Pat Robertson: suit against his CBN empire charges misuse of tax-exempt assets

National Catholic Reporter, Feb 24, 1995 by Arthur Jones

VIRGINIA BEACH, Va. - A fired executive of a Christian Broadcasting Network subsidiary has charged in a $3 million suit here that televangelist Pat Robertson has been mixing tax-exempt assets with those of a for-profit company that he heads.

Not so, counters Robertson, CBN's founder and president. He contends, rather, that Mark A. Barth's claims are a retaliatory strike. Robertson a year ago ousted Barth as president of the 4-year-old subsidiary, U.S. Media Corp., and recently filed a $12 million mismanagement suit against Barth.

The episode is the latest evidence, on one level, of the overwhelming success of the CBN enterprise whose mission, in part, is the preparation of the world for "the coming of Jesus Christ and the establishment of the kingdom of God on Earth."

Congressman Fortney Pete Stark, D-Calif., meanwhile, has sent details of the suit-countersuit to the attention of Internal Revenue Service Commissioner Margaret Richardson.

In a Jan. 13 letter to Richardson, Stark wrote, "I've written to you in the past concerning private inurement abuse [insider gains] in the sale and conversion of private foundations (and) previously sent you information on the extraordinary profits Mr. Robertson has made from these business transactions. I urge the IRS to review the court filings in this case to see what additional information may be provided."

The IRS told NCR, "If we're investigating, whether it's an individual or a tax-exempt organization or a private company, it is not a matter of public record." It becomes so, the IRS said, only if a court case subsequently is initiated by the IRS.

In published reports, however, former CBN chief financial officer Robert N. Prigmore has been quoted as saying the IRS had been investigating CBN for seven years, and the reason was politics: "They're out to get Pat Robertson for his political beliefs," Prigmore told The Virginian-Pilot in June 1994. According to a 1994 congressional report, the IRS was investigating 20 media evangelists' operations at that time.

An explanation of the CBN suit-countersuit requires a look at what Robertson has built since 1959, when for no money down he took over an idle Portsmouth, Va., UHF television station.

Robertson was a Phi Beta Kappa graduate of Washington and Lee University when a born-again religious experience in 1959 inspired his life's work. His early television productions included religious puppet show's; later names included Jim and Tammy Fay Bakker. But it was "The 700 Club" - CBN's most visible program on the air, a daily television newsmagazine show now in its 20th year - for which CBN and Robertson became famous. CBN estimates the show reaches 1 million households. Robertson's initial drive was not financial but evangelical; yet his on-screen fundraising ability became phenomenal.

In 1987-88, when Robertson ran for president - and resigned as an ordained minister to do so - he absented himself from the CBN fundraising screen.

The ministry's income dropped by almost 36 percent in 12 months, from $130 million to $83.5 million. CBN would not confirm those figures, published in The Virginian-Pilot, but it acknowledged "a tremendous drop in revenue."

The newspaper also reported that because of the funding drop, hundreds of employees were let go and humanitarian works were cut back.

The Family Channel became so profitable that it threatened to dominate CBN, therefore the IRS ordered CBN to dispose of it. Thus, even if there were probable personal benefits, it was also the need to put CBN on a firmer financial footing - one not reliant solely on his money-attracting preaching - that led Robertson within two years to create International Family Entertainment, IFE, a corporation he and others then used to buy the Family Channel from CBN in a multimillion dollar deal.

The Family Channel at that point was an extremely profitable satellite service distributing CBN fare, Westerns and "wholesome" programs.

Two years later, in 1992, Robertson took IFE/Family Channel public. According to the Congressional Record, Stark said, "the Robertsons put up $150,000 - 2.2 cents a share - and another shareholder put up $22 million. ... IFE/Family Channel went public at $15 a share and the (Robertson) family retains 69 percent control." In addition, CBN gained free air time for "The 700 Club," more or less in perpetuity, on IFE, now the nation's seventh-largest cable TV company.

A CBN spokesperson said the sale made more than $600 million for CBN. Some published reports claim the deal also made $90 million for Robertson's family. He gave most of his gains to CBN.

"The bottom line," said Gene Kapp, vice president of communications for CBN, "is that the main beneficiary was CBN." Equally, said Kapp, there is a Robertson irrevocable trust, "around $48 million, which will go to CBN in 2010, just as a major portion of Robertson's IFE salary and bonus goes to the ministry or charitable causes." Robertson realizes no income from his stock holdings, said Kapp.

Today, Robertson's business creations include the IFE-owned Ice Capades; a Washington-based news service, Standard News; and an airplane charter company, a travel agency and a hotel and convention center in Virginia Beach. Rumors that Robertson is negotiating with the government of Vietnam to create a 28-channel national cable system are inaccurate, CBN said.