‘Outside threats’ may have pressured Missouri Baptist Foundation trustees into becoming self-perpetuating
By Bob Baysinger
November 4, 2003
JEFFERSON CITY – The Missouri Baptist Foundation (MBF) may have been pressured into changing its charter to break away from the Missouri Baptist Convention (MBC) in 2001, The Pathway has learned.
Deposition testimony has revealed that MBF President James Smith received warnings of possible lawsuits against Foundation trustees if the Foundation failed to take action to prevent changes in composition of its board. One of the warnings was delivered by Larry Johnson, chief executive officer, The Baptist Home, who couched his concern in terms of fiduciary duty of Foundation trustees to protect The Baptist Home and its donors from “outside threats" to change the Foundation board.
Smith defined “outside threats" as “an atmosphere that appears to some to threaten the control of the Foundation …" and “a reference to various factions and various groups active at that time as well as nominating committee changes."
The Baptist Home was the first MBC agency to withdraw from the convention by changing its corporate charter on Sept. 12, 2000 . At the same meeting, The Baptist Home trustees voted to form a new foundation for The Home and to transfer endowment funds valued at $16-28 million, to their newly created foundation.
The MBF followed The Baptist Home’s example in 2001 in changing its charter to prevent the MBC from electing its trustees, along with Word & Way, Windermere Baptist Conference Center and Missouri Baptist College .
The MBF’s dilemma came to light in August when MBC attorneys deposed Smith as part of the convention’s request for a declaratory judgment against the five agencies. Cole County Circuit Court Judge Tom Brown is being asked to determine if the five agencies violated state law by changing their corporate charters without approval by the MBC.
According to deposition records, discussions about other lawsuits against the MBF arose when Johnson paid a visit to Smith’s office in 2001.
At his deposition, Smith described his meeting with Larry Johnson.
“Larry Johnson came to me as CEO to CEO, as friend to friend, as client to Foundation president," Smith said. “I think all of those elements are in our relationship. (He) expressed concern of The (Baptist) Home because of its valuable assets that they depend upon for all of the benevolent care, that there was concern in their board related to any changes that would be forced on the Foundation by any active group."
Smith added that he did not perceive the conversation as a threat from Johnson.
“I did understand his concern and we did talk about the possible exposure of trustees and individuals and the possibility of lawsuits if trustees did not act responsibly," Smith said. “His primary concern was (that) the quality of services at the Foundation not be diminished."
Smith explained that he interpreted Johnson’s concern to be connected to perceived changes that would be imposed upon the MBF board.
“Is it fair to say that you thought a lawsuit might be possible against the Foundation based on the communications you had had from Larry Johnson …?" asked Stan Masters, MBC attorney.
“I felt like people were talking about it. . .," Smith replied.
Smith shied away from linking Johnson to a threatened lawsuit, but Masters pointed out that Smith had also received an anonymous letter warning about possible lawsuits by investors. He indicated that the letter had nearly the same content as the conversation he had with Johnson.
“…I know they (the letter and the conversation with Johnson) were similar . . .," Smith said.
Smith explained that he never thought that Johnson was the author of the anonymous letter.
Smith said Johnson did not suggest during the meeting that the MBF consider creating a self-perpetuating board of directors and did not suggest any actions that the MBF should take to protect against outside threats.
“But did he suggest to you any actions that the Foundation should take to protect against outside threats?" Masters asked.
“No," Smith replied. “The visit was an expression of his concern about our board and that we be aware and have the same concern."
Masters decided to try the lawsuit question one more time.
“Did he raise in his conversation with you the idea that lawsuits might be filed – lawsuit or lawsuits might be filed against the Foundation?" Masters asked.
“Yes," Smith answered.
“Those were his words?" Masters asked.
“I don’t remember the exact words. I remember the idea of we can get sued … . I don’t know that the word ‘lawsuit’ or being sued came up. It was the idea of there’s exposure, there are people with expectations that could lead to litigation."
“So the notion of litigation came up in your meeting with Larry Johnson?" Masters asked again.
“In my mind," Smith said.
Smith confirmed that Johnson had informed Smith, on advice of Johnson’s attorney, that the failure of the Foundation to protect against outside threats would lead to a lawsuit against the Foundation and personal lawsuits against trustees and officers.
Smith was on the witness stand for most of a day. During testimony he talked about the MBF having a fiduciary duty to clients.
“We had clients calling saying, ‘What’s going to happen to mama’s trust? … . Will you be directed that you cannot continue to give it to this account or that?’ We tried as best as we knew how to explain to our clients," Smith said. “The bottom line is there was a great deal of concern at our board."
Masters asked about a charter change by MBF in 1994, and Smith agreed that Convention approval was obtained. In 2001, Smith did not communicate with the Executive Board in advance about proposed charter changes. When Masters asked why charter changes were handled differently in 2001 than they had been in 1994, Smith admitted it was because of the “threat" of “Project 1000." Project 1000 was the five-year effort by Missouri Baptist conservatives to steer the state convention away from a theological center-left position back to theological center-right position.
“There was a threat both real and perceived, I believe, by public statements, by statements made in public meetings, by private statements, conversations that went on with me and our staff," Smith said. “And for a long time I would say, ‘no problem.’ We have always worked with whoever’s in leadership; we’ll continue to do so."
Noting Smith’s use of the word “perceived," Masters asked:
“While this threat you may have perceived from Project 1000 or others, at the end of the day you were still able to work with the nominating committee and get many – if not all – of the nominees that you wanted for your Foundation board, weren’t you?"
“Yes," Smith replied.
And Masters also wanted to know about fiduciary responsibility.
“Is the Missouri Baptist Convention or the Executive Board of the Missouri Baptist Convention among those you consider your clients? …So you owe a fiduciary duty to the Executive Board?" Masters asked.
“Yes," Smith said, “we do."