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Investigation of nonprofit dies with suspect

Clapp

– From the outside, it can appear as though nothing ever happened, as though looting nonprofits and investors of $1 million brings not only no punishment, but also not even an official accounting of what happened.

But officials say now they were preparing to bring charges against a local minister and author alleged to have lost hundreds of thousands of dollars in other groups’ money as well as hundreds of thousands of dollars more from people he convinced to lend his group money. That effort stopped, however, when the suspect died.

Steven E. Clapp was the head of Christian Community Inc., a Fort Wayne nonprofit research and publishing group that focused on congregational issues.

Clapp was the author or co-author of more than 30 books, conducted workshops on personal finance and had been a board member of Planned Parenthood of Indiana, the Religious Coalition for Reproductive Choice, Greater Fort Wayne Campus Ministry and the Indiana Consortium on United Ministries in Higher Education.

He was a volunteer assistant pastor at Lincolnshire Church of the Brethren and said he was an ordained minister.

Christian Community also handled the finances for other nonprofits, including the Religious Institute in Connecticut and Many Voices in Washington, D.C. In early 2012, Clapp admitted to those groups that the money Christian Community held on their behalf was gone. Religious Institute officials said it was owed more than $400,000; Many Voices’ website said the group was “in a heartbreaking financial position.” In addition to handling finances for other groups, Christian Community was running a loan program, promising investors 10 percent returns and encouraging participants to borrow against their 401(k) retirement funds to invest in it. That program lost an additional $500,000, Clapp said.

On May 15, Clapp committed suicide, and the investigations into what happened at Christian Community appeared to end.

Unlike the Olin B. and Desta Schwab Foundation case several years ago, the Indiana attorney general appeared to do nothing in the Christian Community case.

The Schwab Foundation was a Fort Wayne nonprofit formed to help area students choose careers. Attorney Richard Blaich took control of the organization, appointing friends as board members and removing others, then moved the foundation from Indiana to Nevada, where it bought a $1.5 million retirement home in a gated resort outside Las Vegas.

The foundation also paid board members large salaries and rented them luxury cars and attempted to buy a $1 million vacation home in Wisconsin.

In that case, the Indiana Attorney General’s Office sued the foundation, froze its assets, had its board members removed, and moved the corporation back to Fort Wayne. When Blaich died, the attorney general filed an estate in Allen Superior Court to ensure no foundation money was lost. The state sold the Vegas house and won a $175,000 settlement from the board’s insurance company.

But when Clapp died, there was only silence.

A criminal case

That silence, officials said, was because criminal investigations are not made public until charges are brought.

Terry Tolliver, deputy director of consumer protection in the Indiana Attorney General’s Office, said the office was busy; it just wasn’t seen.

“When (the case) came in, there were a couple of different ways to look at it,” Tolliver said. With the investment scheme, “our office is very limited in what we can do because we don’t have authority over securities. So we looked at it from the nonprofit angle.”

That ran into more problems.

Christian Community Inc. was incorporated as a religious organization, which also limits the attorney general’s authority. For most nonprofits, the attorney general can even ask a court to dissolve the corporation, but not with religious organizations.

So the case was referred to the Indiana secretary of state, which regulates securities, and the Internal Revenue Service, which oversees tax-exempt groups. The Secretary of State’s Office would only confirm an investigation is ongoing.

Still, there were a lot of actions that could have been taken short of dissolution, such as freezing assets and putting the organization into receivership, as was done with the Schwab Foundation. But Tolliver said that wasn’t done because another type of case was proceeding, one the attorney general can support but has no authority in: A criminal case.

Death stops probe

Clapp always insisted the missing money was the result of grants that did not come through and poor accounting decisions, even after it was revealed that he was a convicted felon who had served time in federal prison for defrauding banks.

“There’s no hidden money, there’s no hidden account. There’s no condominium, there’s no anything,” he told The Journal Gazette before his death.

In 1986, Clapp was indicted in a federal court in Danville, Ill., on 15 counts of giving false statements to an insured financial institution, accusing him of obtaining hundreds of thousands of dollars in bank loans using fake documents.

After his indictment, he defrauded a third bank of $500,000 while out on bond, then used the money to flee, becoming a federal fugitive, court records show. In 1988, Clapp was sentenced to 13 years in prison and ordered to pay more than $2.1 million in restitution. He was released after serving about 56 months.

The federal government recorded liens seeking the $2 million at the Allen County Recorder’s Office, which added another wrinkle: Any money recovered by the attorney general might be demanded by the federal government for the restitution Clapp owed.

Despite his history, and the loan scheme in which Clapp promised investors 10 percent returns, even encouraging participants to borrow against their 401(k) retirement funds to invest in it, Clapp insisted there was never any malfeasance.

“Early on, this case was investigated from a criminal angle,” Tolliver said. “Our office went into more of a support role with local authorities to investigate criminally.”

Tolliver said local police conducted an asset search to find where the money went but could not find any assets in Clapp’s name.

“I would assume the criminal investigation stopped when he died,” Tolliver said.

Allen County Chief Deputy Prosecutor Michael McAlexander confirmed the criminal investigation.

“I think there was also a case being investigated out of Connecticut (where Religious Institute is based). The assets were not necessarily local here – there were a lot of other financial issues,” McAlexander said. “We were looking at it for filing criminal charges against him, but when a defendant dies, that pretty much ends our investigation.”

A year later

A year after losing almost everything it had, the Religious Institute appears to be doing well. Its annual report calls 2012 “a new beginning.”

Religious Institute is a religious advocacy organization to promote sexual health and reproductive rights. Based in Westport, Conn., it used Christian Community as a fiscal sponsor, meaning it did not have tax-exempt status of its own. Instead, it operated under Christian Community’s tax-exempt status, and Christian Community handled all its finances, including taking in donations and paying bills and staff.

Under that model, Christian Community would not normally be authorized to use those groups’ money for anything other than those groups’ expenses.

Religious Institute now has its own nonprofit status and continues to function; Many Voices is now an affiliate of Dumbarton United Methodist Church in Washington, D.C.

dstockman@jg.net

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