Crystal Cathedral's CFO Resigns ahead of Bankruptcy Hearing

Crystal Cathedral's chief financial officer Fred Southard has resigned ahead of a bankruptcy court hearing about church employees' salaries, including his $132,000 housing allowance.

Southard, who has served for over 30 years at the Garden Grove-based megachurch, said Tuesday that he resigned voluntarily to save the church money, the Orange County Register reported.

"There is a real need for the church to cut its expenses," he said. "Staff is one of the places where they can cut, and that's where I came in."

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A bankruptcy court will hold a hearing March 16 to review the salaries given out to several of the church's workers.

In November 2010, the U.S. Trustee overseeing Crystal Cathedral's bankruptcy case filed objections to the salaries handed out to Southard and two other church employees for what appeared to be redundant duties. The bankruptcy official questioned the $132,019 housing allowance for Southard, who takes only a $12,000 salary.

The federal authority also challenged the need to keep Southard as CFO when the megachurch has a full-time accounting staff.

"There is no justification whatsoever for a housing allowance of this amount," the trustee stated in court documents.

"Mr. Southard has failed to explain why such a housing allowance is necessary or appropriate, given this Debtor is in Chapter 11 and suffering financial difficulties."

The Internal Revenue Service allows clergy to deduct their tax-exempt housing allowances from their gross income given that the amount excluded does not exceed the reasonable pay for the minister's services.

Southard defended his housing allowance as both legal and justified, according to the OC Register.

"My job as a CFO always had a ministerial function," he said Tuesday. "Especially in the early days I did a lot of ministry."

The other two insiders identified by the trustee's November report are related to founding pastor Robert H. Schuller. The hearing Wednesday will also examine the $70,000 compensation for Schuller's youngest daughter, Gretchen Penner, who produces the church's "Hour of Power" telecast, and the $55,000 salary of her daughter, Neva Klaassen, who books musical guests for the TV show.

The financial practices at Crystal Cathedral, formerly known as Garden Grove Community Church, has been under intense scrutiny since the church filed for Chapter 11 bankruptcy protection Oct. 18 after citing debts of more than $43 million.

Bankruptcy filings in December 2010 showed that Crystal Cathedral gave a generous payout of nearly $2 million to 23 insiders and Schuller relatives in the 12 months leading up to the Chapter 11 filing. During the same period, the church sold its Ranch Capistrano retreat center and slashed over 150 jobs.

Millions of dollars in unpaid debt from the Cathedral's 2009 "Glory of Christmas" production triggered the bankruptcy filing. Last year was the first time in 30 years that the church canceled its iconic holiday pageant.

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