Canadian counterpart to the LCEF suspended operations, froze accounts in 2015
Two investment funds run by the Alberta British Columbia district of the Lutheran Church of Canada collapsed in 2015 before receiving a court-appointed monitor and eventually reaching a settlement with the Alberta Securities Commission (ASC) in 2019.
District President Donald Schiemann and four other administrators agreed to pay $500,000 and no longer personally trade in securities and derivatives after withholding crucial financial information from investors.
The Church Extension Fund and District Investment Fund were established decades ago to help build churches, schools, and retirement communities in Alberta and British Columbia, but ran into trouble after over-investing in a real estate development outside of Calgary that became insolvent in 2014.
According to the ASC settlement, the district set up a separate corporation–Encharis Community Housing and Services (ECHS)–in 2005 to oversee the Calgary development, which shortly after started borrowing money from the funds. In 2008, ECHS held $49 million in loans from the Church Extension Fund. By 2012, as the funds continued to raise money from investors, almost 97% of their loan portfolio was tied up in mortgages taken out by ECHS, even though ECHS started defaulting on its principal payments in 2007, never produced any financial statements, and, according to the settlement, “had insufficient assets to secure its loan with the District.”
Ultimately, the settlement concluded, “there was a conflict of interest between the District and ECHS as four members of the [District] Board were also members of the board of ECHS. As a result of the Board’s close relationship with ECHS, including oversight and certain shared management, the Board was acting as both a borrower and lender vis-à-vis funds loaned to ECHS.”
The funds received a court-appointed monitor in 2015, restructured, and started liquidating assets. As of 2019, the settlement said, “a significant portion” of the investors’ claims had been returned, but it did not offer specifics.
The Canadian Broadcasting Corporation broke this story back in 2015.