Wednesday, December 21, 2016

Megachurch Blasted By Charity Commission For Losing £3.9m In 'High Risk' Investments

A megachurch based in Kent has come under fire from the Charity Commission over millions of pounds of unauthorised investments made by a trustee which "appeared to be speculative and high risk in nature".

Though he is not named by the Commission, the trustee in question was Richard Rufus, the former Charlton Athletic footballer who was sacked by the club in 2015 and criticised by a High Court judge after he was revealed to have orchestrated fraud with £16 million from investors including family, friends and churches.

One of the churches was the Kingsway International Christian Centre (KICC) which was initially investigated in 2011 by the Commission.  

The Commission released a report today which found that £5 million of the church's funds were invested, resulting in a net loss of £3.9 million.

"The Commission liaised with the then Financial Services Authority and established that the individual [Rufus] was not authorised to carry out regulated activities (such as dealing in or managing investments). This raised serious concerns as the charity had made substantial investments through the individual which appeared to be speculative and high risk in nature," the Commission said.

"The Commission's inquiry established that the trustees who were in place at the time had invested a total of £5 million of the charity's funds, which subsequently resulted in a net loss of £3.9 million to the charity."

The church is accused of "mismanagement". 

The Commission report concludes that "the trustees who made the investment were responsible for mismanagement in the administration of the charity."

The Commission's conclusions include that the trustees who were in place at the time of the investment failed to: "exercise sufficient care when making the decisions to invest £5 million of the charity's funds through the trustee's investment scheme; ensure they were sufficiently informed and take into account all the relevant factors - they could not show that their decisions were based on sufficient and appropriate evidence particularly as they did not seek proper independent advice on a high risk, high value investment scheme; manage conflicts of interest when making the decision to invest - there was too much reliance on the expertise of the trustee when he was personally interested and conflicted in the decision to invest charity funds through the trustee's investment scheme."

Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said: "This case is a reminder that trustees must ensure that they do not permit any personal associations to interfere inappropriately with their judgement as charity trustees and that any decisions they make are in the best interests of their charity. When trustees are considering a high risk decision, particularly one involving significant sums of money, they should take independent professional advice from properly qualified persons to ensure that they are not exposing the charity to significant risk. Donors and beneficiaries have a right to expect trustees to take appropriate steps to protect property of the charity.
"We make clear in our policy and guidance that where trustees are reckless and make poor decisions that are not in the best interests of the charity and result in significant losses, the Commission will ensure that they are held to account."

In a statement issued to Christian Today, KICC acknowledged "the seriousness of the mistake that was made".

The church said: "The current trustees accept the Report of the Commission and acknowledge the seriousness of the mistake that was made. The trustees at that time believed they were acting in the best interests of the charity and have not benefited personally. We are speaking of events that happened seven and a half years ago. None of the current trustees were involved in the decision making regarding the investments with the now ex-trustee. Since then, we have worked with the Commission, and our professional advisors, to put robust controls in place that would prevent any re-occurrence. With the benefit of hindsight it is clear that the former trustees' decision to invest was not a prudent one. The Charity has since continued to operate and successfully carry out its charitable objectives to the community and looks forward to continuing to do so."

Since 1992 KICC has grown from an initial membership of 300 people to a congregation of several thousand at its headquarters church.

In addition the church has some twenty branches mainly around the M25 including Luton, Bedford, Birmingham, Bristol, Oxford, Manchester and its French-speaking church, which holds services at a separate location in Hackney.

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