Reprint Courtesy of the Fort Worth Star-Telegram
Last year, questions were raised about spending at Mike Murdock's ministry. Now, he has started a church, and the law allows him to keep his financial records behind closed doors.
Fort Worth Star-Telegram, 12/05/04
By Darren Barbee
HALTOM CITY -- Televangelist Mike Murdock's new supermarket-size church has two types of entrances: public and private.
One leads to a sanctuary where worshippers gather to hear Murdock, 58, preach on Sunday mornings.
But as that door opened, the private entrance to the ministry's finances slammed shut.
This summer, Murdock began converting the Mike Murdock Evangelistic Association into a church on Denton Highway known as The Wisdom Center. As a church, its spending is secret under laws meant to keep religion separate from government.
Since the Star-Telegram began an investigation in 2002, questions have been raised about the spending practices of the evangelistic association, which has collected millions of dollars from the public since 1973.
Recent donations have been used to buy more than $30,000 in birthday gifts for a close friend of Murdock's, to pay Murdock's $13,000 delinquent property tax bill and to provide him with a personal line of credit to buy furniture and spruce up a Jaguar, ministry documents show.
Those expenses were among thousands of routine purchases and bills such as phone service, printing fees and payments for TV airtime. The Star-Telegram reviewed thousands of documents and interviewed tax experts about the findings.
But some of those questions might never be answered.
Murdock wanted to start a church to avoid public scrutiny of the ministry's finances, said Randy Foret, who was the ministry's general manager from May 2003 to December 2003.
Murdock's decision came after the Star-Telegram reported in March 2003 that the ministry spent most of its money on overhead and helped Murdock pull in a six-figure salary that allows him a life of luxury.
Foret said he oversaw the ministry's effort to start a Denton church in November 2003 and was told by Murdock that it was created to avoid disclosure laws. Foret said that expenditures were limited to advertising and that furniture was not purchased. The church was unsuccessful because of a lack of public interest, he said.
"The intent was to create a shield from anyone that might be interested," said Foret, who said he left the ministry after becoming uncomfortable with its practices.
Craig Prus, who identified himself as The Wisdom Center's finance director, said the church was not started with the intent of preventing public scrutiny of spending.
"It had nothing to do with public disclosure," he said.
Murdock told the Star-Telegram on Nov. 7 that the church's only goal is to help the community. He declined repeated requests to be interviewed for this report or to respond to a list of questions faxed to his ministry offices.
The ministry's stated mission is to spread the Gospel. Murdock's focus in his TV show, books and public appearances is to teach his audience that God will reward them generously for giving money to his ministry and others.
Since the Star-Telegram first began asking questions in 2002, Murdock's ministry has increased its spending for the poor, especially for children's programs. And his ministry has recently started reaching out to the community, giving away 1,000 meals at Thanksgiving and planning to hand out toys at Christmas.
But the public will no longer be able to learn how he does business.
Checking the books
Gaining access to information about Murdock's ministry has been a challenge, even when its books were required to be open to public scrutiny.
The ministry had been operating as a tax-exempt nonprofit and was required by state and federal laws to show how its millions of dollars in donations were spent.
The Star-Telegram examined records filed with the Internal Revenue Service as well as ministry documents obtained through the Texas Nonprofit Act, which guarantees the public's access to charitable organizations' financial records.
The ministry delayed granting access to most of its financial records for almost a month. In November, it allowed reporters to review the records for about 15 1/2 hours over four days.
The documents included bank statements, accountants' reports and boxes of canceled checks dating from 1999 to June 2004, about the time Murdock began the church in Haltom City.
The records show that Murdock had his most successful year in 2003, raising more than $14.5 million, most of it from people across the United States.
They also show a pattern of spending that "doesn't smell good" to Rod Pitzer, director of research at Ministrywatch.com, which monitors Christian charities.
Pitzer, a former investigator and auditor of trusts and charities in Oregon, reviewed the ministry's IRS forms. The Star-Telegram described other documents to him over the telephone.
Nonprofit organizations are granted tax-exempt status to allow donations to be used as effectively as possible. A charity can jeopardize its exemption and face monetary penalties if it ceases to operate exclusively for a charitable purpose such as religion or education, according to the IRS.
Without an extensive financial examination, there is no way to know whether some of Murdock's ministry expenses were inappropriate, said Ken Vargas, a spokesman for the IRS in Austin.
Religious organizations are rarely audited for anything except accusations of inappropriate political expenditures, Vargas said. If the IRS uncovers illegal expenditures, its chief aim is to see that the money is repaid to the charity, he said.
These are among the Star-Telegram's recent findings:
• Murdock's 2003 compensation more than tripled, to $439,397, compared with 2002. That included speaking fees, "love offerings" from the public and a $25,000 Christmas bonus. By comparison, Viney Chandler, chief executive of the United Way of Metropolitan Tarrant County, received $254,785 in 2003. She oversaw $29 million in revenue, about twice that of Murdock's ministry, according to IRS forms.
Ministry documents say salaries and wages follow IRS guidelines.
• In November 2003, the ministry paid $13,154.02 in delinquent 2002 property taxes and penalties that Murdock owed to the Denton school district. Murdock's 6.8-acre estate in Argyle is valued at $548,914, according to the Denton Central Appraisal District.
Murdock reimbursed the ministry $318 in legal and court costs related to the tax bill, documents show.
The delinquent taxes were an "unfortunate situation, and it did occur, and the ministry opted to pay it on his behalf and help him out," Prus said. He said that the payment was counted as additional compensation for Murdock and that Murdock paid taxes on the income.
Vargas, the IRS spokesman, said Murdock's tax bill could legally be part of his compensation. But Pitzer said such an expense gives the ministry "the look and feel of being set up for one individual to do as he pleases."
Murdock owed an additional $1,647.31 for delinquent county property taxes and penalties. After the Star-Telegram asked Murdock about the bill last month, it was paid. It is unclear whether Murdock or the church paid the bill. Prus said he didn't know anything about it.
• The ministry paid $3,755 in October 2003 for the purchase and delivery of a sofa and ottoman to "The Secret Place," which Murdock has described as the prayer room in his home.
Prus said ministers and pastors are legally allowed furnishings through a housing allowance. He said the cost of the furnishings was added to Murdock's compensation. A ministry document shows that Murdock reimbursed the ministry $3,030 that month for "furn/fixtures," possibly meaning furniture and fixtures.
• In August 2003, the ministry reimbursed Murdock's sister, Deborah Murdock Johnson, $1,226.31 for repairs to a 1997 Seadoo Speedster that does not belong to the ministry. Johnson lives in Leesville, La., across Lake Vernon from the ministry-owned property where she does contract work. She uses the boat as a water taxi, according to a Louisiana company that repaired the boat dock on the ministry's property. Prus declined to comment.
• In 2002 and 2003, the ministry gave $72,000 to televangelist Robb Thompson of Tinley Park, Ill. Murdock has described Thompson as one of his closest friends.
The figure includes an April 2003 check for $8,500 with the notation "B. Day gift." In July 2002, the ministry gave Thompson a $25,000 check with the notation "happy birthday!!" Thompson received another check that year for $15,000 with the notation "one house note!" No records of reimbursement for the checks could be found.
Thompson did not return a phone call seeking comment. Thompson's birthday is in April, Illinois driver's license records show.
Pitzer said the payments "look blatantly wrong."
Vargas said that a large cash gift from a charitable organization to an individual seems "very out of the ordinary" but that it could have been a payment for services, which would be legal.
If conducting an audit, an IRS examiner would investigate the relationship between the person receiving the gift and the organization to determine whether it was legal, Vargas said.
Prus said Thompson has been a speaker at past ministry conferences, but he declined to comment further on the checks.
Murdock and Thompson often exchange gifts, said Murdock's son, Jason Murdock, who lives in Atlanta.
"They've always done that kind of thing," he said in a telephone interview last month. "I've seen it happen multiple times: 'Here's a love gift. Here's 25 G's,' " meaning $25,000.
A few years ago, Thompson gave Mike Murdock a BMW delivered from Germany, Jason Murdock said.
At an October 2002 conference in Grapevine, Mike Murdock said a friend gave him a new BMW 745 delivered from Germany. Such a car would probably cost about $70,000 if purchased new.
The ministry gives birthday gifts to staff members and associates, many ranging from $50 to $100, ministry documents show.
On a recent Sunday morning in Haltom City, Mike Murdock held an infant in his arms, praying with members of his church for God's blessings on the boy in a ceremony similar to a baptism.
Some days, as many as 500 people attend Murdock's services. On this day, about 300 people sat in the $7 million church, and Murdock called several by name during the service.
"Look at someone and say, 'I choose to believe in a miracle,' " he told them.
Murdock's ministry has become more involved in improving the lives of others, especially children, since the Star-Telegram began raising questions about its finances. At the same time, the ministry continues to afford Murdock a life of luxury.
In 2003, the ministry gave at least $6,000 each to two Denton charities, Denton County Friends of the Family and the Community Food Center, ministry documents show.
More than a year ago, the ministry began giving $4,000 a month to support an orphanage in Mexico, documents show. Officials at the orphanage could not be reached to comment.
In October 2002, the ministry also began giving $4,000 a month to support 10 to 12 children at the Mike Murdock Home of Hope in Johannesburg, South Africa.
The ministry paid about $15,000 in startup costs at the home, which supports children affected by HIV/AIDS, said Gerda Audagnotti, co-founder of Acres of Love, which oversees the Home of Hope and several similar homes. The charity is based in Newport Beach, Calif.
Murdock has visited the home in South Africa at least once and was touched by what he saw, Audagnotti said.
"He's just a wonderful man," she said. "That's the interaction we have. We're just thankful for his heart."
The ministry is also generous to Murdock. In 2003, it bought him a $5,838 laptop computer, according to the ministry documents examined by the Star-Telegram. This year, it bought him a $2,275 Scribbler, a notebook computer, according to documents provided by the Trinity Foundation, a Dallas-based televangelist watchdog organization.
In addition, Murdock has access to a 10-seat Israel Aircraft Industries turbojet owned by the ministry and valued at $1,055,550.
Records show that in 2003, Murdock used ministry funds to buy a $188 gold coin and spent $456.50 for work on a Jaguar. He reimbursed the ministry for those expenses.
Some of the faithful who are asked to pay for the ministry's charitable works -- and for Murdock's perks -- are apparently struggling themselves.
Ministry documents show that several individual donors give thousands of dollars. Murdock urges people watching his TV program, Wisdom Keys, to sacrifice by giving money to his ministry even if they cannot afford to do so. He says God will provide. He also asks them to send specific dollar amounts, such as $58.
Many do just that. In December 2003, more than 60 checks written for $58 were returned to the ministry because the donors' checking accounts had too little money to cover them. Other months reviewed showed similar returned checks.
"We can't help it when someone writes us a check for insufficient funds," Prus said. "Every person has their own talents and abilities, and if it's not accounting and keeping up with their own checkbook balances, I can't help that. But I do pray for them, obviously, to be blessed financially."
Jason Murdock, 27, said people sometimes question his father's methods as well as his fast cars, expensive jewelry and estate in Argyle, where he has kept exotic animals such as llamas, a camel, an antelope and a lion.
Mike Murdock recently purchased a second house in Argyle worth $242,763, according to appraisal district records. He has said ministers shouldn't have to apologize for having wealth.
"Sometimes his lavishness is a little crazy," Jason Murdock said. "Who needs an African lion for a pet?"
Jason Murdock used to benefit from the ministry himself, receiving about $1,400 a month. But he and his father had a personal and theological falling out last year during a trip to London, and Jason Murdock said he was cut off financially after returning to the United States.
Jason Murdock now works as a cook in Atlanta and is pursuing a career in the music industry.
Despite their differences, he still says his father works tirelessly for the ministry and has helped support churches and others in times of need.
In certain cases, some people might believe that the ministry's use of donations crosses an ethical line, Jason Murdock said. But the ministry relies on legal and accounting advice to stay within the letter of the law, he said.
"With all eyes on you, and you're entrusted with a lot of money and people's lives -- morally, wouldn't you want to play it a little safer?" Jason Murdock asked.
But from now on, the church's spending will be mostly invisible to the public. Financial disclosures, such as revenues, expenses, assets and Murdock's salary, are coming to an end, according to a Nov. 5 letter from Murdock's attorney, Philip S. Haney of Tulsa, Okla.
The letter, sent in response to a Star-Telegram request to review documents through the Texas Nonprofit Act, said: "Our client is meeting the requirements of Texas law. Arguably, a church is not required to furnish these records, but it is our position that The Wisdom Center, a church, is accommodating the Star-Telegram's request to review existing records of Mike Murdock Evangelistic Association for prior calendar periods."
Churches are exempt from the nonprofit act's disclosure requirements.
"They're now going to go underground," said Pitzer of Ministrywatch.com. "They're not going to have to report anything. And they're not going to have anybody look at this stuff."
After the Star-Telegram began raising questions about spending at the Mike Murdock Evangelistic Association, the ministry began devoting a larger portion of its donations to program services such as Murdock's television show, evangelistic conferences and production of books. Before that, administrative expenses such as salaries, accounting fees and legal costs easily consumed the largest part of the budget. Here is a breakdown of revenue and spending on programs and management over the past six years.
Program services $11.8 million
Management and general $873,078
Program services $6.78 million
Management and general $566,084
Program services $4.3 million
Management and general $715,219
Program services $986,043
Management and general $2.4 million
Program services $710,955
Management and general $1.83 million
Program services $788,930
Management and general $2.03 million
NOTE: Expenditures may not equal revenue. In some years, the ministry saved money; in others, it ran a deficit.
SOURCE: IRS forms
IN THE KNOW
Qualifying for tax exemptions
• Organizations may qualify for exemption from federal income tax if they are operated exclusively for purposes such as charity, religion, education, science or literature.
• Most such organizations must apply for tax-exempt status.
• Tax-exempt organizations that generate more than $25,000 in revenue must file annual statements with the IRS that the public may inspect.
• Churches are not required to file an application for tax exemption, file an annual return with the IRS or disclose any financial information to the public.
• The IRS has no specific definition for a church, though in general it should have regular services, a congregation and a sincerely held theology.
SOURCES: Internal Revenue Service, Ministrywatch.com
The ministry, then and now
The Star-Telegram first examined the Mike Murdock Evangelistic Association for a series of articles published in March 2003. Since then, the ministry has made changes that bring it more in line with accountability standards that nonprofit experts say are necessary to ensure the proper use of donations.
The 2003 series was based on ministry's tax returns for 2000, which were the most recent available at that time. New information is from tax returns for 2001 through 2003.
Then: In 2000, the ministry spent about 62 percent of its revenues on overhead items such as salaries, accounting fees and legal costs. Less than one-third went to programs, such as Murdock's TV broadcasts, evangelistic conferences and production of books.
Now: In 2003, the ministry spent nearly 81 percent of its revenues on programs and slightly less than 6 percent on overhead.
The change: Ministry officials hired new accountants, Chitwood & Chitwood of Chattanooga, Tenn., after the Star-Telegram asked about spending practices. Tax forms from 2001, 2002 and 2003 show dramatically different percentages in spending for overhead vs. programs.
Then: For many years, Murdock; his brother John Murdock of Orange; and his father, J.E. Murdock, made up the majority of the Mike Murdock Evangelistic Association board of directors.
Now: In 2003, the board had six members: Mike Murdock; his sister Deborah Murdock Johnson of Leesville, La.; his father, J.E. Murdock; former Dallas police officer Dean Holsinger of West Tawakoni; and televangelists Jerry Grillo of Hickory, N.C., and Todd Coontz of Aiken, S.C.
The change: By 2002, Murdock and his relatives no longer made up a board majority. Organizations such as the Evangelical Council on Financial Accountability say a board is more impartial and less likely to face a conflict of interest when governed by members without blood or marriage ties to the chief executive.
According to the IRS, nonprofit organizations must "show all forms of cash and noncash compensation received by each listed officer, etc., whether paid currently or deferred." But the compensation for Johnson and J.E. Murdock was not listed on ministry IRS forms for 2003. Ministry documents indicate that both received compensation last year.
None of the ministry's board members could be reached to comment.
-- Darren Barbee
The ministry's reach
Mike Murdock's Denton-based ministry touches Americans in a variety of ways. It is heard on local radio and seen on national television. It produces and sells Bibles, audiocassette tapes, books and songs. It owns various properties and is on the Web at www.mikemurdock.com. In August, it expanded further, buying the International Faith Center in Haltom City and changing its name to The Wisdom Center, which it operates as a church. The property is valued at more than $7 million, according to the Tarrant Appraisal District.
Radio: Daily broadcasts on KKGM/1630 AM.
Television: Weekly broadcasts on the Daystar Television Network, seen locally on KDTN/Channel 2, and other networks.
Worship: The Wisdom Center, 4051 Denton Highway, Haltom City, below.
Other Tarrant property: $91,400 house in the 5400 block of Ira Street in Haltom City, below.
Louisiana property: The Product Development Center, which produces books and other items for the ministry, includes three houses in and around Leesville, a city in Vernon Parish south of Shreveport.
• Two of the houses, along Lake Vernon, have a combined value of $108,300. The properties include a boat dock and gazebo overlooking the lake. The houses, dock and gazebo are shown below.
• One of those two houses is also the registered office for World of Wisdom, a for-profit media-buying company that the ministry says is inactive. The company was formed in August 2003 and is run by Mike Murdock; his sister Deborah Murdock Johnson; and her husband, Robert Johnson.
• The third property, below, a five-bedroom house in nearby Anacoco valued at $72,100, is used for shipping and storage and is the home of John Roberts, a nephew of Murdock's.
SOURCES: Internal Revenue Service, Tarrant Appraisal District, Louisiana Secretary of State, Vernon Parish (La.) assessor's office