SEC Investigation of Global Ministries Foundation Surfaces

By Bill Dries

The Securities and Exchange Commission is investigating Global Ministries Foundation, according to the court-appointed receiver for the Tulane and Warren Apartment, two complexes owned by GMF.

Word of the SEC probe follows search warrants served at Global Ministries Cordova offices Aug. 3 in a separate investigation by the Inspector General’s office of the federal Department of Housing and Urban Development. Search warrants in that investigation were also served that same day at the Dexter, Missouri offices of the Gill Group, which appraised GMF property in Memphis and Florida.

In the latest receiver’s report to the court filed Wednesday, Aug. 10, Donald Shapiro of Foresite Realty Management LLC said SEC senior counsel Michael Adler contacted him in July.

“The SEC required the receiver to maintain all documents, books and records related to GMF and the Warren and Tulane Apartments as a result of an investigation of GMF by the SEC,” the report to U.S. District Judge Jon P. McCalla reads.

The July 18 letter from Adler, which is attached to the report, isn’t specific about exactly what the SEC is investigating.

But it seeks any “relevant documents” from June 1, 2010 “created, modified or accessed” by GMF founder Richard L. Hamlet, his daughter Natalie Metcalf, GMF board members Alan Swafford and Dr. Thomas Stovall. and Nancy Hall, an employee of GMF.

At the top of a list of eight specifc topics the SEC is interested in seeing any records about is “The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee $11,815,000 Multifamily Housing Revenue Bonds … Senior Series 2011A and the Health, Educational and Housing Facility Board of the City of Memphis, Tennessee $485,000 Multifamily Housing Revenue Bonds … Taxable Subordinate Series 2011 B-T.”

Bank of New York, which filed the federal court action in May that led to the appointment of the receiver, is the trustee of the bonds mentioned in the SEC letter.

A memo with the Bank of New York motion specifically claims there is “an appearance of fraud” by Global Ministries.

“The borrower (GMF) has misappropriated the proceeds of the insurance check and failed to turn over to the trustee (Bank of New York) proceeds received from the operation of the collateral,” the memo reads, adding that Global Ministries didn’t tell the bank about its default on the bonds for nine months.

Hamlet has vehemently denied that as well as any wrongdoing. GMF agreed to the appointment of a receiver and has said it is cooperating with the HUD investigators.

The Tennessee Housing and Development Agency briefly deauthorized the Health Ed board from selling bonds in April citing, among several reasons, concerns about a Bloomberg News article that detailed GMF’s technical default on the tax-exempt bonds when the HUD rent subsidies were cut off.

The value of the bonds dropped dramatically -- as much as 81 percent. But there was a delay of as much as seven days in the drop during which some of the debt was being sold in lots for as much as $1.10 on the dollar, according to Bloomberg.

Meanwhile, Shapiro and Foresite also reported to McCalla this week that there is a “potential portfolio buyer” for Warren and Tulane and that Foresite is beginning its own sales marketing efforts this month.

A sale of the properties was the purpose of appointing Foresite as a receiver.

Global Ministries announced it would try to sell the properties following a cutoff in February of HUD rent subsidies to both complexes after Warren and Tulane each failed a second consecutive HUD inspection of conditions at each.

McCalla also notifed all sides in the case that the Aug. 16 hearing will be recorded on video as part of a federal court project allowing such recordings of some court proceedings. Either side can decline the recording by Aug. 15.

The pilot program, started in 2011, has run its course and the recordings are no longer on the court’s website. But the recordings may be used by the court “in its consideration of future matters in this case.”