Windermere ‘for sale,’ MBC seeks injunction
By Don Hinkle
December 13, 2005
JEFFERSON CITY – Last month Windermere Chairman Arthur Mallory denied that Windermere was selling any of its real estate. Now he has admitted that some of its real estate is for sale to private developers to build houses, condos and retirement units at the troubled Baptist conference center in Camden County.
At their board meeting on Nov. 17, Windermere trustees disclosed that they have incurred $21 million of debt as of the end of 2004, and announced the sudden departure of Frank Shock from his chief executive officer (CEO) duties.
These revelations prompted Missouri Baptist Convention (MBC) lawyers to seek “emergency discovery” in the Cole County court action, and an injunction to stop the sale of any real estate formerly owned by the MBC,
According to a Word & Way story posted on its Web site Dec. 1, Mallory was asked by a trustee Nov. 17 “if selling some of Windermere’s property was an active consideration.” Mallory said no, that property would not be sold, because that would “disrupt development plans” under the master plan, which was 5-10 years old. “This [expansion] was not a Johnny-come-lately decision,” he said.
The next day, on Dec. 2, Mallory reportedly had a phone conversation with Word & Way to “clarify” his comments. In an on-line story dated Dec. 7, Mallory said some Windermere property will be sold to private developers for residential development, and that this has been part of the master plan all along.
“We hope people who buy will use Windermere as a place to volunteer,” Mallory was quoted as saying.
The news articles did not identify the trustee who asked the question on Nov. 17, nor explain how the trustee could be unaware of the master plan to sell lots, if in fact it had existed for at least five years or more.
On Dec. 6, MBC attorney Michael K. Whitehead filed a motion for “emergency discovery,” telling the court that financial revelations about Windermere may require an injunction to protect its assets. The hearing on that motion has been set for Dec. 15 before Judge Tom Brown in Cole County Circuit Court. Whitehead told The Pathway a hearing on the injunction to stop the sale of any Windermere real estate would be scheduled after the emergency discovery was completed.
“We knew they felt desperate when they tossed Frank Shock overboard,” Whitehead observed, “but now they seem willing to take the ship down with them, in the sea of red ink they created.
“We will ask the court to stop them, to protect the land that Missouri Baptists worked so hard to acquire and which has been dedicated to ministry.”
Financial information about Windermere was contained in Internal Revenue Service Form 990 for 2004, a public record required from tax exempt non-profits, obtained by The Pathway. Signed by Shock on Nov. 15, 2005, it showed Windermere had an operating deficit of $2 million, and a total indebtedness of $21 million at the end of 2004.
The financial disclosures came amidst news of the Nov. 17 departure of Shock from daily operations. Shock continues to hold the title of president and chief executive officer until a replacement is found, but apparently does not retain any of the duties of either office. He has headed Windermere since Dec. 1, 1989.
Mallory told Word & Way in announcing Shock’s departure that Shock was “the face of Windermere.” Mallory went on to say how Shock and his late wife, Barbara, left their “thumbprints and fingerprints” all over Windermere, noting how Barbara Shock had directed the interior design work for several buildings at the facility.
Shock told the newspaper, “I am pleased that we have worked out an ending that is good. You know when it’s your time.”
Mallory’s accolades to Shock mention that he presided over a period of growth, but do not mention the growth of the Center’s debt under Shock. Windermere reported $13.6 million of loan debt in 2003, according to the Form 990, which grew to $19.5 million in 2004.
The motion for emergency discovery, set for hearing on Dec. 15 at 9 a.m., asks the judge to allow MBC attorneys to re-depose Mallory and to depose a bank representative from Allegiant Bank (now National City Bank) in St Louis, which loaned Windermere the money and mortgaged its property.
The motion reminds the court that the MBC seeks the return of the real estate that was transferred to the breakaway board: 1,300 acres of shorefront property at the Lake of the Ozarks. The actions by Windermere trustees appear to be calculated to laden the property with a “lethal debt load,” so that MBC cannot afford to recover the land, according to the motion.
“We will ultimately ask the court to cancel the mortgage of Allegiant Bank when Windermere is returned to MBC,” explained Whitehead. “The bank had notice before it loaned the money about our lawsuit claiming that the breakaway board lacks legal authority to mortgage the real estate. When the court nullifies the breakaway board, it should also nullify the bank loan and mortgage.”
Breakaway trustees for the center told Word & Way after the Nov. 17 meeting that they had a plan to refinance the embattled agency’s debt, which would reduce the principal from $21 to $14 million. They did not explain how they would pay down the debt, but they did mention a possible sale of bonds. The trustees also announced that they had agreed to pay an out-of-court settlement of $600,000 to a contractor, Hicks Construction of Niangua. Hicks had filed a lien for more than $400,000 against Windermere after the center failed to pay the company for its work on the controversial Wilderness Creek expansion project that began in 2002.
Windermere’s financial trouble began in 2001 when renegade trustees violated Missouri corporate law by amending their charters to become self-perpetuating, without MBC approval. That action set into motion a legal battle with the MBC that includes four other agencies – Word & Way, The Baptist Home, Missouri Baptist Foundation and Missouri Baptist College – who also amended their charters without MBC approval. The five agencies have assets totaling more than $240 million.
Shortly thereafter Shock and the trustees embarked on an aggressive expansion project known as Wilderness Creek. Financing for the massive project collapsed into chaos in 2002 when angry contractors started filing liens for work for which they were not paid. Windermere secured financing for Phase 1 in 2003, landing an $18.75 million loan from Allegiant Bank. The bank made the loan despite warnings from MBC attorneys who wrote a letter to the bank warning that the center was embroiled in litigation. The Allegiant loan enabled Windermere to compensate the angry contractors and all but one (Hicks) dropped their liens.
An analysis of Windermere’s Form 990s from 2002 through 2004 shows that business has remained flat with receipts totaling $3.15 million in 2002; $2.93 million in 2003; and $3.11 million in 2004. But expenses rose every year during that period, from $3.9 million in 2002 to $5.27 million in 2004, shackling the center with additional debt that grew from $750,482 in 2002 to $2.16 million in 2004. Net assets over the same period plummeted from $2.38 million in 2002 to $451,138 in 2004.
Details were not disclosed regarding the renegade trustees’ plan to refinance Windermere’s debt. News reports suggested that a new loan was obtained for $14 million, with a plan for sale of public bonds to fill the gap. MBC leaders are concerned the bonds may be peddled to unsuspecting Southern Baptists throughout the state, who may wind up losing their money, either due to court action or to financial problems at Windermere. The admitted land sale may also be a source of funds which is expected to pay down the indebtedness.
In a related development, lawyers for the Word & Way threatened to sue the Executive Board for “tortuous interference with a contract or business relationships.” Attorney Jim Shoemake, in his letter dated Nov. 23, complained about a Convention motion in October which objected to recent advertising placed in the Word & Way by three agencies related to the MBC. The Convention directed MBC Executive Director David Clippard to write the three agencies – LifeWay Christian Resources, Guidestone Financial Resources and the Missouri Baptist Credit Union—to ask them to stop advertising with Word & Way. Shoemake’s letter was sent to Whitehead, who replied in a letter to Shoemake that the threat was baseless and the MBC letter was justified.
“The Convention has every right to ask these sister agencies not to patronize the breakaways,” Whitehead said. “The prodigal paper has no reason to expect the Baptist family to patronize it, until it comes back home.”