Excerpt from The Hour and the End – Wm. H. Grotheer
Not only did God entrust His chosen people with truth, and the final message to the nations, but He also entrusted them with the means to carry out this primary purpose of their calling. How have these means been handled, and when were fateful decisions made? In an article - "Investment Practices of the General Conference," Elder Robert E. Osborn of the Church's Treasury Department wrote: -
Because the General Conference is responsible for a large pool of capital, the controlling investment and securities committee decided in 1967 to retain professional investment counsel. (This took place at the time the "unitized funds" program. described later in this article, began operation.) Lionel D. Edie & Company, Inc., of New York City, was chosen to do the research, analysis, and selection of securities for the General Conference portfolio. Members of the investment section of the Treasurer's Office worked very closely with Edie & Company and kept in communication by telephone and inperson conferences for detailed review of current and projected trends in the economic and money markets. (Spectrum, Vol. 5, #2, 1973)
The "unitized funds" program, as explained by Osborn, "operated in a manner similar to mutual funds. All unit holders (conferences, unions, divisions, the General Conference, and church-owned institutions) own a proportionate share of the unitized funds, on the basis of the amount invested; and unit holders share in the investment income and capital appreciation." [And loss?] (Ibid., pp. 53-54)
While no report is available to this writer as to the amount of the losses sustained in playing the stock market by the General Conference since 1967, a window into the results of this type of monetary practice is to be found in reports of the investments made by one conference in the Pacific Union. The Pacific Union had chosen to set up its own investment program. One conference - Northern California - during a period of six years - 1968-1973 - had a "paper loss" of over $2 Million.This loss involved
funds of trust deposits, and revocable trust funds. A Lay Advisory Committee reporting on the investments and the losses stated - "If the trustors and trust depositors should elect to withdraw their money the fund would be insolvent - unable to honor these withdrawal requests." This committee made the following two-fold recommendation: -
That the Conference and the Association adopt a policy of making no additional stock investments after this date and of eliminating all investments in common stock and stock investment funds and that the time for accomplishing this be no more than two years. (Report #2, Sub-Committee on Conference Organization & Finance of the Steering Committee of the NCC-LAC)
One member of the Steering Committee, Ken Cortner, reported in the Adventist Laymen's Pipeline, July 1, 1983, the full picture of these investment procedures. That report read: -
Church publications have been silent concerning some seven (7) million dollars of Northern's [Northern California Conference] funds turned over to the Pacific Union Conference in the late 60s and early 70s for investment in the stock market. The market had seriously declined thereafter, and in January 1974 conference officials, without disclosing either the investment or the loss to the church members ordered the sale of shares of stocks that had cost $837,402.97 for $500,000. The realized loss in that single transaction that was sustained by Northern California Conference and/or Association was $337,402.97.
In the fall of 1974, a then independent Northern California Conference Lay Advisory Committee (NCC-LAC), chaired by a lay person in contrast to the present (1983) chairmanship being held and under the control of the conference president, discovered the investments and asked the Conference Executive Committee to call a halt to any further dealings in the stock market and that divestiture of all stock held be completed within a two year period. They contended the $2,053,298.42 loss of stock value from 1968 through 1973 was "only a paper loss" and that by waiting for whatever time it took, the market would recover and possibly even bring a profit. LAC members, generally. did not agree with that decision but lacking authority and having only an advisory capacity felt that they had done their job.
Local and Union Conference officials had characterized the stock purchased as "all of the blue chip variety" and that they had been selected by "a group of experts to whom we gave complete authority to buy and sell in our behalf." Laymen learned that the "group of experts" contained not one single Seventh-day Adventist Church member and the portfolio of stocks described as "all of the blue chip variety" consisted of such companies as Ringling Bros., Barnum and Bailey Circus, and among others, a host of small, insignificant, virtually unknown and highly speculative businesses.
Keep in mind that this is but the story of one conference and its investments. Some units of the General Conference "unitized funds" program dissatisfied with the results turned to the glowing possibility of Dr. Davenport's investment schemes. The story of the resulting scandal need not be recited here.