RZIM: Why Fear Transparency?

Happy 2021? What a week. On the church transparency front, it’s been four business days since I wrote to RZIM asking for some documents that they are (1) required by federal law to provide on request and (2) required by their participation in ECFA to provide on request. I haven’t gotten a response.

This is frustrating but not particularly surprising. I’m not a donor who can withhold funds; I’m not a reporter who can publish an expose. They can ignore me. My hope is that journalists from credible outlets will follow up on these questions with RZIM.

It’s also frustrating because it would be so simple for RZIM to clear this up simply by responding. I understand that paperwork errors happen. I understand that miscommunications happen. “I thought you filed that?” “No, I thought you did?” Fine. It happens. The fastest and simplest way to resolve these things is to provide the correct documents so that any concerns or fears can be put to rest. I am so tired of Christian Boards hunkering down in image protection mode and refusing to communicate. I’m tired of Boards being so paranoid they treat the people who care enough to want them to do better like enemies. Help me help you, RZIM. I would love to be able to say, “No worries, here are the docs, everything looks to be in order.” But I can’t because RZIM is not disclosing the info it should be.

Here’s an example. There have been questions and concerns floated about money RZIM raised for a major building project in 2015-2017. Some people were suggesting that the amount spent was significantly less than the amount raised and asked where the difference went—could it have been used for lawsuits? Settlements?

I want to help you, RZIM. Questions are natural given the timing and circumstances, but if these fears are not supported by the data, then let’s put them to rest. I can rebut some based on the financial documents available up to FY 2016—which were a bear to find, by the way, thanks for that—the rumored amounts don’t line up with RZIM’s reported spending/finances, nor do they line up with externally reported values and generally known costs for this kind of project. The problem is I can’t say for sure without the FY 2017 and FY 2018 docs. Where are they? Just provide them! The reason people are suspicious is because you’re acting suspicious. If there’s nothing to hide, then don’t hide. Is this so hard?

tl;dr

This post really got away from me and I don’t have time to edit for length, so I will just post a summary of the most serious issues up front. Sorry.

  1. RZIM’s last filed form 990 is for 2014 (FY 2015, because of how the accounting dates line up). They applied for reclassification as a church in July 2018. There is a substantial gap between the two where they should have filed IRS Form 990s. Somebody needs to explain what happened here.

  2. RZIM’s secret Board and secret bylaws are iffy; but even moreso are the changes they made in to their restated Articles of Incorporation in 2018. They made RZIM nearly impossible to shut down—dissolution now requires a 90% vote of the Board of Directors, and with fewer than 20 directors, that means the vote must be unanimous or all-but-one. They also absolved themselves of liability for breach of duty of care—can Boards even do that?

The Board of Directors should be communicating. Delays pointing to the investigation being done into Ravi Zacharias’s sexual misconduct make no sense. These financial and governance issues have nothing to do with his sexual misconduct—unless you’re saying they do? Did you hide the financials because of his misconduct? I sure hope that’s not what you’re saying.

Here’s the 2018 Board of Directors who oversaw all this (sans Ravi himself): Peter Sorensen, Mo Anderson, Phyllis Beard, Margaret Zacharias, Christopher Blattner, Tony Cimmarrusti, Sarah Davis, Veronica Colondam, Stanley Foltz, Wee Tiong Howe, Paul Kepes, Darryl Lanker, William Payne, Chuck Zeiser, Casey Cook, John Diepersloot, Kenneth Gamble, and Beth Sankey. Sixteen of these were also on the Board in 2014-2015, or their spouse was. Even if a couple of these people have rotated off, this was the Board in charge for a very crucial period.

Why are disclosure forms so important?

Some background for those who are new to the world of non-profits and tax forms. In the United States, certain types of non-profit organizations don’t have to pay taxes. In return, they are restricted from some forms of political lobbying and they are required to file annual disclosure forms with the IRS. There are a couple variations on the form, depending on the size of the corporation; the version for small organizations with income <$50,000/year is the 990-N and is quite short. However, Form 990, which is required for larger organizations, contains a lot more information, such as:

These forms are very important and reveal information that is rarely found on an organization’s annual report to donors/members. That’s usually more of a pep talk / marketing document, with only very high-level financial breakdowns. The details found on the 990 are important information for accountability and transparency, which every Christian organization should welcome.

One downside, however, is that these forms are substantially delayed. Most organizations operate on a fiscal year (FY) that is offset from the calendar year. That makes dates very confusing. In RZIM’s case, their fiscal year begins on October 1 and ends September 30. (Fiscal years are usually referred to by the end year, but IRS forms refer to the beginning year.) Tax forms are not due until the 5th month after the end of the fiscal year. Then an organization can always get a 6-month automatic extension, and then it is often some more months before the forms are scanned by public sites like GuideStar. So for example, RZIM’s “2014” IRS filing is for their fiscal year beginning in 2014 and ending in September 2015; it wasn’t due to the IRS until early 2016. They actually filed it mid-2016 and then filed a (minor, as far as I can tell) amendment to it in early 2017. So if you’re looking for a nonprofit’s 990s online, it’s not unusual for them to be delayed by a year or two, or even more.

There is an exception to these disclosure requirements: churches and certain church-related associations are not required to file them. This is based on the separation of church and state principle. I personally disagree with this interpretation, but this is how it is. In the past several years, many Christian nonprofit organizations—which are definitely not churches—have been filing paperwork with the IRS to be reclassified as a church or association of churches for tax purposes, thus freeing them from the disclosure requirements. The IRS has been approving these applications, so it is perfectly legal.

What’s going on with RZIM’s IRS disclosure forms?

RZIM is one of these organizations. Its last filed IRS Form 990 was for 2014 (FY ending in 2015). A little aside on this one: I was a little confused about this filing because there are two versions of it floating around; ProPublica has both. I think what happened was they filed one in July 2016 (either late or with an extension), and then they filed an amended version in January 2017. The original filing has Capin Crouse listed as the paid preparer. The difference, according to the supplemental notes, is they amended Line 26 of Part IX (Joint costs, under expenses). The amended version has a much lower number ($929,853) vs the original ($7,304,590). Maybe they double counted some expenses the first time? Weird but probably nothing.

Anyway, back to the important part: RZIM did not file a Form 990 for 2015 (FY 2016, due early 2017); neither did they file one for 2016 (FY 2017, due early 2018). Instead, in spring 2018, they revised their Articles of Incorporation to call themselves an “association of churches” and then in the summer, they requested reclassification as such from the IRS. They received their approval in March 2019 and therefore did not file a form for 2017 (FY 2018, due early 2019). Since they have kept their non-profit status, it seems the IRS did not consider the failure to file for 2017 a third strike.

My question is: why didn’t RZIM file IRS forms for 2015 and 2016? RZIM was not yet reclassified as a church at that point, so it seems to me they should have filed them. It’s not clear to me that reclassification is retroactive. You could argue that maybe the form due in 2018 (for IRS year 2016) was a wobbler since they were about to begin the reclassification process, but the one due in 2017 (IRS year 2015) seems clear enough to me. However, the maximum penalty for failing to file is only $50,000:

In general, the maximum penalty for any return is the lesser of $10,000 or 5 percent of the organization’s gross receipts for the year.  For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000.

That’s nothing to RZIM, so perhaps they just paid it. We don’t know because the FY 2017 and/or 2018 statements aren’t available. Loss of tax-exempt status only happens after three consecutive years of failure to file, and RZIM reclassified the third year. Still, one would think incurring IRS penalties for failure to file required disclosures would tip off, say, the Evangelical Council for Financial Accountability? (RZIM has been an ECFA member since 1986.)

In any case, if this is indeed what happened, that would suggest RZIM deliberately planned to not-file their returns for two years and reclassify the third. Is this what their accountants/lawyers advised them to do? It seems iffy to me. Willful failure to file is frowned upon. But even if it is okay, I think donors have a right to know if this is RZIM’s approach to finances. If donors are comfortable with it, fine; if not, they can choose to allocate their money elsewhere. Is that so unfair?

Why is RZIM’s Board secret?

Let’s talk governance. I know, I know. It’s boring. The legalese documents make your eyes cross. But it’s also really important. These are important early warning signs when something is going wrong at an organization.

Any corporation registered in the US must have a Board of Directors. Being a Director of a nonprofit is not a figurehead position. Directors have serious legal duties. In particular, they are responsible for the organization’s financial integrity. They are required to show care; they are not allowed to “rubber-stamp” things. If you are ever asked to be on a nonprofit Board, take it seriously!

Most non-profits are required to file IRS Form 990s disclosing their Board members each year. Churches—and RZIM after reclassification—are not required to file this form, but many churches post their Elder Boards (another name for the Board of Directors) on their websites anyway. RZIM does not. Their public statements from the Board are not signed with names. Sometimes they sign off as the Executive Committee; we don’t know which Board members are on that.

Here’s what we do know: the Board had 21 names listed as officers in the 2014-2015 IRS filing (two names were partial years; some additional names were key employees but not on the Board). The Chairman of the Board was Ravi Zacharias. His wife, Margaret, was Vice Chairman. His daughter, Sarah Davis, was Executive Director. In 2020, Ravi’s daughter Sarah became the chair, according to an amended filing with Georgia. The CFO listed on the IRS form for 2014-2015 was Jeanette Chuquiure, but she was not on the Board; the Treasurer, a Board member, was Peter Sorensen. Both Jeanette and Peter have been listed as “CFO” on RZIM’s state filings in Georgia between 2014 and 2021, depending on the year.

By 2018, when RZIM reclassified as a church, the Board had shrunk to 19 people. (Usually nonprofit bylaws allow the Board to set its size, within limits.) 17 of these were either on the 2014 Board or a spouse of a 2014 Board member. (Aside: It’s not clear what RZIM’s term limits or qualification requirements are for directors. Of the two new directors, one, Beth Sankey, had been responsible for a $2.283M donation to RZIM in 2015—see page 17 of the Sankey Family Foundation 990-PF.)

The only reason we know about the 2018 Board is because RZIM had to file paperwork with the state of Georgia changing its governance in order to get the “association of churches” classification with the IRS. That paperwork required them to list the current Board. But there’s much more of interest in the paperwork, so let’s talk about it.

What is going on with RZIM’s governance?

It’s a bit odd for an organization like RZIM to have a secret Board. But that is only the beginning of the oddness. All corporations have two important governance documents:

  1. Articles of Incorporation
  2. Bylaws

Articles of Incorporation are normally filed with the state at the time of incorporation. RZIM’s history page says it was founded in 1984, and that is also the year ProPublica has for its receiving IRS nonprofit status. However, RZIM’s initial filing in Georgia (RAVI ZACHARIAS INTERNATIONAL MINISTRIES, INC. / #J608256) is from May 1986.

It’s unclear what’s going on here. Another website listed RZIM as registered in Colorado; it’s not clear to me where that data is coming from—it’s possible RZIM was registered there in 1984-1985 before moving to Georgia, but I can’t find any other evidence of this. The original IRS exemption application documents might fill in the gap (I requested them from RZIM, but they haven’t responded). The initial filing in Georgia in 1986 doesn’t say anything about a transfer. Who knows?

Moving on. Bylaws, by contrast, are usually kept with the corporation. I briefly looked around the websites of several large/mid-sized churches in my area. Some have secret bylaws (hidden even from members); others have hidden bylaws (not published but might be viewable by members on appointment); others publish their bylaws on their website. In my opinion, secret/hidden bylaws are a warning sign. What possible reason can there be for a church or parachurch organization to hide what should be a very boring legal document? It’s very relevant to donors and members of the corporation, and there’s no reason to hide it from the public, either.

RZIM’s bylaws are not posted anywhere. I requested a copy, but I haven’t gotten a response. My guess is they are secret. I’d love to be wrong.

It’s normal for organizations to update these legal documents once in a while to keep up with natural changes over time. RZIM updated their Articles of Incorporation for the first time in 2018. In this case, it seems clear the revisions were driven by their application for “association of churches” status with the IRS, which was filed a few months later in 2018.

Note that in Ravi Zacharias’s lawsuit against the Thompsons in 2017, he repeatedly stated that RZIM was not a church, he was not a pastor, and he was not in any kind of pastoral/counselor-style role over Lori Anne. And indeed, RZIM did not file any legal changes to its Articles of Incorporation until April 2018, after Ravi’s lawsuit had settled. RZIM’s 1986 Articles of Incorporation are public record, and so are the changes they made in 2018. Open those up and follow along, if you like. Note that page 7 of the 1986 Articles is missing, but we can still compare the rest. Drop me a note on Twitter if you see anything interesting I missed.

Article I. Name

No change here.

Article II. Authority

Where the 1986 version is a short sentence calling itself a Georgia nonprofit, the 2018 version has a lot more religious language, like, “The Association shall be governed according to the Holy Bible, and according to the religious beliefs of the Association,” etc etc.

Article III. Purposes

The Purposes were expanded to include “strengthening the Church of Jesus Christ and local churches” and “providing basic resources to the needy, and in particular women and children at risk, in the name of Christ”. This seems to me like a bit of churchy language and a bit of “better late than never” acknowledgement of the work RZIM had been doing since opening its Wellspring humanitarian branch in 2004.

They also went ahead and stated flat out: “The corporation is organized and operates as an association of churches as defined in Section 170(b)(A)(i) of the Code”. I guess that made the IRS reclassification pretty clear.

Article IV. Duration

No change.

Article V. Restrictions

Section 1 prohibiting private inurement is the same. The original Sections 2 and 3 about political lobbying were combined and the 2018 version added a clause about being allowed to use IRS Section 501(h) (a way of calculating how much lobbying spending is too much).

The 2018 version also added a new Section 3:

Irrevocable dedication. The income and assets of the corporation shall be irrevocably dedicated to its exclusive purposes.

I’m curious about this one. Why did they add this? Is this just boilerplate? Did they have a concern someone would try to use funds for something other than the stated purposes? From one angle, this could be a good thing—it prevents RZIM from using donor funds toward, say, legal fees.

Article VI. Directors

This section is fairly similar boilerplate except with some more religious language about not being allowed to do anything “inconsistent with the Holy Bible or the Statement of Faith.”

One interesting change is the 1986 Articles said new Directors would be elected by the previous Directors when vacancies opened; and that if they could not decide, the state of Georgia would. The 2018 Articles defer the election procedure to the bylaws. Most likely they revised their bylaws in 2018 as well, but that document isn’t filed with the state. I wonder if they changed how they select new Directors?

Importantly, this 2018 document lists the Directors by name. This is the only public disclosure of the Directors that I can find after RZIM stopped filing 990s. They were:

Ravi Zacharias, Peter Sorensen, Mo Anderson, Phyllis Beard, Margaret Zacharias, Christopher Blattner, Tony Cimmarrusti, Sarah Davis, Veronica Colondam, Stanley Foltz, Wee Tiong Howe, Paul Kepes, Darryl Lanker, William Payne, Chuck Zeiser, Casey Cook, John Diepersloot, Dr. Kenneth Gamble, and Beth Sankey.

Article VII. No Members

The 2018 clarifies that while the bylaws (unavailable) may have provisions for “membership” in the association of churches, such membership is not membership in the corporation and does not include any voting rights.

Article VIII. Powers

Looks like boilerplate on both to me.

Article IX. Dissolution

Here’s where things get interesting.

The 1986 version of the Articles allowed the corporation to dissolve and cease operations with a two-thirds vote of the Directors. Seems reasonable.

The 2018 version requires a 90% vote at a specially convened meeting. Look back at that Board of Directors list. It’s 19 people. This means to get a 90% vote you must have all but one director agree. Look again that that Board. Ravi Zacharias family members were three of the directors (Ravi, his wife Margie, and his daughter Sarah Davis). We don’t know who replaced Ravi—was it his other daughter Naomi? Even if not, there are at least two family members on the board. Effectively, anything that requires a 90% vote can be blocked by Ravi’s family.

I am not suggesting anything nefarious here. This is just a strange change, and I am very curious as to why it was made. It seems to me that in general, good governance should require independent members of the board enough to equal any voting thresholds. What do you think?

The liquidation provisions are standard nonprofit boilerplate, but the contingency section (Section 3) has changed. Previously, should there be trouble liquidating assets, the Georgia courts would step in to distribute assets in accordance with the corporations purposes. In the 2018 version, the contingency procedure is either specified in the bylaws; or if not, the Chairman of the Board—currently Ravi’s daughter—gets to decide. This seems a bit weird, but without seeing the bylaw procedure, it’s hard to say.

Article X. Contingent Restrictions

This is missing in the 1986 version but looks like boilerplate in the 2018 version to me.

Article XI. Office and Agent

This is just updating the address and lawyer/agent person.

Article XII. Statement of Faith

This is new in the 2018 version. I assume it is part of making them seem more like an “association of churches”? The actual text of the statement of faith is in the bylaws; presumably it’s the same as the statement of faith on the RZIM website. This Article is more about how the directors have to affirm it or resign; the corporation has to follow it, etc.

Article XIII. Limitation of Liability

This is new and very interesting. I’m just gonna go ahead and quote Section 1, emphasis mine:

The personal liability is hereby eliminated entirely of a director to the corporation for monetary damages for breach of duty of care or other duty as a director; provided that such provision shall not eliminate or limit the liability of a director: (i) For any appropriation, in violation of his duties, of any business opportunity of the corporation; (ii) For acts or omissions which involve intentional misconduct or a knowing violation of laws; (iii) For the types of liability set forth in Georgia code sections 14-3-860 through 14-3-864 as amended; or (iv) For any transaction from which the director received an improper personal benefit.

(For your reference, here’s the Georgia code being referenced—it’s about conflicts of interest.)

What the… did they really just do that? Are they allowed to do that? The whole point of a Board of Directors is that they have various fiduciary duties to the corporation and its members and the public. They just… indemnified themselves of any sort of negligence/lack of oversight claim? Only intentional misconduct and knowing violations count now?

The rest of the article clarifies this limitation of liability isn’t retroactive (doesn’t apply prior to these revisions); and it says if they repeal this limitation in the future, that won’t be retroactive either.

I would really be interested in hearing a lawyer’s opinion on this.

Appendix: Documents

I have mentioned a lot of documents and public records in this post, so for convenience I’ve listed them with links below.