Transcription
Alright everybody, good afternoon. My name is Andy Whaley with AgFinancial. Thanks for coming out to this installment of Risk Management Live at General Counsel 2015. Glad you all are here with me. We have two very amazing, distinguished gentlemen. We have Dr. Richard Hammer, who is the chief legal counsel for the Assemblies of God, also an attorney, a CPA, a Harvard grad, also a fifth-grade Sunday school teacher, and a diesel mechanic—and pretty certified diesel mechanic—and pretty much everything else you can possibly imagine, and an all-around great guy. We also have Jerry Sparks, president of AgFinancial Insurance Solutions. Both of these gentlemen are here today to answer your live questions about church law, church tax, risk management, and church insurance.
But before we get to the live Q&A, we're going to start with a couple of brief updates on some key topics that they wanted to make sure that you are aware of. So I'll turn it over right now to Rich and Jerry.
You know, hello everybody. We listen; this is really a dynamic presentation today. We were in the studio once a month doing these; usually we don't have this musical background, so this is kind of nice. But let me just make a few introductory comments here. It's interesting how technology creates even new legal and risk management types of issues. I want to mention cell phones, and cell phones have created many different kinds of legal liabilities, and I just want to mention a couple of them. The first one is the use of cell phones for sexting or for engaging in sexual photos or dialogue. And, and the reason I bring this up is there was just a recent case a few days ago, and it's one of many that I've reported on, and that has to do with this issue of sexting and the fact that there's criminal liability associated with this; that it's often times your youth pastor that does this with members of the youth group, thinking it's innocent fun. But the case I just read in Arkansas resulted in a six-year sentence in the penitentiary. Three cases I've got recently in three different states, unrelated, all five-year prison sentences. So think of these youth pastors; their ministries are ruined; they'll never be employed as a minister again. So I just want to emphasize the need to take these devices very seriously.
Another risk associated with cell phones, of course, is inadvertent driving. You think of this lead pastor, associate pastor; you're driving a vehicle on church business, and you're texting; you're distracted; you cause an accident; you kill a family. Just think of the liability back to the church under those circumstances. Forensically, it's easy to connect the dots and see what you were doing at the time of the accident; if you're on a cell phone or a texting message communication or not. And so I think it's important for churches to have a cell phone policy that absolutely prohibits the use of these devices while you're driving. And you know, in 46 states, texting is prohibited already by law, and for you to be texting while you're operating a vehicle in violation of state law, that's called negligence per se; that means you're automatically liable for any damages that you create. The only issue is going to be how much you're going to pay for it. So the point I want to bring up here is in recent—in the last few years—there has been technology that's really addressed this issue, and there are dozens of apps available now that deactivate cell phones if they're traveling more than 15 miles an hour. And so just—just think of having something like that on a phone that will—at will—prevent the phone from being used if you're traveling more than 15 miles an hour. So the point is you can enforce your policy with such a program; without it, people are on their honor, and in many cases, unfortunately, that's not good enough.
So I have a few more to share, but I'll turn it over to Jerry.
You know, I'm often asked what is the number one item that comes to—in front of us—for risk management, and that is actually what's happening in the church: church fraud. We have where somebody is actually stealing. Rich and I had a case here just last week where a pastor called us and found his treasurer had been stealing money from the church. And this is the number one—the number one question we get asked: you know, what do we do when we catch somebody stealing, and how does the insurance pick up? Do I have insurance for this? So I'm just going to ask Rich to talk a little bit: what should a person do once they find somebody has been stealing? What would you suggest?
Well, I think the most important thing is to have some reasonable understanding of how much was taken. In my experience, I've dealt with way over a hundred of these cases, probably hundreds; it seems to be about ten times what the person claims he or she embezzled is what actually happened. So somebody comes—you find a person to be guilty of embezzlement of church funds—well, I think I may have taken $2,500. I guarantee you that's going to be probably $25,000 or more. And so before you err on the side of mercy and give this person not a second chance, but agree not to prosecute, you need to know how much was taken. And the best way to figure this out is to get a certified fraud examiner, a CFE; it's usually a CPA with law enforcement training. These are the people that banks use to determine how much money was stolen by a teller, and it's your best chance to find out what was taken. Once you answer that question, you can decide what you're going to do about it: are you going to give the person an opportunity to pay that amount back over time or not? And if the person is non-cooperative, then many church leaders think the door is open to turn it over to the authorities, and this is serious. And the authorities include not just your local prosecutor, but also the IRS, because some prosecutors won't prosecute cases of less than a certain amount of money, which you may or may not come under that—that rule—but the IRS will pursue you no matter what, how little was taken, until time stands still. And that's—that's what put Al Capone in prison: you know, as tax fraud, not everything he did. So it's a serious issue, but you've got to know what was taken. I can tell you 9 out of 10 churches, once they have a reasonable understanding of what was taken, will give the person the opportunity to pay it back within a reasonable amount of time. And if that's done and the person's removed from any position in the church, then I think that that's a reasonable response. Many churches just immediately turn it over to the prosecutor, and it doesn't—that's the other option you've got. These cases can result in significant liability. There was a case in Louisiana a few years ago of a 55-year-old grandmother, church treasurer, embezzled $3,000, and she was sentenced to eight years at hard labor on a rock pile. So I'm just amazed at the severity of some of these sentences. There is a church administrator stole $350,000 from the church; 35-year prison sentence. So this is important. And let me just conclude this, Jerry, by saying this: you need to—boy, this music's wonderful—is it—it's great. Go ahead.
Okay, so actually, if somebody is stealing from your church, one of the things that's really important is that if you're not willing to prosecute, your insurance is not going to pay any money. Most people say that you have to prosecute and be willing to prosecute for your insurance company to pay out under employee dishonesty. One of the other things that's really important is that when it comes to employee dishonesty insurance, the last company that is in effect on your insurance is a company that's going to pay, no matter how long and no how—no matter how many years people have actually been stealing from you. Most crimes are actually happened over—it's not you know, time of year; I mean, it could be ten years that somebody is stealing funds, and it's only going to be the last policy that is in effect that is going to take care of paying the insurance under the employee dishonesty. So we had a church here the other day, and actually they had $10,000 worth of employee dishonesty. When they first started looking into this, they figured this person stole $25,000. And what I'm just saying, you know, if you go back 10—you know, we go back 10 years, we're probably looking at $250,000 that this person has stolen. So you've got to be—number one, you've got to be willing to be able to prosecute, and number two, you've got to know that the last insurance policy that is in effect is going to cover all of the claim, and that's the only thing you're going to collect.
And Jerry, one other point, and that is everything we're talking about here is after the fact: what do we do after the fact? The important point to make, I think in conclusion, is these cases are always preventable, and it's because the church has relaxed its—its internal controls—what accountants call internal controls for the safeguarding of financial assets of the church: how you handle cash, how you deposited, how you reported it. It's the failure of churches to have proper internal controls that contributes to this problem; it should never happen. That's the main advantage of having a CPA audit every year, because what they will do is give you a management letter, which I think is probably the most important part of the audit, that outlines the areas of internal control deficiencies and tells you what you could do to shore up your policies to make sure this kind of thing never happens. So I'm a strong advocate for that as a way to prevent this. Several studies have shown that embezzlement is not caused so much by a need for the money as it is to unsupervised access to the money. And I will tell you that if you'll go to AGFinancial.org and look under risk management resources, we have all sorts of resources, not just for this question, but on the internal controls about church fraud, how to handle church fraud, what internal controls you should have in place; all those are available on Risk Management Live on our website under risk management resources. If you need to know about liability insurance, property insurance, how to handle a sexual offender in your church, whatever question you may have, that's what we are—but that's what Risk Management Live is about; that's what we're here to do, is we're here to answer your questions. We actually have Andy Whaley sitting here in the audience, and if you have a question specific to your church, we're going to be glad to answer those questions for you. So just go up tap Andy on the shoulder, and he'll be able to get a question.
I do have a question, Rich, if that's okay, because somebody asked me—well, I know we're going to get—I'll get them lining up, but I already had a person ask me a question; they didn't want to come on mic, but I'm going to ask it to you. With the Supreme Court ruling on same-sex marriage, we have a church that actually owns a shopping strip; so they own the whole shopping strip, and what they are worried about is they rent to other people—the John Q. Public—with the protection of gender. Now, do they need to be worried about discrimination if they will not rent out to somebody that may be gay?
Well, that—that was not addressed directly by the Supreme Court in its opinion, but that is addressed by something called public accommodation discrimination laws, of which there are just a patchwork quilt of thousands of these laws—county, city, village, state—that prohibit various forms of discrimination by places of public accommodation. And so what you need to do is look at those laws that apply in your community, and do they consider churches to be places of public accommodation? And if so, what types of discrimination are prohibited? Many of these don't mention sexual identity or sexual orientation; that's changing; this is dynamic. All you can do is take a snapshot today of what the—what the laws say; it'll be different tomorrow; there's constant change, and it's all moving in one direction toward the acceptance of sexual orientation and gender identity as prohibited forms of discrimination. So the question is, would a church be a place of public accommodation? And some—some of these statutes say no, but there's always the possibility under some of them that if the church has entered the commercial marketplace, then they—they are subject to these laws because they would be considered places of public accommodation. So would—if you own a strip mall and yet the church operates out of one building, but you've got excess property you rented out, there's no question that that's going to be more likely that you're going to be found to be a place of public accommodation, subject to these non-discrimination laws. So churches need to be very careful when you enter the commercial marketplace: in a strip mall, maybe in a traditional church where you rent your sanctuary for weddings to members of your community, that kind of thing; that the commercial use of your property—there's no question—it's going to make it more likely that you're going to be subject to some kind of public accommodations law. What does that mean? That means that if the same-sex couple says, "Pastor, we want to get married in your church," it's—you—that's much more likely you're going to face liability if you refuse to honor that. So you need to make that decision: is it worth the commercialization of our ministry to reduce the valuable constitutional protection that we otherwise would have?
So if a church has got a shopping strip, would you suggest the only way to protect that church from being discriminated against because of somebody's sexual orientation is not to rent out that facility, or what kind of—you know, what advice would you give to that church?
That's right; that's one option, and I think that would put you in a much more defensible position. But again, you need to look at the law in your community and see if churches are just flat-out exempted, whether you engage in commercial activities or not, and what—what your law prohibits; maybe it doesn't mention sexual orientation or identity as prohibited forms of discrimination. So you need to look at that as well. Thanks.
Okay, Andy. Alright, we have several questions from the audience here. Let's start—go ahead.
As a youth pastor, what is the legal responsibility that I would have personally—say a student got injured at a youth outing or event off campus? You know, possibly I took a group of students to the movie theater; they slip, they fall, they get hurt; they choke on popcorn; they die; something like that.
Yes, you're not face personal liability because you're acting as an agent of the church; you're—if you're negligent, that's going to be imputed to the church. Don't—I wouldn't be the least bit concerned about that. Yeah, you just need to make sure that the church has enough insurance to take care of that liability.
Dr. Hammer, you recently addressed the General Presbyterian, as I remember. I got two questions: a—one was you addressed the fact that I am from the South, and there was a Georgia court that apparently recently ruled that a church could be held liable because they did not check background checks on a youth worker that they had hired. I find that in the district office—is often network offices where general counsel churches will hire their own staff without the district office involvement. And so could you address that just a little bit more—than the liability of churches if they don't check backgrounds?
Well, absolutely. Second question?
Yeah, that is true. The gold standard, in my opinion, of insulating the church from liability for cases of child abuse is doing proper reference checks, and that doesn't mean unknown people in other states you never heard of before; that means institutional reference checks: where's this person worked with minors before—other churches, scouting, teaching, coaching, etc.—and getting two or three references from those organizations that have seen firsthand this person interact with children. That is the gold standard; that is the highest and best thing you can do to determine a person's fitness or suitability. The Georgia case you mentioned was interesting because what happened there was you had a pedophile that applied for a job as in children's ministry in a church, and he presented the references to the church; he claimed he obtained the references himself, and one of the ladies who had allegedly gave a reference later said, "I never gave that reference; he forged my signature; I would have never recommended that guy." So the—the point there is, you know, obviously don't accept self-serving references from the person you're evaluating; that was what happened in that case. The other thing I would mention is that number one reason why churches get sued is because of sexual molestation; so doing reference checks, doing background checks is really a must for any church doing—you know, that has a youth program.
Second—last follow-up question: we're all about kingdom business and preparing people for the heavenlies, and so uh, could you tell me why Pluto is not a planet?
Well, because in 2007, at the triennial meeting of the International Astronomical Union—the IAU—which is the official astronomy designating body in the—in the world, the status of Pluto—the definition of a planet—was to be considered. Their 10,000 members in this organization; during that 10-day convención, 2,400 people registered; on the tenth and final day, there were 400 left; of those 400, when they took the vote on planet definition, 220 voted to define planet in such a way that had excluded Pluto and bumped it into the lower category of a dwarf planet. So the lesson here, church leaders, is always put the controversial issues at the end of the agenda. Good job, Dr. Hammer. And at the end of our live Q&A, we're actually going to play a game called "Stump Dr. Hammer," so we'll hang out here for a little bit. Next question.
Dr. Hammer, Phil Route from Cape Girardeau, Missouri. We have a pastor, Bethel Assembly. We have a Christian school which also serves almost like a Cape Community Christian school; about 26 different denominations or churches are represented there. We've always had a standard where parents meet a standard in order to have a student in the school, which is actually one of the parents to be have a born-again experience. Now, and I don't think the SCOTUS ruling had anything to do with this, but just definitions that we're trying to find out—we're having—you know, we have people come in and say, "You know, I'm in a homosexual lifestyle; I'm now—I'm married; I am born again." I'm born again, and I know this is happening a lot of different—different venues that people are saying, "Well, I have a born-again experience completely." So how do we—how do we deal with that? How do we do with it? Because obviously that whole mindset—it comes from that background—is going to be filtered in through our school if we have children who have parents that are—you know, whether they're lesbians or homosexuals and they're married—half where we're trying to define how we can do that and keep our standard as best as we can, specifically dealing with other parents that are concerned about this. So I don't know—we're out of the world—it falls there.
Yeah, I think different churches will come to different conclusions there, but—but the bottom line is if it's a church-owned and operated school, you generally will share the constitutional protection accorded to churches, which is the core of the First Amendment guarantee of religious freedom. You have a right to determine issues involving membership, uh, the selection of clergy, and I would add to that, you know, admission to a church-operated school. You certainly do for your Sunday school; why should a Monday through Friday school be any different? And—and if you decide this would be deleterious to us—to our mission—to allow these students to—to attend, I think you have that right; I think I think that's constitutionally supportable. I've never seen a case where that's been argued, so I'm speculating here, but I would say at a minimum you have a strong legal defense, although seldom can you say anything's 100 percent.
A little follow-up to be to that: let's say that that Christian school has a lunch program that is a federally involved—you know, like we're getting the federal—federal goods to help with the lunch program—super kids to have reduced lunch. How's that—how's that—is that—or we—I'm—is that a whole different area that we're looking at this?
Yes, that's—that's the one issue I meant to mention before, and that is the one game changer here is if you accept any kind of governmental aid, because whether it's state or law or federal or local—any government aid you receive—or funding comes with strings attached; there'll be a whole host of non-discrimination provisions; sexual orientation is going to be on there in all likelihood, and—and so that—that could be a game changer; that—that could actually result in some legal—some basis for a legal claim against the school under those circumstances. So you need to review that document carefully that you signed to qualify for that aid and see what kind of discrimination—are—provisions are we going to be subject to. We're already seeing universities getting discriminated against or actually having issues with discrimination on sexual orientation because of federal funding of the loan program. So with Christian schools, I think that you're seeing a lot of our universities and colleges already having issues with this, and I don't think it's going to get any better. Christian colleges and universities face three existential threats: one is the loss of federal financial assistance based on their discriminatory policies pertaining to same-sex or gender identity; number two is accreditation; there's rumblings that we're going to lose our accreditation for Christian higher education; that's—that's a death sentence; and number three is loss of tax-exempt status. The IRS commissioner last week said, "Well, that's not an immediate threat." Well, thanks for that; that's reassuring. It's like having a sledgehammer swung at your head—you know, as long as they keep missing, you're okay, but if they connect, it's all over.
Afternoon, I would stand in on the webcast that you did after the Supreme Court decision, and you said some things about the General Council bylaws are—you know, superseded, kind of thing; we don't have to have it at a district level or a church level, that kind of thing. But then you mentioned there could be policies that could be written—I'm just using that as an example—is could the—could you or your department provide the language for policies that would be suggested or recommended that we could probably use as a guideline?
Yes, actually, we have retained the Becket Fund, which is probably the preeminent First Amendment advocacy group in the country today, to—to provide counsel on these issues. I'm going to be speaking on Thursday morning at 9:15 in the General Counsel business session; there's a 45-minute break where we're going to—there's going to be an interview of me and Josh Holly, who's an attorney for the Becket Fund, and I believe that they have prepared that kind of documentation; we've asked them to, and let's bring that up then and see what—what they do, because I've not prepared that; I've deferred to them because all they do is First Amendment litigation, so they understand this issue better than I do, and I—I would defer to them, but I know they've prepared this kind of information; we'll bring that up on Thursday morning.
Excellent. I think we have time for a couple more questions. Go ahead, sir.
Question about the president wanting to have overtime paid for salaried employees making less than $52,000; how will that affect ministries where they have salaried employees, but they don't make $52,000 a year?
Well, what that means is they're not going to be considered exempt employees, and so the church is going to be responsible for overtime and for minimum wage for that person. Now, one big exception to that would be ministers, because the Department of Labor regulations specifically exempt ministers from Fair Labor Standards Act because of what they consider to be a First Amendment requirement. So we're talking about non-ministerial staff here, but if they're—if this regulation is adopted—it's just proposed now—and if it happens, it'll be later this year, then—and we don't know the exact number—probably somewhere around $50,000—it's kind of hard to pin it down because it's based on federal statistics—but if it's about $50,000, anybody making up to that amount—you know, they've got to make more than that to be considered an exempt employee if they meet the professional, executive, or administrative definition.
Excellent. I think we have time for just one or two more questions. Okay, we have my friend Lisa here. Go ahead. In terms of the actual First Amendment…
Protection? Is there any difference in how the exercise of free right given to the individual versus the corporation? Insofar as a minister might be protected in the discrimination, but the church itself would not.
Hate? Well, that's what the Supreme Court did in the Hobby Lobby case. You know, said that a closely held corporation of less than five owners was entitled to First Amendment protection. And so that was heavily criticized, that ruling of course, but it does stand for precedent to some extent when it comes to churches and ministers or individuals. You know, there's no question the church has constitutional protection, as do clergy obviously. So that's to me, I put that in a different context than secular or businesses like Hobby Lobby. I think the protections are much greater over here when you're talking about churches.
We want to thank you guys for joining us for Risk Management Live for this great session. We're always here to answer your questions. If you guys want to register so you can know what is happening with Risk Management Live, you can sign up on our website, AGfinancial.org, and we'll be able to answer your questions there. Oh, and I will tell you that Rich and I do cutting-edge stuff. So I mean, you know, the Supreme Court decided one week, and we're changing our subject to take care of that subject right then and there. So we're here to answer your questions and to keep your church from, hopefully, being in…
Thank you guys for joining us. God bless. Thanks, Rich.