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Federal bankruptcy officials question Crystal Cathedral compensation [Updated]


Crystal Cathedral, the Orange County megachurch that filed for bankruptcy last month, allowed its chief financial officer to largely avoid federal income taxes by paying the bulk of his salary in the form of a housing allowance. [Updated at 7:12 p.m.: The information is contained in tax records.]

The six-figure housing allowance paid to financial officer Fred Southard -– along with compensation to members of the church founder's family –- are among the expenses questioned by the U.S. trustee's office and the creditors' committee assessing the bankruptcy case.

The documents also suggest that the church paid at least three insiders for redundant duties. The filings give the first look into the long-questioned financial practices of the Garden Grove church, which employs more than a dozen family members and in-laws of founder Robert H. Schuller.

The Crystal Cathedral has cited the weak economy and a 24% drop in donations in 2009 for its financial problems. More than 550 creditors are owed $50 million to $100 million, according to the initial bankruptcy filing last month.

According to court documents, longtime financial director Fred Southard received $132,019 out of his total $144,261 compensation in the form of a housing allowance last year.

Southard has been the Crystal Cathedral's chief financial officer since 1978 and owns a home in Newport Beach valued at $2.3 million.

Federal tax law allows religious organizations to give a housing allowance to "ordained, commissioned or licensed ministers" who perform certain duties for the church. The allowance is exempt from federal income tax.

The Reformed Church in America, to which the Crystal Cathedral belongs, had no record of Southard being commissioned or ordained as a pastor, according to a spokeswoman.

Southard told The Times on Wednesday that he was ordained as a minister by the Crystal Cathedral about 10 years ago and has taken the bulk of his compensation in the form of a housing allowance since then.

"That's what ministers are allowed to do, and so it's to the individual's advantage to do that," he said.

He said that apart from his duties as finance officer, he occasionally preached and led a weekly Bible study over the years.

[Updated at 7:12 p.m.: Southard said that other church employees who were ordained ministers also received housing allowances but that he was unsure who or how much.]

“I doubt that many would spend what I do, because most people don’t live in the area I do,” he said

The U.S. trustee's office did not address tax issues in an objection it filed to Southard's compensation package, but questioned why Southard should be employed as director of finance as the bankruptcy goes forward, when the church also employs a full-time accountant.

It also suggested that Southard should not even receive the allowance.

"There is no justification whatsoever for a housing allowance of this amount," according to the 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 trustee and creditors committee also objected to compensation for the church's director of programming, Gretchen Penner, who is Schuller's daughter, and Penner's mother-in-law, Neva Penner Klaassen, the programming manager.

The church requested approval to pay Penner an annual salary of $69,525 and Klaassen a salary of $55,099 while the bankruptcy proceedings are in progress.

-- Abby Sewell and Nicole Santa Cruz

Photo: Crystal Cathedral in Garden Grove. Credit: Anne Cusack/Los Angeles Times

Comments () | Archives (18)

Nepotism, greed, and a lack of accountability at the Crystal Cathedral? Who would have guessed?

Who cares?
If the government gets the money they want they will spend it in Afghanistan building abortion clinics, convincing ignorant tribesmen to slaughter their neighbors, blow up houses, burn crops and waste our money making weapons to sell to other poor slobs eager to kill their neighbors.
Let them give the guy a housing allowance, or a new car or a jet or a new dog - wheee! After what they allowed the megabanks and stockbrokers in New York to do (with our money) I really couldn't care less about the Crystal Cathedral.

Big surprise that these folks were cooking the books.

I'm shocked!! Shocked I tell you to find a megachurch/televangelist playing fast an loose with the rules.
I believe Robert Schuller to be a good man, but his children's metaphorical apples certainly didn't fall in the same orchard as his tree.

Greed by the dozens, com'on old folks, send some more almighty dollars to these "Pastors". Mr Schuller has forever joined the ranks of Jim Baker and the other greedy Hall of Fame'rs.

Tax churches. The continued subsidy of churches and other religious organizations is not only an outrageous violation of the first amendment of our constitution but it is also an invitation for con artists.


It's disgusting how churches have to get a free ride while the general public has to pay taxes. It's time to treat them as any other business and take away their tax free status.

i feel like we're back in the 1980's if only for a brief moment, as a megachurch is now in hot water for financial reasons

This is the kind of thing that makes people look into other religions...shame on this church and their leaders.

A $2.3 million dollar home for a Pastor? There is no way anyone can justify this.

I don't think the Lord is pleased.

Here we go again. So typical of the religion of $Churchianity$.

If your preacher wears a Rolex and/or drives a Mercedes, you'd better watch your checkbook.

Wow!! The High and Mighty chickens are coming to roost all over the nation. What was kept in the dark is now coming to light. Nothing but stinking crooks in every American walk of life. Even the Churches can't be trusted -- not one can be trusted. Truly, Jesus must be on His way back to repossess His World for we are a corrupt people and have corrupted His world. What a sad lot we are.

The other night there was a program called "Religion or Brainwashing?" covering Warren Jeff's fundamentalist latter day saints church. I found myself thinking isn't all religion nothing but brainwashing? Parents take their babies to church, send them to Sunday School (or other school depending on religion) and tell them to believe in some type of God. We look at the fundamentalist muslims and think they must be brainwashed to act that way.

I see these mega church pastors the same way. The followers have been brainwashed by their christian upbringing and can no longer think for themselves. I mean, seriously, if they could step a little outside the box they are in, they would have to ask why the pastor arrives in a BMW, wears a $2000 suit accessorized with a Rolex and then drives home to his mansion. I should feel sorry for them but when they blindly followed these guys and voted for Bush, they totally screwed up the country and they are headed down the same path with McCain.

I agree these organizations should pay taxes just like the general public. If anything money gained through the church should go to help homeless and people that can't afford the luxury of having enough food/enough clothes for their loved ones.

The wheel of karma grinds slowly, but it grinds exceeding small. Looks like the wheel of karma is about to roll over the crystal cathedral. Crunch!!!

So, I guess money really can't buy your way into heaven? Surprise, surprise.

In reply to Sick and Tired in LA -- you said this is the sort of thing that makes people look into other religions.

I agree -- I hope members of Crystal Cathedral will now look into Christianity and find a church which actually preaches the Gospel.


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