wfn.org | LCMS: All Parties Settle LCMS Foundation-loss Lawsuits

[Worldwide Faith News <wfn@igc.org>]

The Lutheran Church--Missouri Synod
Board for Communication Services

LCMSNews -- No. 26
May 14, 2002

All parties settle Foundation-loss lawsuits

By David L. Mahsman

All parties to two lawsuits that involved the LCMS Foundation and the 
investment losses it sustained three years ago reached a preliminary 
settlement April 25.

Foundation President Mark Stuenkel announced that the Foundation will 
receive $9,675,000 from "all potential sources."

"This is a global settlement from several sources," Stuenkel said.  "The 
Foundation will not be involved in any further litigation on these matters."

Because of provisions of certain of the settlements, the amounts and 
sources of specific settlement payments cannot be disclosed, according to 
Synod and Foundation legal counsel Leonard Pranschke.

"I'm very glad that we're able to get these matters resolved," Stuenkel 
added.  "It's good that the Foundation can now move forward with its 
mission: `Linking Christians with giving opportunities.'"

The $9,675,000 to be received by the Foundation is about a fourth of what 
is estimated to have been lost on investments in 1998.

In June 2000, the Foundation filed suit in federal District Court in St. 
Louis based on such losses against Vining-Sparks, the broker that sold the 
Foundation the investments -- mortgage-derivative securities -- that 
resulted in the losses.

Then, in September 2000, a class-action suit was filed in St. Louis County 
(Mo.) Circuit Court against the Foundation, Vining-Sparks and certain 
individuals by 15 persons who claimed an interest in assets held in 
Foundation fixed-income portfolios.

The $9,675,000 in payments resolves all claims, including both lawsuits and 
other claims that were settled without litigation.  The lawsuit settlements 
are still considered tentative, however, because final approval of the 
class-action settlement requires giving notice to the class and a hearing, 
which is now scheduled for Aug. 15 in St. Louis.

Of the total recoveries, $3.2 million will be passed on to the class 
members in the class-action suit.  After they pay their attorneys, the 
balance will be allocated to the class members on a proportionate 
basis.  Funds either will be put back into the unitrusts or will go to the 
Pension Plan for Pastors and Teachers pre-retirement account owners who 
suffered losses.

"The plaintiffs in the class- action suit will get the income stream from 
the replenished unitrusts, and the money will eventually be available for 
ministry," Stuenkel said.  "Also, PPPT account owners who shared in the 
losses will receive a portion of the settlement, giving them more for 
retirement."

The remaining $6,475,000 from the settlements will be distributed among the 
Synod entities -- Lutheran Church Extension Fund, Concordia Publishing 
House and others -- that sustained losses on their investments with the 
Foundation.  Stuenkel said the Foundation will pay the attorneys' fees 
associated with these recoveries so that the Synod entities involved will 
receive the benefit of the full $6,475,000.

Stuenkel, who became Foundation president in May 2000, said that the 
Foundation has changed the way it does business.

"The key change is that we've hired all outside investment managers," 
Stuenkel said.  When the losses were sustained, investments were handled by 
Foundation employees.

"No employee makes investment decisions," he said.  "And we've hired 
Wilshire & Associates, one of the leading national firms, as our investment 
consultant."

The losses and subsequent litigation marked a difficult time for the 
Foundation, Stuenkel said.  "The church isn't about litigation; it's about 
mission and ministry.  I'm glad that's what we can be about again."

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LCMSNews is published by the News and Information Division, Board for 
Communication Services, of The Lutheran Church--Missouri Synod.  Please 
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