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O.C. Catholic Donors at odds with Bishop Kevin Vann – Los Angeles Occasions

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The FedEx envelopes landed on the doorstep of some of Orange County's most influential Catholic philanthropists at dawn – real estate developers, lawyers, CEOs, and other church stalwarts who had raised tens of millions of dollars for the local diocese over the years.

Inside were letters from Bishop Kevin Vann that were limited to two words: You are fired.

These June missives sparked an uprising in the Orange County Church that burned into the Vatican and remained largely hidden from the diocese's 1.3 million ordinary Catholics.

At the heart of it all is a dispute between a group of well-connected lay people who helped the church financially recover from the clergy abuse scandal two decades ago, and a prelate who has fresh money over the problems caused by the pandemic and a new round of harassment stared at complaints.

The benefactors have accused Vann of breaking national law by removing her from the board of an independent charity after rejecting what they believe to be an illegal plan to "invade" foundation funds and disregard donor requests.

Bishop Kevin W. Vann during his installation in 2012.

(Genaro Molina / Los Angeles Times)

You officially complained last month to the papal nuncio, the Vatican's representative in Washington, DC, and the Archbishop of Los Angeles, Jose Gomez, head of the American Bishops' Conference, and a cardinal in Rome responsible for clergy and charitable foundations , Pope Francis alarmed.

A spokeswoman said the bishop was on vacation for a month and unavailable for an interview. His representatives denied that he or the church had acted improperly, but declined to answer many questions about the situation. Spokeswoman Tracey Kincaid said the diocese "does not comment on internal processes".

The situation in Orange County could be a harbinger for other dioceses. At a time when the generation change and the consequences of the abuse scandal have made Catholics more ready than ever to question the church authorities, COVID-19 is forcing controversial decisions against bishops. A Georgetown University survey of 116 American bishops published last month found that almost a quarter were considering parish closings due to falling revenues in the pandemic, and 45% either had or were considering closing elementary schools.

The Church in California has put additional financial pressure. A state law that came into force in January provided for a three-year time window for filing claims for sexual abuse, which were previously excluded by statute of limitations. Lawsuits against church organizations across the state are already mounting.

The most striking part of the Orange County conflict may be that the bishop's opponents are not church critics, but devout insiders.

Two real estate developers, Rand Sperry and Dr. Jacqueline DuPont, executive director of assisted living companies, have been recognized by the diocese for "exemplary business integrity," and DuPont co-chaired the gala dedication last summer of Vann's Crown Jewel, a gleaming new $ 130 million cathedral complex in Garden Grove. The board member who drafted the Vatican's complaint, Tustin's attorney Don Hunsberger, was named Orange County Catholic Man of the Year in 2019.

"None of my brothers on the board of the Orange Catholic Foundation have ever been able to question the actions of our Ordinary in this way," Hunsberger, the former board secretary, wrote to the nuncio on July 2, using the ecclesiastical term for bishop . "Each of us suffered from the weight of making that decision."

Most of the directors who were evicted from the 18-member board did not return messages and those who declined interview requests. This story is based on emails, memos and other internal records of the diocese and the foundation, as well as reports from people familiar with the dispute who spoke on condition of anonymity for not having the authority to discuss the matter publicly .

California was on the first day of the COVID shutdown when the diocese's chief financial officer reached out to the Orange Catholic Foundation and said the bishop needed a lot of money and quickly. CFO Elizabeth Jensen said the school system was close to $ 8 million and communities were $ 4 million. This is evident from correspondence and interviews with people familiar with the conversation, verified by The Times.

In a follow-up email dated March 23 to Foundation Chairman Stephen Muzzy, a Trabuco Canyon real estate and private equity investor, the CFO wrote that nine municipalities "did not have enough cash to cover basic short-term costs" were missing. Parents in poor areas and "even some in South County" couldn't pay college tuition, she said.

"I think the situation is getting serious, which motivated me, on behalf of Bishop Vann, to ask OCF about the resources that I believe have real needs," wrote Jensen.

The money the foundation made available could be repaid later, she said, but “there is no guarantee. We are all in uncharted waters. "

The emergency funding request, which the board ultimately rejected, was unprecedented in the history of the foundation. The nonprofit was founded 20 years ago in the midst of another crisis: revelations that priests had sexually abused children and their superiors had covered them up. When the abuse crisis hit the country in the late 1990s and early 2000s, large donors reduced their donations. Many said they didn't trust the church leaders who covered up the abuse and didn't want their money to pay legal bills or million dollar settlements with victims of abuse.

The church leadership came up with a solution that was adopted by many dioceses: independent foundations that benefited Catholic causes but were beyond the control of the bishop. In some cases, dioceses have moved existing church assets to the new nonprofits, making them inaccessible to plaintiffs and other creditors should the local church go bankrupt.

Retired Laguna Niguel banker Jim Tecca, who chaired the foundation years before the current dispute, explained the dynamic between the diocese and the foundation in a way that is appropriate for real estate-mad Orange County.

“When you're an investor in real estate, start a business instead of doing it yourself. If there are lawsuits … personal wealth is not at risk, ”Tecca said.

When then Bishop Tod Brown signed a $ 100 million settlement with 90 victims in 2005, the independent foundation was already up and running. It grew into a respected and trustworthy organization that annually awarded millions of grants and donated endowment funds to parishes and institutions such as Mater Dei and Santa Margarita high schools.

Bishop Tod Brown at the Cathedral of the Holy Family in Orange in 2004.

Bishop Tod Brown at the Cathedral of the Holy Family in Orange in 2004.

(Rick Loomis / Los Angeles Times)

The annual conference on business and ethics drew high profile speakers like actress Patricia Heaton and Dodgers broadcaster Vin Scully to raise hundreds of thousands of dollars for Catholic schools, while estate planning seminars encouraged wealthy parishioners to give money or property to the foundation. The average bequest to the nonprofit, according to recent marketing materials, was a staggering $ 867,000.

Decisive for the success, so the proponents, was the view of the donors that the foundation is completely Catholic and yet independent of the hierarchy, or as the mission statement says: “An autonomous, pious foundation that works with members of our diocese … according to each giver's intention. "

The donors were assured that the contributions would be used for the purposes specified by them, be it for seminary training, the care of older priests, parishes in poor areas, scholarships at a certain high school or the purchase of the cathedral organ.

"We shared the same mission statement with each and every donor," said Susan Strader, a Newport Beach board member who co-led the fundraising drive to complete the cathedral complex with her husband, property developer Tim. “Your money could go to candlesticks, lessonaries, stations of the cross, buildings, and classrooms. There was no money that could only be moved out of this donor intention. "

A voluntary lay-dominated board ruled the foundation, and its promotional materials set the limits of the bishop's influence: "The Bishop of Orange is one of the voting members of the board, but not the chairman."

Tecca, the former chairman of the board, couldn't recall a single legal or ethical argument during his tenure, he said, adding, “The reason is that we did what the donor said. Exactly. No question."

Vann, a 69-year-old Illinois native, was installed as bishop in 2012, a year after the diocese bought televangelist Robert H. Schuller's Crystal Cathedral out of bankruptcy for $ 57 million. The 34-acre property required major renovations and was worth over $ 72 million.

The Rev. Robert H. Schuller, who died in 2015, founded the Crystal Cathedral Ministries in 1955.

The Rev. Robert H. Schuller, who died in 2015, founded the Crystal Cathedral Ministries in 1955.

(Allen J. Schaben / Los Angeles Times)

The cathedral was open for less than a year when the coronavirus hit. When the diocese made a March 19 solicitation to the Board of Trustees to inform it that it needed $ 12 million, the foundation had assets of approximately $ 45 million.

Those who were aware of the call said Jensen, the Diocese's CFO, asked the Foundation for the full amount. Through a diocesan attorney, she said she never asked for $ 12 million and only set out the scope of the problem.

In a written request two days later, she identified more than $ 2.6 million in certain foundation accounts that she wanted to turn over to the diocese. She noted that the board's funding decision "should respect the donor's intent".

Much of the foundation money went to foundations, which annually paid a small percentage of their value to charity. Under state law, charities must be “careful” when paying endowments and follow all donor instructions. The foundation agreements limit the amount to 5% per year. Still, according to her written question, Jensen requested 25% from two funds and 50% from another.

In a statement from the diocesan attorney, Jensen said when she asked for the money: “I had no specific knowledge of the particular restrictions in each donor agreement. It is for this reason that I have emphasized that any restrictions imposed by donors must be respected. "

In a series of phone calls and emails, the board members informed church officials that while they wanted to help, the law did not allow it.

"Right now you have the feeling that the hands of the board are tied and cannot grant funds for the foreseeable future," summarized Jensen in an email on March 25, in which board chairman Muzzy replied: "I am shocked about what I perceive is the tone of your e-mail – that the OCF does not want to help the (bishop). "

In a three-page letter later that day, Muzzy wrote that, on the advice of his lawyers, the board rejected the diocese's request for emergency money. He enclosed a copy of the state law on foundations.

The board of directors, he wrote, “cannot violate its fiduciary duties and legal requirements as administrators of endowment funds. This would be a violation of every duty we have towards our donors … "

The bishop had other potential sources of money. The diocese's annual financial report found that the diocese had net assets of $ 195 million as of July 2019, of which $ 37 million was held in "cash and cash equivalents." Communities, schools, and other organizations have also received more than $ 18 million in loans from the federal paycheck protection program, according to a government database.

Nonetheless, the members of the Board of Trustees searched for emergency funds for the diocese in the weeks that followed, including soliciting donations from longtime benefactors. They handed over $ 1.4 million in April, according to the foundation's records, which The Times reviewed.

The money didn't calm Vann. Speaking to Zoom's board members in June, he said he saw the new funds as evidence that Suzanne Nunn, a longtime advisor to the foundation who served as executive director, lied, according to sources familiar with the diocese. whether the non-profit organization has money for the diocese situation that asked not to be named. The sources said Vann told the board to fire them. They declined, telling the bishop's staff that Nunn was for the board's pleasure, not theirs, the sources said.

Nunn declined to comment. After the bishop expressed his displeasure, she decided to leave the foundation anyway, and the board was to finalize her severance agreement at a June 19 meeting.

Early in the morning, Vann wrote to the board via FedEx that he had decided to "remove all currently elected board members." He said that despite repeated requests, the board had failed to achieve the goals it set, including establishing a strategic plan and hiring a permanent executive director.

Bishop Kevin Vann at Christ Cathedral. The Diocese of Orange.

Bishop Kevin Vann at Christ Cathedral. The Diocese of Orange has become the fastest growing diocese in the country at a time when most parishes and schools are shrinking and closing.

(Kevin Chang)

"(S) There has been a loss of trust and collaboration as the father of his family," he wrote, adding, "Although I had hoped to avoid this outcome, I have come to believe that it is necessary and in the Das Probably from OCF and its mission at this particular point in our history. "

He thanked them for their service and signed the letter “Your in Christ”.

On the same day, a new chairman appointed by Vann dismissed Nunn.

The dismissed board of directors, which included a pastor from San Clemente and a 74-year-old nun who worked in the cathedral, were stunned. A former director commented, "I feel fired by God," according to sources familiar with the board's response.

As is so often the case, the shock gave way to the lawyers. Attorneys examined canon law and corporate governance documents, arguing that the bishop had violated state company law, according to emails and memos reviewed by The Times. The foundation's statutes allowed a majority of the board of directors to remove a director for any reason, but the bishop limited himself to removing a director solely for a spiritual failure such as excommunication or causing a public scandal, or against the foundation's goals.

Three board members, Muzzy, Hunsberger and Newport Beach financial manager Ryan Kerrigan, wrote to Vann in a July 2 letter that he lacked the legal authority to dismiss the directors and asked him to reconsider.

"What have we done to deserve such arbitrary, judgmental treatment," they wrote, copying Gomez, head of the Archdiocese of LA, and the papal nuncio, Archbishop Christophe Pierre, and another Vatican official, Cardinal Benjamin Stella.

A letter to Pierre on the same day apologized for "sending this letter on plain white paper".

"We were locked out of the offices of the foundation by order of our full professor, so that we do not have access to writing paper that is worthy of the recipient of this letter," wrote Hunsberger on behalf of the dismissed board member.

An accompanying memo drawn up with an attorney for the foundation warned of possible legal ramifications. It was charged that the bishop opened the diocese to complaints from the displaced directors for their "illegal" removal and von Nunn for dismissal "for their refusal to allow illegal acts". The memo also alleged that donors could bring infringement suits and that plaintiffs' attorneys could seek foundation funds in the new clergy abuse lawsuits.

The bishop responded on July 28, informing the three board members that the removal of the directors “was strictly in accordance with the OCF bylaws and canon and civil law, as I have confirmed in advance, to ensure the continued appropriate separation from OCF and to ensure the diocese. ”

"I cannot imagine a bishop being so naive as to believe he can get away with it and not alienate donors large and small."

Charles Zech, an expert in finance and management for the Catholic Church

A diocesan attorney said in a statement that the foundation's assets were not permitted against persons with legal claims against the church.

"(T) here cannot be an indication that … any believer in the (diocese) can break the corporate veil and unlock the assets of OCF," the lawyer wrote.

So far, the Vatican has not weighed in publicly. The nuncio did not reply to messages. A spokeswoman for Gomez did not answer questions about the archbishop's reaction to the conflict in Orange, but stated in an email that he "has no day-to-day administrative oversight of the Diocese of Orange".

A member of the old board, Strader, was reappointed to the new board. When asked about the complaint of her former colleagues, she said that the bishop was "the ordinary of the diocese so that they don't really have a leg to stand on".

According to a diocesan attorney, the new board has not paid out more than 5% of the foundations since the changeover.

The diocese's top donor, Timothy Busch, an Irvine entrepreneur who co-founded JSerra High School in San Juan Capistrano, donated large sums of money to the new cathedral, and donated more than $ 15 million to the Catholic University, declined to comment.

"I was neither involved in this board nor in the decision," he said in a text and added: "Thank you very much for taking care of the leadership of the church."

Villanova professor emeritus Charles Zech, an expert on the finance and management of the Catholic Church, said he was unaware of a similar dispute between a bishop and a foundation and described the layoffs as "outrageous."

"I can't imagine a bishop being so naive as to believe that he can get away with it and not alienate large and small donors," said Zech.

Harriet Ryan is a contributor to the Los Angeles Times.

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