May 14, 2002
All parties settle LCMS Foundation-loss lawsuits

By David L. Mahsman

All parties to two lawsuits that involved the LCMS Foundation and the investment losses it sustained three years ago reached a preliminary settlement April 25.

Foundation President Mark Stuenkel announced that the Foundation will receive $9,675,000 from "all potential sources."

"This is a global settlement from several sources," Stuenkel said.  "The Foundation will not be involved in any further litigation on these matters."

Because of provisions of certain of the settlements, the amounts and sources of specific settlement payments cannot be disclosed, according to Synod and Foundation legal counsel Leonard Pranschke.

"I'm very glad that we're able to get these matters resolved," Stuenkel added.  "It's good that the Foundation can now move forward with its mission: `Linking Christians with giving opportunities.'"

The $9,675,000 to be received by the Foundation is about a fourth of what is estimated to have been lost on investments in 1998.

In June 2000, the Foundation filed suit in federal District Court in St. Louis based on such losses against Vining-Sparks, the broker that sold the Foundation the investments -- mortgage-derivative securities -- that resulted in the losses.

Then, in September 2000, a class-action suit was filed in St. Louis County (Mo.) Circuit Court against the Foundation, Vining-Sparks and certain individuals by 15 persons who claimed an interest in assets held in Foundation fixed-income portfolios.

The $9,675,000 in payments resolves all claims, including both lawsuits and other claims that were settled without litigation.  The lawsuit settlements are still considered tentative, however, because final approval of the class-action settlement requires giving notice to the class and a hearing, which is now scheduled for Aug. 15 in St. Louis.

Of the total recoveries, $3.2 million will be passed on to the class members in the class-action suit.  After they pay their attorneys, the balance will be allocated to the class members on a proportionate basis.  Funds either will be put back into the unitrusts or will go to the Pension Plan for Pastors and Teachers pre-retirement account owners who suffered losses.

"The plaintiffs in the class- action suit will get the income stream from the replenished unitrusts, and the money will eventually be available for ministry," Stuenkel said.  "Also, PPPT account owners who shared in the losses will receive a portion of the settlement, giving them more for retirement."

The remaining $6,475,000 from the settlements will be distributed among the Synod entities -- Lutheran Church Extension Fund, Concordia Publishing House and others -- that sustained losses on their investments with the Foundation.  Stuenkel said the Foundation will pay the attorneys' fees associated with these recoveries so that the Synod entities involved will receive the benefit of the full $6,475,000.

Stuenkel, who became Foundation president in May 2000, said that the Foundation has changed the way it does business.

"The key change is that we've hired all outside investment managers," Stuenkel said.  When the losses were sustained, investments were handled by Foundation employees.

"No employee makes investment decisions," he said.  "And we've hired Wilshire & Associates, one of the leading national firms, as our investment consultant."

The losses and subsequent litigation marked a difficult time for the Foundation, Stuenkel said.  "The church isn't about litigation; it's about mission and ministry.  I'm glad that's what we can be about again."

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LCMSNews is published by the News and Information Division, Board for Communication Services, of The Lutheran Church--Missouri Synod.  Contact Joe Isenhower via e-mail at joe.isenhower@lcms.org , or by phone at (314) 996-1231.  

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