Charity Gospel for Asia files for creditor protection after $170M lawsuit
In proposed class action, former donors allege Christian charity didn’t spend money as promised
A Christian charity facing a multimillion-dollar class-action lawsuit launched in Nova Scotia has filed for creditor protection, arguing that the coronavirus and the negative publicity from $170 million in claims against it have led to a decline in donations.
For 35 years, Gospel for Asia, or GFA, has operated in Canada as a not-for-profit corporation. It collects donations for specific things such as wells, goats and chickens, as well as missionary work and child sponsorships.
The charity, which also operates in the United States, promises that the money will help people living in poverty in India and surrounding countries. In 2015, it brought in the equivalent of more than $43,370 a day from Canadians.
However, a CBC News investigation found dozens of former donors, GFA staff and board members had concerns about how the organization was actually spending the money it accepted. They believe hundreds of millions of dollars intended for the poor in Asia were "missing."
In February, plaintiff Greg Zentner of Woodburn, N.S., launched the class-action lawsuit that alleges the charity "defrauded or made negligent misstatements" to donors. The statement of claim also said the "defendants civilly conspired to misrepresent the nature of donations collected." The class action has not yet been certified.
Donations can't be sent out of country
The Canadian branch of Gospel for Asia's head office is just outside Hamilton, in Stoney Creek, Ont. A justice of the Ontario Superior Court heard Gospel for Asia Canada's application under the Companies Creditor Arrangement Act on June 26 in Toronto. The justice appointed PricewaterhouseCoopers (PwC Canada) as monitor to the organization's finances and operations.
The court ordered that while the charity can collect donations, it cannot "use or dispense" any donations or send donations into the field through an agent. This means that it cannot send money collected from donors to Asia without approval from the court.
GFA has asked for a stay in the class action and permission to be able to send its donations into the field. The court has yet to rule on this.
In the meantime, GFA is still appealing to potential donors about the need to provide help in South Asia due to the coronavirus pandemic. Under a heading of "bringing hope and relief to starving masses," its website states: "We are in a unique position to provide aid where others cannot."
A mailing sent out in June implored people for coronavirus response money, asking them to agree to, "Please use my gift in South Asia to help feed the hungry, minister to the hurting, save lives — and express the love of Jesus!"
The charity states in court filings that donations have become a challenge in recent months, with only $2.5 million collected in the first six months of this year. In the court documents, the charity cited it received about $7.7 million in donations in Canada in 2019, about half of what it amassed in 2015.
Charity concerned it won't survive
In its application for creditor protection, Gospel for Asia stated that while it intended to defend itself against the claims in the class action, its "ability to attract donations and conduct its charitable works will be greatly diminished and it is possible that GFA World [the Canadian branch of the charity] would not survive."
It only lists $8,900 in creditors, including Canada Post and an Ontario utility company. But it states it needs protection due to the financial claims made in the class action.
GFA stated having a monitor to oversee finances would "help stabilize future donations" and give it "the breathing space necessary to allow it to continue its important charitable work, [and] provide its donors with the transparency of a court-supervised process."
Dean Peroff, one of the lawyers representing the charity, said it would be inappropriate to comment on a matter before the court.
Halifax lawyer John McKiggan, who represents the plaintiffs in the class action, sees the request for creditor protection as a way to avoid the lawsuit. He has filed a motion to oppose the proceedings that is scheduled to be heard on Sept. 1.
"In their filings, Gospel for Asia Canada admits that they have no creditors. That they don't owe anybody any money. The only creditors are the class members from this lawsuit," he told CBC.
McKiggan said the charity should not be allowed to send donations out of the country while there are outstanding allegations related to how it spends money.
"Our allegations are that money was disappearing [and] has not been properly accounted for," he said.
"So this proceeding, the CCAA proceeding, is asking the court to approve a process where Gospel for Asia can continue to collect donations and continue to send those donations out of the country, with no means to ensure that that money is being spent as directed."
This isn't the first time the charity has faced accusations or found itself tied up with litigation. The charity ignited controversy in evangelical circles in the United States, where it faced a class action with similar allegations. It eventually settled last year for $37 million.
During those proceedings, lawyers representing Gospel for Asia confirmed that $20 million was taken from Canadian donations to help pay for a sprawling $45-million campus in Texas, which includes a 100,000-square-foot administration building and 80 homes for staff. Initially, financial statements stated the money came from an anonymous donation.
WATCH | Gospel for Asia spokesperson takes CBC on a tour of Texas campus:
The charity has since said it paid the money back. But that's not enough to ease McKiggan and his clients' concerns.
"We believe that the evidence admitted to in court by Gospel for Asia establishes some very serious concerns about the way in which these entities are managed. And we think that the court needs to closely examine their financial practices. And that won't happen if the CCAA [creditor protection] proceedings continue as they've asked," said McKiggan.
No records of funds received from Canada in India
Rev. Bruce Morrison has been following GFA's activities closely for years. Two decades ago, he was so impressed by the organization's work in India that he encouraged his congregation at the Christian Fellowship Church in New Glasgow, N.S., to pledge support through its Sunday collection.
The church in rural Nova Scotia raised about $150,000 for the organization. But after hearing about discontent among staff, Morrison started examining GFA's operations and found financial discrepancies.
He discovered that between 2007 and 2014, Gospel for Asia reported to the Canada Revenue Agency that it had sent nearly $94 million to its operation in India. Meanwhile, financial records submitted to the Indian government showed the charity received no funds from Canada during that time period.
"Our church was very committed to helping them largely because of the endorsement that I gave concerning this organization. So it was very disappointing for me to find the irregularities," Morrison said in a recent interview.
In response to the application for creditor protection, he filed a thick affidavit outlining his concerns.
Morrison alleges that the lack of transparency about how donations were used amounts to fraud. He was particularly concerned to learn the charity wasn't spending all the money it received. He learned Gospel for Asia had millions sitting in foreign bank accounts.
"In Canada and elsewhere, they appeal to donors with a sense of urgency," he said. "And yet they're sitting, they've traditionally sat on these cash reserves of hundreds of millions of un-utilized donor money. So it's just staggering. In fact, I think it's hard for people. It was hard for me [and] it still is to comprehend."
The RCMP looked into Morrison's allegations and closed the file without laying charges.
Johnnie Moore, a spokesperson for the charity, told CBC earlier this year that the American settlement was not an admission of guilt and he maintained that the organization would have won if the case had proceeded to court.
In an affidavit included in the application for creditor protection, Pat Emerick, ministry director and president of GFA Canada, said there is "no basis" to the allegations of fraudulent misrepresentation and misappropriation of funds made in the Canadian lawsuit.
But Emerick's affidavit said the American litigation and the "Internet chatter" that followed has contributed to a "marked decline" in donations in Canada. The coronavirus pandemic "placed an additional strain on donors' ability or willingness to donate."
"It is our belief that these allegations arise from a fundamental misunderstanding of GFA Canada's operations, administrative challenges that arose and how they were addressed, and how GFA Canada's accounting works," he said in the court document.
Morrison still hopes the lawsuit leads to answers about how the charity's money was used.
"I don't doubt that there have been good things that GFA has done. But they have not spent the donor money anywhere close to the degree that they've said they've had," he said.
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With files from Angela MacIvor