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Church Foreclosure Looms, as Pastor Accused of Squandering $500k

Fifth Third Bank cites material adverse change in church's finances

March 24, 2004


It's not every day that a shoving match breaks out in the balcony of a Baptist church.

But it's not every day that a bank threatens to foreclose on a church.

Yet that's the situation at First Baptist Church of Cold Spring, Ky., a suburban Cincinnati congregation that has become a house of worship divided over finances and questionable spending by the church's pastor.

"You know who's fault this is?" an elderly woman said through tears after a recent shouting match broke out in the church's sanctuary. "Satan."

Fifth Third Bank of Cincinnati called the church's $4 million mortgage loan after citing "a material adverse change" in the church's financial condition. The bank was concerned that money in a church construction account was -- according to church records -- being spent at casinos, Internet gambling Web sites and betting services, hotels, restaurants and trendy retailers such as Macy's and Filene's Basement.

More than $100,000 in checks were written to "cash" and to Pastor Larry Davis, who until recently controlled the construction account. Another $14,000 was withdrawn at automated banking machines at thoroughbred race tracks.

All told, the bank is questioning more than $500,000 in spending.

"The borrower has engaged in false, misleading and materially inaccurate representations when it certified that the proceeds of the loan were to be used solely for construction of improvements on the real estate securing this note," lawyer Alan J. Stratman wrote on behalf of the bank in March 10th letter to the church's attorneys.

"If payment arrangements are not made ...we will recommend to the bank that it exercise all legal rights to collect the entire balance owed," Stratman wrote.

The bank has already allowed a couple of deadlines to pass and has not yet followed through on its threat to foreclose. First Baptist trustee Rob Moore said in an interview that the bank will back off if the church puts up an additional $800,000 in collateral and allows the mortgage payments to be directly withdrawn from the church's bank account.

"We'll get this worked out," said Moore. "It's a power struggle."

But a criminal investigation has also been launched.

The Kentucky State Police and a Campbell County, Ky., grand jury are investigating. Police have searched Davis' church-provided home while authorities are combing through boxes of church records.

Pastor Davis has not been charged or even named as a suspect. He has not specifically addressed questions about the spending other than to say at a recent press conference in his lawyer's office that eventually everything will be explained.

Moore said Davis was owed back pay and other compensation, but he also would not elaborate.

Meanwhile, the situation has divided the suburban Baptist church of about 1,500 members.

A group of about 200 members, including a number of deacons and church trustees, who believe Davis is at fault recently began attending services at another church. During a contentious church business meeting those dissidents were ousted by a vote of members from their leadership posts and replaced with people generally supportive of Davis.

It was during that meeting that shouting matches and a shoving match broke out.

Concerned that the church broke its own bylaws by ousting leaders the church's lawyers quit. Breaking the bylaws could give the bank more cause to call in the mortgage loan, the lawyers said in a statement.

Others in the church are calling for calm.

"We need a healing process to get us back on track to what we should be about," member Don Willig said as he recently addressed about 200 members of the congregation. "What we really need now is to come back together and heal. We're here for the Lord because he is here for us."