and 2006.'  Huddleston defended his report by phone, saying it is based on sworn testimony and company documents.

The examiner's report says they raised money through bond sales and loans, and they lent the money to churches from various denominations. The company morphed into financing general developments under 'a tangled web of non-profit and for-profit corporations and limited liability companies,' where the ministers made 'substantial income over and above the salaries disclosed in the … filings with the U.S. Securities and Exchange Commission,' the report says.  In one instance, the two made more than $6 million each by selling one corporation's holdings to another.

Full post as published by Georgia Bankruptcy Blog on June 24, 2009 (boomark / email).