Facing Potential Clawback, Church Asks Members To Donate
A Michigan church that received approximately $300,000 in donations from a convicted Ponzi schemer has spurned a request by authorities to return the funds, instead announcing the creation of a fund that parishioners could donate to and which ultimately would be used to help the fraud victims. Resurrection Life Church, located in Grandville, Michigan, received multiple donations and tithes from David McQueen, who is currently serving a 30-year sentence in federal prison after being convicted of operating a $46.5 million Ponzi scheme.
McQueen promised investors monthly returns of 5% through his investment in a Florida company known as Maximum Return Transactions ("MRT"). MRT promised investors monthly returns ranging from 5% to 11% from trading in foreign currencies, with McQueen pocketing the difference between the 5% promised return and the actual return received from MRT. McQueen's entity, Accelerated Income Group ("AIG"), also recruited insurance agents to sell the investment to their clients. For a short period of time, this form of arbitrage was successful.
However, in mid-2007, MRT stopped making payouts to investors (and was later alleged to be a Ponzi scheme in a civil enforcement action filed by the Securities and Exchange Commission). However, rather than notifying AIG's investors of the failure of MRT, McQueen continued soliciting investors with promises of the lucrative monthly returns. In an attempt to reconstruct the returns from MRT, McQueen placed nearly 1/3 of investor funds in a variety of speculative investments that resulted in severe losses. Despite these losses, investors continued to receive falsified account statements showing consistent account gains. The scheme later collapsed, as all Ponzi schemes do, and ultimately resulted in losses of $46 million to approximately 800 investors.
As part of his scheme, McQueen assumed a larger-than-life persona in his community that included outlandish displays of wealth coupled with a self-professed claim that he was "blessed to be a blessing" to sympathetic causes. From 2005 to 2009, McQueen contributed approximately $300,000 to Resurrection Life Church through various tithes and donations. However, those funds were not McQueen's personal funds, but rather were funds belonging to investors.
After McQueen was ordered to pay $32 million in restitution to his defrauded victims, the U.S. Attorney's Office began contacting third parties who had received funds from McQueen seeking the voluntary return of those funds to be used to compensate victims. One of those third parties that received such a request was Resurrection Life. However, in a letter dated February 16, 2015, Resurrection Life secretary Bernard Blauwkamp informed the U.S. Attorney's Office that while it had "prayerfully considered your request," the Church would "respectfully decline" to return the $300,000. A subsequent post on Facebook by Pastor Duane Vander Klok elaborated on the Church's position:
Regarding the recent request to voluntarily return the funds that were donated years ago by McQueen, we unfortunately do not have those funds. The money was dispersed to various charitable causes many years ago according to the requirements of the law. Because so much time has passed since the donations were made, it is impossible to find those dollars now. The orphanages, missionaries, even local businesses who actually received portions of that money have all long since put it to good use, and so have the businesses where they spent it and so on.
If Resurrection Life Church had been aware of the nature of the funds at the time they were received, or even before the funds were dispersed to charitable causes, we would have gladly returned them to the investors. Sadly, we never had that opportunity because no one had any knowledge of the illegal circumstances surrounding the gifts until many years later.
Any attempt to take our current donations and redirect them to the investors would create an ethical and potentially legal dilemma because, not only do we not have an equivalent sum available but, what we do have was donated recently and not for that purpose. Redirecting donated funds to a purpose other than what they were donated for is a very serious legal matter. We do not desire to be unethical, or commit a crime today, in reaction to the crime committed by someone else many years ago.
The Church also announced plans to create a fund to accept donations which would be used to compensate victims. As Pastor Klok explained,
Since for both ethical and legal reasons we cannot simply redirect funds to the investors, we have been exploring what we can do for them. We are in the process of establishing a special fund account to benefit the investors who lost their funds. Our church community can donate to the account and all the monies received into that fund will be put towards the restoration of the investor’s loss. An independent attorney will oversee the escrow fund and will coordinate with the US Attorney for eventual distribution of all funds received to victims. Details of how to give to that account will be made available to our congregation through our website and social media as soon as they are finalized.
The U.S. Attorney's Office has not publicly commented on the Church's position. While receivers have been successful in bringing similar suits around the country, here the lack of a receiver over McQueen's entities as well as the length of time that has elapsed since the donations took place back in 2005 - 2009 suggests it is unlikely that the church could face a clawback action seeking return of the donations. It remains to be seen whether the Church's efforts to collect funds for victims will have any meaningful result, but those efforts will likely include the complex task of attempting to administer a claims process including hundreds of victims.
The Church's February 16, 2015 Letter is below: