Georgia Bankruptcy Blog

Cornerstone Ministries Investments, Inc. (google finance) filed a Chapter 11 Petition in the Northern District of Georgia on February 10, 2008, Case No. 08-20355.  From the organization's website --

Cornerstone was founded in 1985 to finance church growth and building programs. Often, church plants and start-ups cannot secure financing from conventional sources. That's where Cornerstone helps. Since our founding, we have financed more than 170 churches and assisted hundreds of others with advice and counsel. In that time, none of the churches we have financed have experienced bankruptcy.

We provide short-term (1-3 years) funding so that the churches can get established and begin to grow in their own facilities. It has been shown that churches grow 15-20% faster in the right facilities.

The filing reflects total assets of $159 million, and liabilities of about $154 million, as of September 2007. The largest unsecured creditor is Trinity Trust Company, of Reno, NV, with a claim of $141 million.  CEDE & Co., of New York, a company that often holds stock for other companies, is listed as holding  debt of over $4 million. Other creditors (over 3,000) are listed here.

Update March 17, 2008 -  The debtor has filed the following documents -

• Statement of Financial Affairs and Schedules.
• Schedule of Bondholders
• Schedule of Vendors
• Equity Security Holders

Scott Riddle's practice focuses on bankruptcy and litigation. Scott has represented Chapter 11 debtors, creditors, trustees and other interested parties in bankruptcy cases and bankruptcy litigation.  For more information, click here.

Cornerstone accepted investments as a faith based organization originally intended to take those investment dollars and make loans to churches, schools etc. They evolved into a company making extremely speculative real estate loans many to closely held development companies owned by Cornerstone officers and directors. Their lending practices where in conflict with the best interests of Cornerstone's investors. Many of those loans become due in 2008 and will likely be impaired resulting in serious investor losses. Someone needs to investigate this company to see if some of their practices were in violation of law.

Jim, So was this situation like the former Arizona Baptist Foundation situation or the Alanar situation if you are familiar with those? I.E. The fund was supposed to only make first mortgage secured loans to Churches but the sponsors went in contravention to the organization's bylaws and invested the money outside the stated corporate purposes?

What type of ventures did this group invest in?

Are Jack Ottinger and Marv Hofflinger still affiliated with this fund?

Jim, that is a pretty incendiary statement you made. Are you willing to put up you first and last name on this blog (I have) Are you willing to name the companies and the names of the the officers and board of director members whom you claim made these speculative loans to their 'closely held companies'?
You are making serious allegations here,
can you back up your statements?

Jim - click chapter 11 petition on main blog page and you will find that Ottinger signed petition and Hoffinger is the biggest creditor.

So what can we expect next as investors? Is this the sort of thing where it will drag on and on and six years from now I get a check for eight bucks?

I just got the bankruptcy paperwork in the mail and am also wondering if there's any way of knowing if those who are small investors will get anything back. Anyone have any idea?

Do I have to pay income tax on the "Interest" I will prob. never see ??

Dan,
Read their latest quarterly report and the latest offering. They list the conflicts. The risk factors are especially telling.

To continue with HosedChurchPlanter's comment -
Cornerstone holds my grandmother's IRA investment. She did not receive her usual dividend check last month. Should she consider her investment lost until and unless Cornerstone can emerge from Chapter 11?

Wellstone is the largest borrower, officers and directors of CMI who have ownership interest in Wellstone: Jack Wehmiller 18.75%, Robert Covington 18.75%, Cecil Brooks 18.75%, John Ottinger 18.75%

CMI was highly leveraged and in many cases in a subordinant position. Wellstone, majority owned by CMI officers and directors, who owes CMI somewheres around $76,000,000 is not meeting some of their obligations. Their middlecreek development is encumbered by hundreds of thousands of dollars in liens and their sales are extremely slow. A good portion of CMI assests have been pledged for loans. Due to their leveraged position and the poor condition of the housing and credit markets it's hard to see how they can realistically restructure. Are the CMI difficulties a result of market conditions, poor management, conflicts of interest or bad faith. Management, past and present, needs to be held accountable.

Well, what do you bond holders want to do?
Iam 65 and most of my retirement in CMI bonds,now there is no income,now what? Maybe we should all [bond] together and hire a bankruptcy lawer to protect our investments.What say you?
Harley

Dan, click on the Chapter 11 Petition link on this page, it will prove what Jim stated. I am the daughter of a Christian senior who invested in Cornerstone. I told her years ago to put her IRA with a bank which is insured. She said that this Organization was "Christian" and she trusted them because they were Christian. She is now out over $13,000. She won't see a penny of that money. I told her to take the rest of her "Christian" holdings and put them in a cash account.

I think the worst people in the world are those that use faith to steal your money, in God's name. Some of those that ran CMI and Wellstone are living a great life in resort communities while the investors may have lost everything.

Thou shalt not steal! I think it is a law.

Jim

Is it for certain that the entire investment is lost? Aren't there some assets to recover in a liquidation?

We too were duped into thinking this fund was being used to build churches and nursing homes. Only later did we learn much of what was going on was speculative housing developments little better than condo flipping.

Dear Hosed,

Pray for a rapid turnaround in the housing market.

Does any one know if the creditors committe apponited by the judge in this case represents the trinty trust which holds all d,e,f,g bonds held in trust for cornerstone? The appointed counsel is Alston & Brid,Atlanta,Ga 404.881.7000.
This should be known,because if not each investor is on ther own.

Alston & Bird represents the unsecured creditors committee, which generally represents the general unsecured creditors as a whole. The committee generally does not pursue matters that might only affect some, but not all, the unsecured creditors. In cases where there is a significant number of bondholders, separate from the general unsecured creditors, a bondholder's committee is also appointed and has its own counsel. Additionally, in some cases, creditors or bondholders may have direct claims against other parties, such as officers and directors.

So Mr Riddle, help me out here. As small-time investors facing losses what actions should we be taking? Is there anything we should be doing other than mailing in the claim form stating the amount of our bonds and hoping for the best? Should we be picking up the phone and calling you (or somebody) for consultation? Or will the Alston and Bird firm be fighting to acheive whatever recovery of our investment is possible? Could individuals also have claims against investment firms who inappropriately recommended CMI?

thanks

I don't want to get into too much detail on the blog, but it is generally a wise move for creditors and bondholders to seek an independent review of the case where they may have different interests than the general unsecured creditors, where the debtor corporation may have been dominated by other parties, or where non-debtors played a major role in leading to the bankruptcy. The unsecured creditors committee and counsel may very well protect the interests of all creditors, but there are times when they do not.

My mothers investment was purchased in 2002, due to mature in 2007. The money was re-invested in Cornerstone without her permission or knowledge. She called Cornerstone, they could not give her an answer. What should she do?

For all of those concerned about loosing it all and are considering bringing additional attorneys to the table, I do not believe you are at a severe level of risk. There are still more assets than liabilities. If you owned a house, a car, and three rental properties and your net worth totaled 2M, but had no renters and therefore no income, you would not be able to pay basic living expenses once any cash on hand had been expired. This is a very similar situation for Cornerstone. The credit market has made it difficult (but not impossible) to refinance these debt obligations which is a key aspect of this business. There is still a great chance of receiving everything back, but unfortunately it does look as though it is going to take some time. The more attorneys that get involved the longer this process will take.

Google "trinity trust" the wife of trinity trust was an employee of either our advisors or us and then "elected" to be a board member of PIF/Cornerstone

Series F bond holders should look into the real possibility that that offering may have been illegal and therefore subject to recession. The SEC has questioned if there was a qualified indenture (trustee). Mr Riddle may be able to help.

Does anyone out there have any information about Wellstone
I am trying to help a widow, her daughter and their disabled daughter who have over $400,000 in bonds (their husband did a great job of accumulating funds but it looks like he got scammed like so many others).

Further comment: Does anyone out there have any information on whether CMI has deviated from their stated corporate purpose. Further, do any officers or directors of CMI have any ownership interest in Wellstone or other projects they have sponsored ?

You can go to this website and check out all the documents that have been filed by Cornerstone in the bankruptcy court. It shows the 20 creditors who seem to be owed the biggest amounts, check out who the TOP 2 are in that list of 20 that are on the court petition for Chapter 11, and also on another document it shows all 6188 bondholders, and another one has all the vendors who are owed money.
http://www.bmcgroup.com/

Bill,
Wellstone LLC is owned 75% by past or present officers or directors of CMI, no question! John Lowery, of Wellstone, has stated he was the largest shareholder. I think that's 100%. There are a number of "Wellstone" corporations involved in this injustice. There's a Wellstone Securities, there's a wellstone communities, there's a wellstone retirement,etc. They are all controlled by the same or similar groups of individuals. Those people have had serious conflicts of interest which I believe could be against the law! Please go to the SEC website and read their own statements in their amendments to their prospectus. Then go to your state's attorney general and the FBI and file complaints against those b-------!

Mark,
If you read CMI's sec filings you will find that CMI's assets are highly leveraged and are therefore at extreme risk. They have put some of their loans in second position to other secured creditors. They have used some of their loans as security to borrow funds that they can not repay and have guarantied other Wellstone loans with no security. If Wellstone can refinance their CMI loans with a third party lender or if there is a dramatic turnaround in the housing market there may be a chance for CMI bond holders, otherwise the outlook is bleak.

Cecil Brooks in the beginning was very convincing about his and CMI's integrity. Is there an objective professional in this field who can evaluate the data that's available and provide an objective evaluation of the situation.
Should all creditors attend the meeting in Gainsville?

Jim,

I tried to locate the info on SEC site. Do you have the info that you could post?
Thanks.

It appears that some former and current CMI officers also hold or held ownership or officer roles in one or more of the organizations that borrowed money from CMI, sometimes simultaneously. How can you justify CMI’s borrower and lender having linked transactions, in which a single individual or group of individuals were responsible for making the loan request and also approving the loan? Was this �"linked relationship� revealed to the CMI Board and/or to CMI stakeholders prior to the transactions? Was this practice approved in advance by the board of directors?

Is it true that extremely high fees were paid by certain borrower officials on behalf of “marketing expenses�? and “relationship building costs�? or certain properties: $1million sponsorship of a marathon, $ for golf course memberships, $ for charter airplane flights (both business and personal), $ for a guest appearance by Jay Leno, $ for numerous box seats for the Dallas Cowboy’s games, $ for donations to foundations and charities, etc. How were these fees paid? Were they revealed to and agreed by the lender’s board?

Anyone hear what the out come of the creditors meeting on the 18th ??

Jim,

Your posts paint a pessimistic view that regretably I can't argue with. I'm curious though what brought you here... do you stand to lose $ in CMI?

HCP

I am one of the top twenty unsecured bond holders. I found out yesterday the last two months of my interest was pulled back by Cornerstone after it had reached my bank and I had paid my bills. Now my brokerage firms says I owe them the money Cornerstone took back. Has any one had this to happen to them? How can this be legal? Not only do I not have my money in Cornerstone now I have to find a way to pay my brokerage firm.

Dear hosed,

CMI and Wellstone's negative impact goes far beyond the bond and stock holders. As it stands today there are plumbers, carpenters, landscapers, electricians and many others who could or will lose hundreds of thousands of dollars, perhaps millions.
There are neighbors to their proposed developments who have lost millions. Greed and corruption reach out in all directions.

Barbara,
Google "sec", click on "filings and forms", then "search for company filings" enter cornerstone ministries investments inc then scroll down to the 2007-10-04 filing(on right side of screen) and go to risk factors that start on pg 4 or 5.

To any of the top twenty, do you feel the mtg on the 18th was a good one and we are on the right track to getting CMI up and running again.
Also has any one explained why CMI is in the pickle they are in, there's lot's of rumors as to why, but what are the facts.

Thank you for your assessment of all the harm done by CMI. Yes, it really is a horrible thing. But that wasn't my question... so I'll ask again, what brings you here? Are you possibly affiliated with the people offering to buy CMI bankruptcy claims for 22 cents on dollar?

Aprox $103M of CMI assests consist of 2nd mortgages, much riskier than a 1st motgage. $35M of their 1st mortgages are pleaged to D B Zwirn.

Anybody out here heard about a capital investment co in N.Y that will buy cornerstone bonds for 22%??? Wonder if there is another investment deal out there that would pay us 35-40% ?? Think they know something we don't.What say you??

Jim:

Where do I find information about the
pledges to D.B.Zwirn?

Thanks

Dear Hosed,

Myself, my family and a hundred or so of my neighbors have been harmed by CMI through Wellstone. I have long felt that some of the officers and directors of CMI have had conflicts of interest that may be criminal in nature. They need to be investigated. I have no interest in CMI assets.
Wellstone continues in a lawsuit as plantif which is costing large sums of money that could be better used to pay parties they owe money such as CMI. I'd like to see Wellstone / CMI get out of my life and spend their time and money trying to salvage what they can of your investments.

Harley, in answer to your question about the 22%...I got a letter today. It is a N.Y.company that invests in claims of unsecured crditors in domestic bankruptcy cases.

Barbara,

The info on Zwirn is in the CMI filings of 3/17/08 listed near the top of this blog

I called ASM to ask some basic questions about their offer to buy our bonds.
Ms Morgan told me they hold the bonds until the bankruptcy is resolved. I asked her how long she thought that would take and she said 5 or 6 years. Oh really?
I wish I would have told her that if her company could afford to tie up their capital that long with no interest and no clear idea as to the resolution, then I could too.
Instead I said thanks but no thanks.

All you people shouldn't make so many quick judgements. If ASM want to buy your bonds for 22cents, rest easy that the bonds are worth a lot more then that. ASM Capital (ran by one Adam S. Moskowitz), wants your bonds so badly that he first bid 10 cents, than 22 cents. And now, they're calling people asking them what would they sell for. Take this as good news. It will be a while longer but all is not lost.

You do have to wonder... these guys wouldn't be offering 22 cents if they didn't think it was worth a lot more. Five or six years? Well, shoot, they were 5 year bonds to begin with; that isn't an eternity. And while it may be hard to imagine, the "credit crisis" will pass, and the assets are still there, just totally illiquid.

This is how I rationalize it anyway. Of course all bets are off if there is slimey behavior going on in the background, as some have suggested here. Not sure you can rule out the possibility of fearmongering on the part of vulture funds like ASM.

HCP

Now.. there is a new company called Debt Acquisition Company of America www.daca4.com and they are offering 35 cents on the dollar.

Think of it this way.. they are NOT saying Cornerstone bonds are worth 35 cents. If they want to buy them for 35, they ARE saying the the value is much higher.

Looks like the bid is up to 35 cents. An encouraging sign.

HCP

Jim is not mistaken with his information.

Subcontractors were repeatedly lied to regarding when to expect payment.

Wellstone properties are all encumbered by valid liens. The work was completed, and the subcontractors were not paid on schedule. A schedule that Wellstone set up.

I have never in my life seen so much money thrown into the wind, as I have with Wellstone.

If you are concerned about where CMI put it's money, you need to look at the cost of TPC memberships, private jets, chauffers, etc, which Wellstone provided to its top management.

Has anyone heard from the committee? How far or have they started with the auditing of Cornerstone? Also when will there be another meeting?

Regarding the entry on this blog by John Doe dated April 10, 2008 at 1:37PM which states:

"If you are concerned about where CMI put it's money, you need to look at the cost of TPC memberships, private jets, chauffeurs, etc, which Wellstone provided to its top management."

If John or anyone else has any specific information that would help us investigate the expenditures John mentions, I would appreciate hearing from them. In addition, the Hayes Consulting web site www.haysconsulting.net will be available by the end of next week.

Thanks,

Steve Deming

Anybody got an idea how long this bankruptcy process will take?

Does anyone have an idea how long this bankruptcy process will take?

Mr. Deming, Unfortunately everything that John Doe stated is true. How can you be contacted directly?

Anybody out there know anything about the trinity trust and what it means?? They hold over a millon $ in trust--what does in trust mean??

Anonymous,
I would love for someone to give me direct information. My email is steve underscore deming at bellsouth dot net Our broker never said any about real estate, just church loans.
Steve

Don't panic and give your money away. If these people did not believe that they were offering less than it was worth do you believe they would make an offer? Don't think so!

What has happen to Anonymous? I thought he was going to write me and tell me about the allegations he purposes is ture. My email is steve_deming@bellsouth.net.

Does anyone know if Wellstone has filed?

Wellstone can't pay thier bills but can spend $100,000 to be title sponsor for a gala in Texas

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As an attorney who has represented investors in similar circumstances, it will be necessary for investors who suffered investment losses to determine whether any collateral parties can be held liable. These collateral parties may include brokerage firms, investment advisors and the like that were involved in the transactions.

It would be wise for anyone who invested and lost money in Cornerstone to take the following steps immediately:

1. Start making a written chronology that touches on the following areas:
- How did you learn about Cornerstone Ministries?
- Did someone recommend the investment to you? If so, who?
- Why did you decide to invest?
- What did you expect the investment to do for you?
- Did you purchase the investment to generate income? If so, how much income did it generate and how important was that income to your overall financial picture?
- How was the investment described to you? Was it described as a safe investment? Risky?
- Were any promises made to you about the performance of the investment?

2. Gather all of the written marketing materials that you received in connection with the investment.

The written chronology is very important because (1) memories fail over time and (2) the document is a “living” document because it can evolve over time when new information is added later. For example, many times an unrelated event such as a TV commercial will trigger a memory about a statement that was made to you about the investment. If you have already created a written chronology, it is easy to add that information.

The above is written as practical advice and not legal advice. It does not create any sort of attorney-client relationship. If you believe that you have been injured, you should seek legal counsel.

Jason R. Doss
Page Perry, LLC
1040 Crown Pointe Parkway
Suite 1050
Atlanta, Georgia 30338
(770) 673-0047
(770) 673-0120 (facsimile)
www.pageperry.com

What is this post above me!? Since when does this blog take ads from lawyers..

It should have been weeded out and never posted.

All of this speculation is fruitless, there is no way to know if everyone will get their money back until CMI has a plan they present to the court. They have more assets then liabilities, and they have some smart people working on it. Remember Chapter 11 is voluntary. They simply need time to get their house in order, don't panic. Send me email with any info you have thats credible, not panicky.

Anyone know the dates for the creditors meeting.

check their latest SEC filing. Their loan loss reserve will exceed $48,000,000. Wellstone's lender on Craig Ranch in Texas is trying to foreclose which will wipe out CMI's position. CMI was leveraged 30 times and in a subordinate position on much of their assests. That means that if a property's value goes down say 10% from their inflated.2007 values CMI's position would likely be a total loss.
You don't have to take anyone's opinion as fact.
If you read their SEC filings and their bankruptcy papers it's all there.

Its my understanding they have 120 days from February 10th (date of Chapter 11), to file the Business Plan with the court. THat would be around June 10th. So, I'd imagine it could be any week now.

I understand they have 120 days from the filing date of 2/10/10 to submit their plan to the court. So that would put it around June 10th., I believe this is the case. However, there are so many lawyers following this thing around, I'm not sure.

Well, Jim that wasn't so helpful.So what's your point anyway?
It's not like we have alot of options here.

Jim's posts have never been known for their actionable content. He seems to be venting. Perhaps he's some sort of jilted insider, who knows. It may well be the case that we're all screwed and he just feels the need to stop by occasionally and remind us of that fact. Hard to tell what the motives could be.

As for reading the filings and such there is so much data there it's hard to see how a layperson could draw conclusions without retaining their own team of experts to interpret it.

I fully expect to take a big loss on this. What remains to be seen is whether it's a total loss. Those buyout offers, which may or may not even be on the table any more, are the only encouraging signs there will at least be some level of recovery.

I have just become aware of some of the questionable business practices of Cornerstone. We were told that the monvey we invested would be invested in Christian based projects. The latest revelations are very disappointing. My wife and I along with the church have investments with Cornerston. I saw on an internet site recently that Cornerstone has filed for an extension of the date to submit their reorganization plan. They have requested a date in September or November.

Dear Disappointed Pastor,

You are right. Some of the officers and directors of CMI took your money, telling you that they would lend it to faith based organizations when in fact they formed Wellstone and lent your money to themselves for highly speculative real estate development. This type of deception is likely criminal and will likely result in the loss of some or all of your money.

And my broker said it would be 30 days for them to get financing and they would be back on track. Not to worry! Duh! Duh! Has anyone seen my broker? I think he gone into hiding. Oh and by the way, seems the other side has it together. The want to elect and examiner to find out about what the Debtor has done. Says the Official Committee of Unsecured Creditor has supported most of the positions taken by the Debtor. Now who was it that was wondering when the next creditors meeting was going to be? Does look like they have got started yet.

Fellow Bond Holders,
We can 2nd guess, believe rumors, jump to conclusions but there is still room to believe in the leadership of CMI and that they never had any intentions to make business decisions that led to this situation.
I hear that one large deal in Texas went sour and caused the current situation.
I believe we who are affected need to pray for these folks who are doing all they can to get back on track.

Worried Wille still praying to the God of impossibilitys for the ressurection of CMI!

Jim is more then likely a lawyer hoping to profit some way by spreading unsubstantiated rumors, etc. about CMI. Don't be surprised to get a call from a "Jim" who happens to be a lawyer who wants to sue CMI on your behalf and collect fee's. Notice "Jim" will not give his last name? Yes, beware.

For Cmi to be successful required that they could continue to raise capital through bond sales and that the speculative real estate development market remain at unsustainable levels. They were banned from selling bonds in a number of key states due to misrepresentation and fraud which severely restricted their ability to raise capital and the housing market tanked, a perfect storm.
My only interest here is that I believe that the actions of some of the CMI officers and directors may have been criminal and if so that they be held accountable.
I am not a lawyer and have no interest in buying any of your stocks or bonds. What I have stated is not rumor. It is based on CMI SEC filings, their bankruptcy petition and newspaper reports.

Please read the Bmc website-letters being mail from the courts to the trinity trust are being returned as undeliverale on the 26 June.
Check it out, if your bonds are held in trust by trinity.
Whats up with this B.S Looks as if we all need to to apply pressure some how on the court and the creditors committee to give us some answers and who the hell is trinity trust anyway!! At the time we purchased the bonds no one said antyhing about any trust companys.
Harley

I have tried to log into your website but it doesn't work.
My mother has a substantial investment in Cornerstone Ministries. As her power of attorney, I would like to know
what recourse we have to reclaim this investment. What is the time frame for the Chapter 11?
We of course, entered this investment on faith and don't understand how/why this money was
mishandled.

The following is a quote from a current web site. Does anyone have further information regarding this?

"Cornerstone Ministries Investments has filed a motion with the U.S. Bankruptcy Court seeking an extension of the exclusive period during which the company can file a plan of reorganization to September 8, 2008 and an extension of time to solicit acceptances until November 7, 2008."

There was an informative article published in the August 2008 edition of Christianity Today magazine discussing Cornerstone's bankruptcy. You can find the article online at:
http://www.christianitytoday.com/ct/2008/august/6.17.html

Jason R. Doss
Page Perry, LLC
1040 Crown Pointe Parkway
Suite 1050
Atlanta, Georgia 30338

I don't like to be the barer of bad new, but it seems that all of these places that are being shut down on their projects, all the people who have made a good, and I mean good, living off of Cornerstone and all the records that the committee are trying to get to examine to see who did right or wrong are being held up by the fancy high priced lawyers that all these board members and building sites like Craig's Ranch are trying to hold this up as long as they possibly can. Doesn't seem like to me this is going to any quick fix. May take longer than 2 years. May not get any money at all.