PTL Seeks Help Under Bankruptcy Law

The Jim Bakker-founded PTL ministries, beset by scandal, deeply in debt and pursued by the Internal Revenue Service and the Justice Department, filed for protection under federal bankruptcy laws Friday, the organization’s new officers announced.

The announcement came one day after Jim and Tammy Bakker, whose free-spending style and sex-and-payoff scandal triggered the fall of their empire, received a frenzied welcome by supporters on a brief trip back to the ministry headquarters and theme park.

The new financial officers, who took over when Bakker relinquished control of the organization to the Rev. Jerry Falwell in March, said PTL was $70 million in debt, including $23 million in delinquent payments. But they insisted PTL was not bankrupt.

“This is not a sign of failure or shame,” declared PTL attorney Norman Roy Grutman at a televised press conference at PTL’s headquarters in Fort Mill, S.C. “PTL has assets far above its known liabilities.” PTL officers said assets are about $175 million.

Mismanagement Blamed

But Grutman blamed “chaotic mismanagement” under Bakker with bringing the organization to the point where it could no longer survive without protection under Chapter 11 of the federal bankruptcy laws.

Under those procedures, a bankruptcy court judge permits the debtor organization to suspend payments to creditors and prevents civil court actions from being taken against it. Meanwhile, the organization must file a plan with the court outlining how it intends to reorganize its finances and satisfy creditors’ claims.

Lisa Runquist, a Los Angeles attorney who specializes in practice with nonprofit religious groups, said it is not common for religious entities to seek protection under Chapter 11, but if large debts exist “that would be a very good reason for filing. . . . It would give them a chance to work things out without creditors breathing down their necks for a while.”

Depending on court-approved plans, debts are either paid in full under Chapter 11 procedures, or, more often, they are reduced and paid on a pro-rata basis, Runquist said.

If financial recovery under Chapter 11 cannot be accomplished in a reasonable time, a bankrupt organization may have its assets liquidated by the court under Chapter 7 of the Bankruptcy Act, Runquist added.

PTL board member Jerry Nims, who chairs Falwell’s Liberty Broadcasting Network, said financial records inherited by the new board from the Bakker administration were “atrocious. There were no checks and balances and no internal controls. . . . There was mingling of funds. We found major discrepancies in what . . . we had purchased and what showed up here.”

Grutman said Falwell, who was not at the press conference, had initially opposed seeking Chapter 11 protection but later agreed to go along with it “as the only responsible thing to do.” The petition was filed Friday afternoon in Columbia, S.C., Grutman said.

Business as Usual

PTL business operations will continue as usual, and its employees will be paid, the officers said. Also, under Chapter 11, television stations cannot cancel the PTL show because of past unpaid debts.

Grutman predicted the ministry would be out of court-supervised reorganization within 12 months.

The theme park’s Heritage Grand Hotel in Fort Mill will begin charging a 7% room-use fee to pay the state of South Carolina, Grutman said. The PTL owes the state $1.3 million for room use in the past, and a $300,000 state tax payment has already been made since the new officers took over, according to Harry Hargrave, the PTL chief executive officer.

Grutman accused Bakker of operating a “kind of Ponzi scheme” in which “millions of dollars” in $1,000 time-shares were sold to PTL “partners” in exchange for guaranteed “free” stays of several days a year at the hotel. But the existing rooms were oversold many times over, Grutman charged.

“The game has ended,” Hargrave said at the press conference. “We can’t build any more buildings to cover the past fiscal sins.”

Grutman said the only suit of consequence now pending against PTL is a claim for $14 million filed by Roe Messner, a Kansas City contractor, for projects at the still-unfinished Heritage Village USA, the PTL theme park.

“It was a handshake agreement. There was no bidding. There are incomplete papers and we couldn’t agree on a settlement,” Nims said.

More Problems

Other legal problems loom for PTL, which stands for Praise the Lord and People That Love. The Justice Department, the IRS and the Postal Service have all launched criminal investigations, including possible mail and wire fraud, Falwell has said.

The IRS has proposed lifting PTL’s tax-exempt status back to 1980 on grounds that the organization was used for the personal enrichment of the Bakkers and other top PTL officials. Chapter 11 reorganization won’t keep criminal investigations from going forward, however, according to attorneys familiar with bankruptcy law.

No mention of the bankruptcy court petition was made on the PTL television program Friday morning, but news of the plan reached crowds at Heritage Village only hours after the Bakkers had made a surprise visit to the facility. Cheering supporters mobbed their black Mercedes Thursday as it pulled in front of the hotel and Bakker shouted that he had returned to stay.

The defrocked Assemblies of God minister resigned in disgrace after admitting a sexual tryst in 1980 with church secretary Jessica Hahn, who received ministry funds on condition that she not talk about the incident.

In a high-stakes drama with soap opera overtones, Falwell and others later accused Bakker of homosexual activity and financial greed. The new officers have adamantly barred Bakker from returning to PTL airwaves and ordered the Bakkers to vacate by Monday the $1.3-million parsonage they have occupied in Tega Cay. The pair returned there Wednesday night after staying in semi-seclusion in their Palm Springs home since the scandal broke in March.

Return to TV Ministry

Bakker, who said Wednesday that he would return to an unspecified TV ministry “within 30 days,” has countered that Falwell stole the ministry out from under him and that Falwell had broken his promise to return control to Bakker after a “cooling-off period.”

“This is a free country,” Hargrave said Friday when asked if the Bakkers would be allowed to visit Heritage Village. “We welcome them back to this part of the United States. . . . They can come back any time as paying guests.” But he made it clear that PTL officials had no intention of letting them reside in the PTL-owned lakefront home.

The PTL officers said that while they did not yet have a reorganization plan prepared for the bankruptcy court, they did not expect to sell off PTL empire assets to satisfy debtors.

Nims predicted that, as a result of the reorganization, PTL “will emerge more stable, more financially sound and a better place for people who believe in it.”

But Arthur Borden, head of the Evangelical Council for Financial Accountability, a Washington-based agency that sets standards for Christian organizations, said that if Bakker succeeds in beginning a new, competing TV ministry of his own, “it would make it very difficult (for PTL) to get new money.”