AME Church will no longer allow ‘one person to count the money’ after nearly $100M goes missing
Rev. Cedric V. Alexander, a retired pastor with the African Methodist Episcopal Church, Inc., has filed a proposed class-action lawsuit alleging that the denomination lost some 70% or nearly $100 million from its retirement plan through "foolish" and risky investments, which have hurt about 5,000 participants financially.
The 49-page federal complaint was filed Tuesday in Maryland, where Alexander resides.
The document alleges that Jerome V. Harris, the former executive director of the denomination's Department of Retirement Services, was "given sole authority to invest tens of millions of AMEC clergy's and other Church servants' retirement savings in a questionable and potentially unlawful purchase of undeveloped land in Florida, a promissory note to an Illinois installer of solar panels, and an even more foolish investment in a now non-existent capital venture outfit."
And while all of this was happening, church officials kept reporting to the plan's beneficiaries that their retirement funds were safely flourishing as investments in annuities from Symetra Financial.
"This suit is about a complete and total abrogation of these fiduciary responsibilities by Defendants, resulting in numerous breaches of duty and resulting in a single, unmonitored individual, Defendant Harris, controlling all Plan assets and investments," the complaint says.
The Christian Post reached out to the AME Church for comment on the complaint. No one was immediately available.
Alexander, who retired in September 2020 after more than two decades of service in the historically black church denomination, said from Jan. 1, 2021, through March 31, 2021, his retirement account showed a balance of $86,631.75.
On Sept. 13, 2021, he requested a rollover of his funds from the church's plan to an individual retirement account. He was informed in October 2021 by Rev. James Miller, the newly elected executive director of the denomination's Department of Retirement Services, that his request could not be accommodated due to a pending audit and the church's retirement funds being frozen.
Miller followed up with a letter in November telling participants in the retirement plan that the audit was taking longer than expected. On Dec. 14, 2021, The Atlanta Journal-Constitution reported that the denomination was investigating "possible financial irregularities" with its retirement fund investments.
Everything came to head during a meeting of the denomination's general board on Jan. 31 when participants in the church's retirement plan were told that "more than $90 million of [the denomination's] $126.8 million [retirement fund] was missing, and no one connected with the Church, except its former Department of Retirement Services Executive Director, Defendant Harris, knew where the money and other plan related records went."
"Those attending the January 31st meeting were told that despite repeated representations to Plan participants over the last two decades, the Plan's assets were not all invested in annuities provided by Symetra," the complaint notes.
"Instead, the Council of Bishops, General Board, Department of Retirement Services, the chair of the Department, Bishop Green and the Trustees allowed a single individual, Defendant Harris, to exercise full decision making authority over the use of all Plan assets. Rev. Miller, Defendant Harris's replacement as Executive Director of the Department of Retirement Services, put it this way: 'never again will we allow one person to count the money,' essentially conceding that the Plan's other fiduciaries previously had completely abdicated their duties owed to the Plan and the Plan's participants, including Plaintiff Alexander and the other members of the Class."
Others listed as defendants include Bishop Samuel L. Green, Sr., the Trustees of the African Methodist Episcopal Church Ministerial Retirement Annuity Plan, the African Methodist Episcopal Church Ministerial Retirement Annuity Plan, the Department of Retirement Services, the General Board of the AME Church, the Council of Bishops of the AME Church and John and Jane Does 1 through 20.
According to the complaint, the governing documents of the AME Church's retirement plan stipulate that it is governed by the federal Employee Retirement Income Security Act of 1974, which requires that management and investment decisions should be made solely in the interest of the participants. However, the legal filing claims Harris did not follow that guidance.
An investigation revealed that Harris invested tens of millions of dollars "in high-risk, speculative and demonstratively imprudent investments in Motorskill Ventures Group (a now defunct venture capital outfit)."
Investments were made in "Motorskill Ventures," "Motorskill Asia Ventures," and a separate investment in Financial Freedom Fund, LLC, which invested in additional Motorskill Ventures Group investments called "Motorskill Ventures 1" and "Motorskill Asia Ventures 1."
Last June, the AME Church's investigative committee was informed by Motorskill Ventures Group "that these investments are worthless, the funds in which the Plan invested were terminated by Motorskill, and that the Plan will recover nothing from its investments."
According to the complaint, the investigative committee could only verify $36.9 million of the church's retirement fund invested with Symetra. Another $1 million of value was identified in investment in another "speculative, high-risk investment in undeveloped real estate located in Key Marco Island, Florida."
"Defendant Harris initially invested $1.5 million of the Plan's assets in the undeveloped land, reflecting a loss of $500,000 and providing merit to the pejorative phrase 'Florida land deal,'" the complaint noted.
Harris is also accused of investing in Financial Freedom Fund, LLC, described as a manager of a private Real Estate Investment Trust that provides loans for commercial and residential construction. Money from the retirement funds was also used to provide a promissory note to an Illinois installer of solar panels called Day and Night Solar.
"Upon information and belief, Defendant Harris would not have secretly moved tens of millions of dollars in Plan asset's out of Symetra annuity investments and invested them in a risky or fraudulent venture capital company Motorskill Ventures Group, Financial Freedom Fund, LLC, or invested an additional $1.5 million in a Florida land deal if he did not stand to benefit in some way," the complaint argues.
It was also claimed that at the Jan. 31 meeting, the office of the executive director of the AME's Department of Retirement Services "had been emptied, with nothing in the office cabinets but 'empty files and paperclips.' Even the most current version of the Plan document could not be located."
As a result of the situation, Alexander has not received any of his retirement benefits since 2020.
"As of the date of the filing of this Complaint, Plaintiff has not received any of his retirement benefits, despite being retired, without much income, for well over a year. All other members of the Class similarly have had their pension payments halted and/or have been informed that they have only one-third of the amount or less in their individual retirement accounts than they had previously been told," the complaint says.
Alexander's retirement account total has been reduced from $86,631.75 to $26,025.29, since the investigation, the complaint states. Other participants in the fund, says the complaint, have also seen a 70% reduction in the value of their retirement accounts.
The denomination announced that the Department of Retirement Services had reported a material loss in a statement last October and that a "comprehensive audit and review" would be conducted by an independent law firm and accounting firm. AME vowed to make the report of the findings public upon receipt.
In the first week of February, Alexander said he received a letter from the Department of Retirement Services informing participants of "troubling news" that "plan funds were frozen, and distributions delayed pending the investigative findings." The letter stated that federal investigatory agencies along with the outside consultants were "working on the matter."
"The AME Church takes this crime seriously," a statement from AME said, according to The Wall Street Journal. "We are also committed to making every fund participant whole by restoring their full investment plus interest."