PART 2. RESEARCH GUIDE TO MARS HILL CHURCH ORGANIZATIONAL/INSTITUTIONAL ISSUES
Part 1. Research Guide to Mark Driscoll’s Personal Issues
Part 2. Mars Hill Church Organizational/Institutional Issues
- Part 2A. Five types of organizational forms found in “Mars Hill.” Official source links and summary profiles.
- Part 2B. General background on top legal problems for non-profits.
- Part 2C. Five potential legal/ethical problems: inurement; misappropriation of funds solicited with a specified designation; spoliation of evidence; constitution, bylaws, and board structure; and conflicts of interest.
Capstone Article 2 – Some Words for Discernment for Those from Mars Hill
Capstone Article 3 – Answering the Original FAQ List About Mark Driscoll and Mars Hill
Part 2C. Five Potential Legal/Ethical Problems for Mars Hill Church, Mark Driscoll, and Its Other Leaders
Step 3 – Tutorials for Five Core Problems with Mars Hill Church
The deeper I study into what the IRS, non-profit consultants, and researchers list as top legal problems that put tax-exempt status at risk (see Part 2B), the starker my questions about the Mars Hill Church complex. Have their leaders’ ongoing patterns of actions and inactions demonstrated they’ve already succumbed to some of those issues? Are they doing these unethical and possibly illegal things because of blind spots – or with eyes wide open?
I keep unearthing evidence that suggests five of the more common non-profit issues may jeopardize their status:
- Inurement – misusing a public non-profit for private benefit.
- Misappropriation of restricted donations that were solicited for a designated project.
- Lack of transparency including intentional obfuscation or alteration of evidence.
- Governance policies and practices.
- Conflicts of interest especially by board members and employees.
Could it be that the longer Mars Hill leaders fail to respond to such challenges, the stronger case they make for the “reasonable belief” standard the IRS needs to conclude that such allegations as might be filed against Mars Hill MAY indeed be true? If they do, that could therefore lead the IRS into potentially pursuing an investigation. And that in turn could potentially lead to loss of tax-exempt status.
My Perspective: Frameworks for Research and Interpretation
However, keep in mind that this series is meant to be a Research Guide with constructive study resources, more than just a sharing of my conclusions as a substitute for others doing their own homework. These are tutorials, and are designed for self-study. Don’t expect to zoom through these all at once, as the concepts they address are dense and intense – but essential to interpreting what may have gone on, and may be going on, with Mars Hill Church.
I have focused on finding facts that help discern and interpret, to move from the “what” of facts to the “so what” of their significance. But I will not be providing an exhaustive presentation of my research on each issue. Nor will I provide a catalog of relevant online posts, maybe just a representative few DIY research posts so you can see for yourself how important it is to be have these issues on our radar.
Also, you’ve perhaps noticed a lot of “hedging” language: “It seems like … allegedly … might have been … could be problematic … potentially …” That is because I am expressing opinions from applying research and critical thinking skills. I may be proven wrong on many points, but hopefully it is clear that I am doing my best to dig deeply, understand broadly, and interpret this complex situation wisely as possible.
In this post, we transition from the big picture down to even more detail on a few very specific issues. These are ones that I believe may carry the most weight in terms of allegations about how Mars Hill Church and its leaders have operated. I believe they could be ones that are serious enough to lead to official investigations
But, whether there’s an official investigation of Mars Hill Church et al by the IRS or Washington state agencies is not the only possibility. From as much research and analysis of the history, documents, and reports as I’ve been able to absorb, these five issues seem to me absolutely essential to fix, if Mars Hill is going to turn away from being what appears to be a highly toxic environment to serve in or to support. In my opinion from all I have studied and seen, Mars Hill lacks adequate levels of transparency, accountability, and taking responsibility for their harmful actions/inactions. All of that just might mean that the most appropriate solution is to completely shut it down. (I’ll save for another post what I think should be the guiding principles for deciding what to do with a troubled organization, and my thoughts about an evaluation plan for Mars Hill Church in particular.)
Some Final Notes
As a reminder, the issues in this post are more about the organizational system and how it’s run, rather than the personal issues of Mark Driscoll and/or other Executive Elders, Board of Advisors and Accountability members, and Mars Hills pastors. Some elements involve ethical issues, some legal, some a mixture of both.
These all relate directly to the larger question of whether Mars Hill is truly functioning “in the public interest” – as the IRS requires of tax-exempt non-profits – or whether it has succumbed to benefitting insider individuals and related entities, such as the various LLCs and trusts laid out in Part 2A.
And with that, now on to the tutorials with summary descriptions of five key issues and some suggestions of how they relate to the Mars Hill Church organizational complex.
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Key Points and Significance
Non-profit corporations gain IRS tax-exempt status in part by functioning in the public interest. If they change into operating instead for the private benefit of inside members or related organizations, that is called inurement. In extreme cases of inurement, the organization looks more like a sole proprietorship business than a non-profit enterprise. Activities that can turn out to be inurement may involve misuse of the tax-exempt organization’s property, money, credit, goods, services, facilities, compensation, reimbursement of expenses, or other assets transferred to or benefiting individuals. Inurement is illegal. It can also lead to the IRS revoking the privilege of tax-exempt status.
Detailed Description and Examples
Inurement/Private Benefit – Charitable Organizations. Here is a short definition from the IRS. Quote:
A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization. (Page Last Reviewed or Updated: 14-Mar-2014)
Section 310 Principles of Private Inurement. Read the following quote. Then I’d suggest reviewing the rest of Sections 311 Origin Summary of Doctrine, 314 Private Inurement: Scope of Proscription, and 315 Emphasis on Compensation. Then select a few of the one-paragraph examples. Example 313-J could be of particular interest. Quote:
The concept of private inurement, while lacking precise definition, is broad and wide-ranging. The word inure means to gravitate toward, flow to or through, or transfer to something. The term private is used in this setting to mean personal benefits and other forms of nonexempt uses and purposes. Consequently, the private inurement doctrine forbids
- the flow or transfer of income or assets of a tax-exempt organization (one that is subject to the doctrine) through or away from the organization, and
- the use of this income or assets by one or more persons associated with, or
- for the benefit of one or more persons with some significant relationship to,
- the organization, for nonexempt purposes.
From Section 314 Private Enurement: Scope of Proscription. Quote:
The concept of private inurement has many manifestations. While the most common example is excessive compensation, there are several other forms of private inurement, including sales of property, and transactions involving lending and rental arrangements. Although the concepts of private inurement and private foundation self-dealing are by no means precisely the same, the following summary of self-dealing transactions offers a useful sketch of the scope of transactions that may, in appropriate circumstances, amount to instances of private inurement:
- Sale or exchange, or leasing, of property between an organization and a private individual
- Lending of money or other extension of credit between an organization and a private individual
- Furnishing of goods, services, or facilities between an organization and a private individual
- Payment of compensation (or payment or reimbursement of expenses) by an organization to a private individual
- Transfer to, or use by or for the benefit of, a private individual of the income or assets of an organization (see IRC §4941(d)(l)(A)-(E)).
Section 315 Emphasis on Compensation. Quote:
The payment of reasonable compensation by a tax-exempt organization for services rendered does not constitute private inurement. (A tax-exempt organization subject to the private inurement doctrine may pay compensation to an employee in the form of a salary, hourly wage, bonus, commission, and/or the like, or make payments to a vendor, consultant, or other independent contractor.) Conversely, excessive compensation can result in private inurement […]. Whether the compensation paid is reasonable is a question of fact, to be decided in the context of each case. […]
The StartChurch website has a 2014 article by Raul Rivera on “excess benefit” transactions, which is one of the key forms of inurement. See Federal Law Disqualifies Church Leaders. He notes that, according to U.S. Code Section 4958 – Taxes on excess benefit transactions, certain people are disqualified from making decisions on transactions that benefit insider individuals. “Under the law, a disqualified person is anyone who is in a position to exercise substantial influence over the affairs of the organization.” These include board members and pastors.
Evangelical Council for Financial Accountability (of which Mars Hill Church is a member) – see ECFA Standard 3 – Financial Oversight and ECFA Standard 4 – Use of Resources and Compliance with Laws. Related to possible unethical behaviors related to Mars Hill and Real Marriage, see the ECFA Advisory Opinion page, the section on Product Procurement.
This important article on Church Exemption from Form I-990 by lawyer Laura Umetsu examines the issue of churches not being required to submit IRS Form I-990 (though other non-profits are), why that has happened, and how this lack of transparency and accountability creates significant potential for private inurement by church leaders. She makes both legal and practical arguments for why churches should no longer be exempt from this IRS regulation, and suggests reasonable and relatively elegant solutions for fixing the underlying legal structures in this complex problem.
In Money Over Mission, investigative reporter Becky Garrison provides a good companion piece to the article by Laura Umetsu. [Go to that link to view the article. To download a PDF, click on money-over-mission File link on the left-hand navigation bar.] While Ms. Umetsu covers the overarching legal issues of churches potentially skirting the intent, rules, and regulations for non-profits; Ms. Garrison addresses this specifically with what has happened at Mars Hill Church and why their antics make a good case for fundamental change in the legal structure for religious non-profits.
Inurement – Potential Application to Mars Hill
Key issues that have been mentioned related to Mars Hill Church where allegations of inurement may possibly be a factor include the following.
Total compensation package for Executive Elders, and whether any of those constitute “excessive compensation.”
Compensation for Board of Advisors and Accountability members.
The use of tax-exempt donations given to Mars Hill Church, to pay a $200,000+ contract with ResultSource Inc. to ensure the book Real Marriage written by Mark and Grace Driscoll would achieve New York Times Bestseller List status, leading to larger levels of sales and royalty payments.
Even though promises were made that royalties on certain sales of the book would be donated back Mars Hill Church, there seems to be the appearance of using church funds almost as the equivalent of a “loan” to cover the ResultSource Inc. contract – and if donations by the Driscolls to Mars Hill were considered repayment, one form of inurement is lack of timely repayment of a loan. [Paragraph 314.2. Quote: The “very existence of a private source of loan credit from an [exempt] organization’s earnings may itself amount to inurement of benefit.”]
Explore Articles on Mars Hill Church and Inurement
For issues of personal benefit to Mark Driscoll, see Warren Throckmorton’s blog and the tags on:
For issues related to excessive compensation to executive elders, see Warren Throckmorton’s blog and the tags on:
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Restricted/Designated Solicited Funds
Key Points and Significance
In standard accounting procedures for non-profits, if a church designates a fund when soliciting donations for it, these are restricted and must be used for the purpose stated – unless there is a clear statement at the time of solicitation that the organization retains the right to use these donations for other purposes at their discretion. Otherwise, the church needs to contact each donor and either request permission to use the money for the unrestricted funds (General Fund) or other purposes, or return the donation. Failure to follow these procedures is misappropriation of funds with solicited designations. It is both unethical and illegal.
Detailed Description and Examples
There are at least four main issues involved in understanding misappropriation of restricted donations:
- The difference between donations with solicited designations versus unsolicited designations.
- Organization’s option to redirect designated donations requires a disclaimer at the time of solicitation.
- The illegality of misappropriation.
- Why misappropriation is not found in a specific IRS code.
The best single source I found to address all three issues comes from the Foundation Group. Their 2009 article, Are You Misappropriating Your Nonprofit’s Funds?, was written by Greg McRay, founder and CEO of Foundation Group, which was started in 1995. According to his bio for the article, Mr. McRay is “registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.” The IRS website page on Enrolled Agent Information notes that “Enrolled agent status is the highest credential the IRS awards,” earned either through a comprehensive IRS test on individual and business tax returns, or through experience as a former IRS employee. In light of the fact that no specific code on misappropriation of non-profit solicited designated donations, his status as an Enrolled Agent is crucial to understanding that Mr. McRay is offering highly authoritative information. Unless otherwise noted, quotes below are from Mr. McRay’s article and comments (which range from 2009 through 2012).
1. SOLICITED VERSUS UNSOLICITED DESIGNATIONS. Quote:
Solicited designations. A solicitation means that your organization asked for donations for a particular cause. Maybe it was by letter, email, website, radio spot…it doesn’t really matter. What matters is that donations given in response to a direct solicitation are to be permanently dedicated to that purpose. In our soup kitchen example, the board cannot move that money around, no matter how dire the circumstances, if those funds are the result of a solicitation. Just last week, many of you may have read the story of the director of a large, national charity resigning after it was found he did just this very thing. Was it for a good reason? Yes. Was it illegal? Unfortunately, yes. [Emphasis added.]
Unsolicited designations. These are donated funds that the donor designates without having been solicited by the charity. …
2. DISCLAIMER AT TIME OF SOLICITATION. One commenter had a question about his church’s annual pledge drive for the national denomination’s missions fund. However, the pastor had used those funds for operational expenses of the local church instead of sending them to the national headquarters. Mr. McRay responded that “Unless a disclaimer was given at the time of the solicitation that the funds could be redirected at the discretion of the church, then this is a textbook example of misappropriation. It is both unethical and illegal.”
3. ILLEGALITY OF MISAPPROPRIATION OF RESTRICTED FUNDS. Read the Q&A section below the main article. Many of the comments and Mr. McRay’s responses offer insights into typical questions that non-profit directors and donors raise. Repeatedly he notes that misappropriation of funds is both unethical and illegal. For instance, here are two questions one commenter asked. (I’ve edited the questions slightly to work better in this format.) Quote:
1. Does a governing body of a non-profit organization (ie: Church Council, Church Board, Deacons, etc.) have the right to reassign monies from a designated fund for General Fund deficiencies? [T]he governing body does NOT have the right to reassign monies if the either 1) the designation was solicited for that purpose by the church […] or 2) the unsolicited designation was honored without disclaimer of right to redirect. The only thing that can be done is to go back to the donor and request permission from them to redirect the funds. Hopefully, if survival of the church is at stake, the donor would be eager to help.
2. As the treasurer, am I legally / personally responsible should any misappropriation of funds be inadvertently (as directed by any church governing body) or intentionally made? On question #2, you would not likely be liable from an IRS perspective assuming you are not a board member, officer or trustee. However, if your title of treasurer is that of an officer, you do have liability. From a fiduciary perspective, you owe it to the church to do the right thing.
4. WHY MISAPPROPRIATION IS NOT FOUND IN A SPECIFIC IRS CODE. Another question/answer set for this article gives as clear of a response to this problem as I have yet found. Quote:
This was an incredibly helpful article. I am struggling, however, to find this info on the IRS website. Where would I find the actual law/code so that I can keep it for reference? Like many legal issues, it is not always chapter and verse. It is often an extrapolation of broader principles. An example is the IRS prohibition against private benefit, which specifically leads to boards that must be a majority unrelated by blood, marriage and outside business ownership. The latter is not an articulated rule, but is nevertheless prohibited based on the broader prohibition. Start with IRS Publication 557 for a primer. (Link added.)
The StartChurch website has two relatively current articles by Raul Rivera that apply some of these points for non-profits specifically to churches:
There is relevant information on donor solicitations at IRS 4.76.51 Fund-Raising Activities.
Evangelical Council for Financial Accountability (of which Mars Hill Church is a member) – see ECFA Standard 5 – Transparency, especially the subsection on “Project Reporting,” and ECFA Standard 7 – Stewardship of Charitable Gifts, especially the details from these subsections: 7.1 Truthfulness in Communications, 7.2 Giver Expectations and Intent, and 7.3 Charitable Gift Communication.
Restricted/Designated Solicited Funds – Potential Application to Mars Hill
Key issues that have been mentioned related to Mars Hill Church where allegations of misappropriation of restricted funds may possibly be a factor include the following.
The Global Fund. Donations were apparently solicited in ways which seemed to indicate funds would be used for international projects. For a period of time, donors could select the option for either Global Fund or General Fund on an online payment site. Apparently, no disclaimer for redirection of donations appeared at the time of solicitation. However, it turns out the overwhelming percentage of funds were used for national projects, not international.
Around the same time, the definition of “Global Fund” was shifted from what presumably was a designated restriction to any donations from a target audience of those who did not personally attend a Mars Hill Church but participated online through podcasts, etc. At some point, the Global Fund option on the donation site disappeared and only the General Fund was left. Apparently a redirect disclaimer appeared at this time.
Also, a generic apology/explanation was issued if donors happened to misunderstand that the Global Fund was strictly for international work. (If it turns out the Global Fund did constitute a non-profit designated restricted fund, then Mars Hill Church would be required to ask donors whether they wanted their contribution returned or redirected.) And there is the possibility that publications and website pages began being changed to reflect the apparently altered definition of “Global Fund,” potentially obscuring the historical track record for contributors interested in understanding what had happened with their donations.
The Jesus Festival. Donations were apparently solicited for the specific purpose of presenting a free Jesus Festival. (I have not seen whether there was the required redirect disclaimer at the time of solicitation.) Apparently due to insufficient levels of contributions, the Festival was cancelled, and the funds were used for other purposes. There was some kind of notice about the cancellation, but it apparently was not widely distributed. Around the time the Festival was originally slated to happen, some who donated to it inquired about it.
Explore Articles on Mars Hill Church and Restricted/Designated Funds
For issues related to the Global Fund, see Warren Throckmorton’s blog and the tags on:
For issues related to the Jesus Festival, see Warren Throckmorton’s blog and the tags on:
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Spoliation of Evidence
Key Points and Significance
Spoliation of evidence is the destruction or withholding of evidence. It is an issue that can be raised, regardless of whether the forum is a (1) criminal case, (2) civil lawsuit, or (3) regulatory agency action (such as an IRS investigation of a Complaint/Referral against a tax-exempt non-profit organization). Spoliation can apply regardless of whether it was done intentionally or not. Either way, it is considered a serious issue, with a potentially severe range of consequences, such as criminal charges like tampering of evidence. The topic is complicated by the fact that different jurisdictions have different definitions and possible consequences.
Detailed Description and Examples
RANGE OF LEGAL DEFINITIONS. The following range of legal definitions comes from the article by Michael A. Zuckerman, Yes, I Destroyed the Evidence – Sue Me? Intentional Spoliation of Evidence in Illinois (John Marshall Journal of Computer & Information Law, 2010, pages 102-103).
Spoliation of evidence refers to the “act of damaging evidence.” The precise definition of spoliation, however, varies greatly across jurisdictions. At its narrowest, spoliation is defined as the “intentional destruction of evidence . . . or the significant and meaningful alteration of a document or instrument.” Most jurisdictions reject this narrow approach and define spoliation more broadly to include “the destruction or significant alteration of evidence or the failure to preserve property for another‘s use as evidence in pending or reasonably foreseeable litigation.” (Emphasis added.)
STATE-BY-STATE STATUTES. It’s complicated, because of differences in laws from state to state. Here are some of the potential consequences, depending on the statutes in a particular jurisdiction, that I’ll summarize from details in the Wikipedia article on Spoliation of Evidence:
- It is considered a criminal action, subject to fines and incarceration.
- The court can interpret that act as “consciousness of guilt” and therefore assume that the evidence went against the case of spoliators.
- It may lead to criminal charges for spoliation of evidence or perhaps even tampering of evidence.
Here is a PDF that addresses laws on Spoliation of Evidence from All 50 States, as compiled by Matthiesen, Wickert & Lehrer, S.C. These state-by-state listings of statutes are from 2013, but still can serve as an index to locating any more current updates in state law codes.
WASHINGTON STATE. From the information in that same compilation by Matthiesen, Wickert & Lehrer, S.C., it appears that Washington state uses a “rebuttable presumption.” As best I understand it, this means that the Court presumes that someone who alters, destroys, or withholds evidence is doing so because of some “consciousness of guilt.” So, the burden of proof may shift to the defense to demonstrate they are NOT culpable for the charges at issue – instead of the offense demonstrating that they ARE culpable.
Here is a source for Washington state Revised Code of “the compilation of all permanent laws now in force.”
Spoliation of Evidence – Potential Application to Mars Hill
Key issues that have been mentioned related to Mars Hill Church where allegations of spoliation of evidence may possibly be a factor include the following.
Email Deletion Policy, December 2013. At one point late in 2013, Mars Hill Church put out a notification that all emails in their system would be automatically deleted after a certain number of days. A group of former elders filed an official letter/notice of potential legal action in order to stop Mars Hill from carrying out that policy. (Which Mars Hill apparently did, and stopped the implementation of the announced new policy.) At issue here was the destruction of evidence.
From some of the background reading I did on this issue, it seems clear that print documents, digital documents (such as website posts and emails), audio, and video can constitute relevant evidence in legal actions. So, it is imperative to preserve “discoverables.” That was potentially at issue with the email deletion policy.
The possibility or actuality for spoliation of evidence becomes particularly relevant in several contentious issues involving Mars Hill Church media, where online documentation apparently either “disappears” or is altered in a way that substantially changes the meaning of what is there – but typically without any notice that the information has been edited/updated. For instance, that could possibly apply in the situation about the Global Fund – IF disclaimers were added after the fact to “clarify” according to the Mars Hill Executive Elders’ opinion/explanation that the Global Fund was merely a general source of donations and not a specific designation for donations.
Website Scrubbing. There are regular reports of Mars Hill Church apparently “scrubbing” items from its site, especially after a controversy about the topic arises. While most websites probably undergo routine changes and updates, that is different from a demonstrated and documented pattern of altering or deleting items that seem to break the trail of factual evidences for research and potential investigations. Couldn’t this be seen as at least as an unethical lack of transparency? But, given the possible severity of some of the other legal risk issues there, it might not be in Mars Hill Church’s best interest to make such changes.
Explore Articles on Mars Hill Church and Spoliation of Evidence
For issues of evidence changing, removal, website scrubbing, etc., see Warren Throckmorton’s blog and the categories and tags on:
- Email Retention Policy.
- Mars Hill Global. Global Fund. Mars Hill Go. There has been substantial alteration made to online information, videos, etc., related to the Mars Hill Global Fund.
- Mars Hill Church (category). In the list of articles in this category, you can find numerous posts about information that was altered, added, or deleted that could substantially affect the history and interpretation of certain issues or events.
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Governance Policies and Practices
Key Points and Significance
In the Compliance Guide for 501(c)(3) Public Charities, the IRS stresses that they do not get overly specific in requirements for specific forms of governance, or particular policies and procedures. However, they are equally clear that they expect tax-exempt organizations to function with “sound operating and compliance with tax law,” and that they have legal authorization (Section 6033 – Returns by exempt organizations) to ask for information including on governance relevant to those concerns.
Detailed Description and Examples
As indicated above, the IRS does not get hugely specific about governance. Still, to hone in one what details they may be most concerned about, should they ever conduct an investigation, there are important details that can be gleaned from the following materials. All are linked in with the IRS page on Governance of Charitable Organizations and Related Topics. Even simply considering the section headings, and the emphasis found in the repetition of topics, starts building a picture of what the IRS considers important in terms of transparent, accountable, and responsible governance.
Governance Practices. This eight-page document gives expanded versions on governance-related topics found in the Compliance Guide. Sections are still relatively short – a few paragraphs each – but they continue to build toward the greater depth of detail needed to ensure governance that is above board.
- Organizational Documents.
- Governing Body.
- Governance and Management Policies, including executive compensation, conflicts of interest, investments, fundraising, governing body minutes and records, document retention and destruction, ethics and whistleblower policy.
- Financial Statements and Form 990 Reporting. (Although churches are not required to submit Form 990, it equates to a very large checklist of considerations for conflict of interest, the topic of the next section in this post.)
- Transparency and Accountability.
Governance Checksheet. This two-page checklist is used in cases of an IRS investigation of an Exempt Organization, and so contains essential information. It includes sections on the following. So, although the IRS does not dictate all the particulars in these areas, they may check carefully to ensure you have policies on them, that you comply with them, and that they comply with sound operating procedures and tax laws.
- Governing Body and Management.
- Organizational Control.
- Conflict of Interest.
- Financial Oversight.
- Document Retention.
Governance Guide Sheet. Four pages of additional information for IRS agents who are filling out the Checksheet. This did not seem as essential to read, but I’ve included it for those who want to be thorough.
Life Cycle of a Public Charity. This webpage links to other detailed topics for federal and state regulatory matters on nonprofits, so it’s a helpful index to trouble-shooting. It has major sections on starting up a non-profit, applying to the IRS, required filings, ongoing compliance, and significant events (like reporting changes or shuttering the organization). I’d strongly recommend at least skimming through the homepages for the sections on Ongoing Compliance and Significant Events. These give a one-paragraph summary of key points for most subsections.
Corporate Structure – Potential Application to Mars Hill
Key issues that have been mentioned related to Mars Hill Church where allegations of problems with governance policies and practices may possibly be a factor include the following.
Bylaw Changes in 2007 – Was it the Spiritual Equivalent of a “Hostile Takeover”? The main allegation on governance is that the change in bylaws in late 2007 consolidated what looks to be absolute control of Mars Hill decision-making in Mark Driscoll and those he selects as Executive Elders and Board of Advisors and Accountability (BOAA) members. In effect, he can stack the decks with those who will comply with his wishes. If this is so, then in effect, it also means that a tax-exempt non-profit entity functions as if it were a sole proprietorship owned by Mark Driscoll.
To consider whether this is so, you may want to go through the IRS documents on governance listed earlier in this section, and then compare the lists of governance practices they are concerned about and see how the bylaws of Mars Hill Church compare with them. Then, you may want to look at demonstrated patterns of behavior of all Executive Elders and BOAA members since 2007 to see if their practices conform to the requirements of their governing bylaws. Here is a series of PDFs with Mars Hill bylaws from the recent past to the present.
By-Laws of Mars Hill Fellowship: A Nonprofit Corporation Without Members (Link notes it is prior to October 29, 2007; apparently the date of the bylaws is February 11, 2006) #81449. 14 pages.
Revised Draft of By-Laws of Mars Hill Fellowship: A Nonprofit Corporation Without Members (September 25, 2007) #97070. 18 pages.
Amended & Restated Bylaws of Mars Hill Church (November 8, 2011). 24 pages.
Second Amended & Restated Bylaws of Mars Hill Church (May 3, 2012). 26 pages.
Some questions to consider:
What is the Mars Hill policy on “whistleblowers”? How does that relate to non-disclosure, non-compete, non-disparagement agreement that have sometimes apparently been required in order for staff members to receive a severance package upon their departure? What about the staff resignation process, where someone who is resigning is apparently required to list any “issues” they have with the church’s leaders?
Is it disingenuous for Mark Driscoll to declare that he is just following the bylaws, as if that is an objective source of governance, when there seems to be strong evidence that he consolidated power through getting the bylaws changed to his liking in 2007?
Is there genuine independent oversight of Mars Hill Church? Or is it an autocracy? Or an oligarchy?
If you had to identify the equivalent of “shareholders” of Mars Hill Church from the apparent power they have, who would you say “owns” Mars Hill?
Explore Research Articles on Mars Hill Church and Governance
Top 15 Non-profit Board Governance Mistakes (From a Legal Perspective), by Ellis Carter (CharityLawyer, October 5, 2009).
ARTICLES SPECIFIC TO MARS HILL TO BE ADDED.
Also, see Warren Throckmorton’s blog on Mars Hill non-disclosure agreements and non-compete agreements.
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Conflicts of Interest
Key Points and Significance
The other four issues covered in this post all have some elements where conflicts of interest potentially arise. In all of them, it would seem someone wrongfully benefits. It may be with:
- Money through flawed financial practices (inurement).
- Appearance of doing good through misleading fund-raising (misappropriation of restricted donations).
- Prestige through maintaining a false public image of doing good via “spin” (spoliation of evidence).
- Power through personal or self-biased group control (governance).
Eventually, each and all of these contribute to a profile where a tax-exempt non-profit no longer functions in the public interest, but for the private benefit of insiders and related organizations.
Detailed Description and Examples
Because conflict of interest issues have been touched on directly or indirectly in the previous sections, there is not much new to add here. I did find one set of IRS resources that I think would be beneficial as a summary of what all might constitute conflicts of interest, and that is the Form 990 and its related instruction booklet.
Churches are not required to submit Form 990. But that’s exactly the Form you should take a look at for what it has to say about all five issues covered in this post, but especially how they relate to conflicts of interest. Form 990 has sections on the following that are especially relevant. Consider going through them line by line to see what possible conflicts of interest you can identify.
- Part VI – Governance, Management, and Disclosure.
- Part VII – Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors.
- Part VIII – Statement of Revenue.
- Part IX – Statement of Functional Expenses.
One other helpful IRS document is the Instructions for Form 1023 Sample Conflict of Interest Policy. I found Section 2 on Financial Interest especially useful. Quote:
2. Financial Interest
A person has a financial interest if the person has, directly or indirectly, through business, investment, or family:
a) An ownership or investment interest in any entity with which the Organization has a transaction or arrangement,
b) A compensation arrangement with the Organization or with any entity or individual with which the Organization has a transaction or arrangement, or
c) A potential ownership or investment interest in, or compensation arrangement with, any entity or individual with which the Organization is negotiating a transaction or arrangement.
Compensation includes direct and indirect remuneration as well as gifts or favors that are not insubstantial.
A financial interest is not necessarily a conflict of interest. Under Article III, Section 2, a person who has a financial interest may have a conflict of interest only if the appropriate governing board or committee decides that a conflict of interest exists.
Conflicts of Interest – Potential Application to Mars Hill
Key issues that have been mentioned related to Mars Hill Church where allegations of conflicts of interest may possibly be a factor include the following.
- Are past and/or current board members (both Executive Elders and Board of Advisors and Accountability/BOAA) relatively free from conflicts of interest in their relationships with one another personally and professionally, and their boards are therefore substantially “independent”?
- Does filling empty positions on the BOAA with people who have close personal or financial dealings with Mars Hill constitute a potential conflict of interest?
- Does designating local people with close personal or financial dealings with Mark Driscoll to serve on the team investigating official charges against him constitute a potential conflict of interest?
Real Marriage Book, ResultSource Contract, and Mars Hill Church. You may want to go back to my earlier descriptions of some of the list of individuals, LLCs, Trusts, and other entities that seem to be intertwined in financial dealings involved with the Real Marriage book. You’ll find them in Part 2A (subsection on Concluding Thoughts and an Example for Homework / reproduced below) and Part 2C (subsection on Inurement – Potential Application to Mars Hill).
Concluding Thoughts and an Example for Homework
Hopefully this lay-of-the-land grand tour helps understand why it has been complicated to find information on some entities, or conduct comprehensive analysis on relevant issues about Mars Hill. As an example of one of the most complicated problems, consider the following. (And attempts to track this, plus where more specific questions of legal/ethical issues arise, will be in Part 2B.)
Mark and Grace Driscoll wrote the book Real Marriage.
But On Mission LLC owns the copyright and therefore received the royalties from it.
On Mission LLC is in turn governed by (distributes funds to) OMCRU Investments LLC, which is in turn governed by/distributes funds to (1) On Mission CRUT (of which a/the beneficiary is the Mars Hill Church non-profit) and to (2) Lasting Legacy LLC (which according to some research apparently was involved in the purchase of the current home that the Driscoll family lives in).
However, funds from tax-exempt donations to Mars Hill Church non-profit were apparently used to pay a contract with outside agency ResultSource Inc., which basically was used to ensure enough copies of Real Marriage were purchased to get it on the New York Times Bestseller List.
Explore Articles on Mars Hill Church and Conflicts of Interest
For issues of various leaders with potential conflicts of interest, see Warren Throckmorton’s blog and the tags on:
- Executive Elders and Key Leaders. Mark Driscoll. Sutton Turner. Dave Bruskas. Jamie Munson.
- Board of Elders.
- Board of Advisors and Accountability. Paul Tripp. Jon Phelps. James MacDonald.
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09/07/2014 – Addition of some subheads, and clarifications on a few other subheads and sentences.
12/08/2014 and 12/16/2014 – Addition of exploration/research article sources at end of various sections.