GAPJC Executive Committee refuses to hear complaint about plan to give GAC control of donor-designated funds
By Parker T. Williamson, Editor Emeritus and Senior Correspondent, May 29, 2008
The Presbyterian Church (USA) Foundation has been denied its day in court. In a preliminary order handed down May 26 by the Executive Committee of the General Assembly Permanent Judicial Commission (GAPJC), the court refused to hear charges made by Foundation President Robert E. Leech against the Advisory Committee on the Constitution (ACC).
At issue is the ACC’s recommendation that the 218th General Assembly declare that the General Assembly Council, not the Foundation, has fiduciary authority over donor-designated funds. The Foundation claims that the ACC’s recommendation, if enacted, would constitute a dangerous trust violation.
The GAPJC dismissed the Foundation’s complaint primarily on jurisdictional grounds. It said that one General Assembly entity (the Foundation) has no standing to initiate judicial action against another General Assembly entity (the ACC).
An arm’s-length relationship
The Foundation was established by the 1799 General Assembly to serve as fiduciary of funds given to the denomination. In that sense, it understands itself to be an entity of the General Assembly. But it is also a separate, free-standing corporation with its own articles of incorporation, by-laws, board of directors, officers and staff.
Historically, the Foundation has acted independently of General Assembly control. Its articles of incorporation call for the Foundation to follow directives of the General Assembly, but only “to the extent that such directives are lawful.” As a fiduciary, the Foundation understands its obligation to manage and disburse funds entrusted to its care with prudence and according to state law.
On occasion, the Foundation has reminded General Assembly agencies of its primary allegiance to fiduciary law rather than to the exigencies of denominational politics. One such occasion occurred in 2004, when the 216th General Assembly ordered its agencies to begin a process of divesting from their portfolios stock in corporations doing business with Israel.
The Foundation expressed a note of caution to make sure that the General Assembly understood that any recommendation on divestment could only be followed by the Foundation so long as it was consistent with the Foundation’s fiduciary responsibility.
Mark Klemm, senior vice president of development for the Foundation, told The Layman during a post-General Assembly interview that the Foundation must rank its fiduciary responsibility to beneficiaries over any social policy that might reduce investment income.
Klemm said the Foundation is required to honor contracts with donors who buy lifetime annuities that will eventually benefit denominational programs of their choices. It provides donors who buy the annuities with a guaranteed annual rate of return until the donor’s death. He insisted that investment decisions cannot be altered in a way that would threaten the Foundation’s ability to meet its obligations.
“The fact is, nothing may come of all of this,” Klemm said.
Nothing did.
Two years later, the 217th General Assembly backed away from the former assembly’s divestment stance.
No harm, no foul
A second reason given by the GAPJC for dismissing the Foundation’s complaint against the ACC was that the ACC had done no harm to the Foundation when it recommended that the GAC be given the last word on managing donor restricted funds.
Foundation officials say that if enacted by the General Assembly, the ACC recommendation would effectively undermine the Foundation’s fiduciary authority and destroy a system of checks and balances that has been in place since 1799. According to Dr. Steve Martin, a Foundation board member and its former chairman, the ACC recommendation threatens “to muddle the distinction between those who manage funds and those who are the beneficiaries of those funds.”
Martin argues that the ACC recommendation, if enacted by the General Assembly, would deliver a blow to the church’s integrity.
No stay of enforcement
Aware that a recommendation from the ACC, amplified by the applause it is receiving from Stated Clerk Clifton Kirkpatrick, might carry great weight among General Assembly commissioners, the Foundation asked the court to issue a stay of enforcement. Had the stay been issued, the ACC recommendation would not be presented for consideration at the upcoming General Assembly meeting, allowing time for the matter to be properly adjudicated before the GAPJC.
But the GAPJC says that since the ACC has only expressed an opinion, it has done no injury. The Foundation has “failed to state a claim upon which relief can be granted,” said the court. “Advice and/or recommendation do not constitute ‘actions’ and therefore cannot be addressed by remedial complaints.”
Because the preliminary order was rendered by the GAPJC’s executive committee, it can be appealed to the full court. But by the time such an appeal can be heard, the horse will be out of the barn. Time constraints prevent its consideration before the General Assembly meets June 21-28.
The ACC recommendation essentially concurs with an Advisory Opinion that was issued by Kirkpatrick in July 2007. According to the standing rules of the General Assembly, Kirkpatrick’s office advises both the ACC and the GAPJC.