Depositors' funds lent by Fairfax Savings bank in Baltimore to the PTL ministry in 1984 and 1985 were insured by the Maryland Savings- Share Insurance Corp., a state-chartered private insurance company not funded by the Maryland state government. (Published 12/1/87)

To the aggressive Maryland bankers scouring the country for new business, it looked like a loan too good to pass up. Jim Bakker, the flashy TV evangelist whose requests for money had been spurned by hometown banks in Charlotte, N.C., needed a quick cash infusion for his fast-growing PTL ministry.

Malcolm Berman, the chairman of Fairfax Savings bank in Baltimore, and his chief partner, Jack Stollof, flew to Bakker's evangelical Disneyland and liked what they saw. The result: Over the course of four months, between November 1984 and February 1985, Fairfax Savings advanced $12 million to Bakker's ministry. Using its then state-insured depositors' money, it granted two crucial loans that helped finance completion of the 505-room Heritage Grand luxury hotel and nearby water park, the crown jewels of PTL's sprawling Christian family retreat known as Heritage USA.

However rosy those deals may have looked at the time, they turned sour earlier this year when Bakker abruptly resigned from PTL after confessing to a sexual encounter seven years before with a former church secretary named Jessica Hahn.

Today, largely as a result of that unforeseen development, Fairfax's loans to PTL are in default, and the Maryland thrift finds itself mired in the messy and well-publicized bankruptcy battle among creditors and contributors over the fate of Bakker's former $129 million evangelical empire.

This month, Fairfax got dragged more deeply into the PTL morass when a group of former PTL contributors filed a $758 million class-action lawsuit against the Maryland thrift and 14 other defendants, charging violations of federal racketeering and securities laws.

The suit accuses Fairfax of being a coconspirator in alleged bankruptcy fraud designed, in part, to restore Bakker to his former PTL throne. Berman denounced the suit as "ridiculous," saying he knew nothing about the alleged conspiracy and was indifferent to Bakker's fate.

But to some critics, Fairfax's entanglement with PTL illustrates some of the freewheeling lending practices that once typified Maryland's savings and loan industry, whose excesses led to a statewide financial crisis in 1985.

At a time when banks in the Carolinas were shunning PTL like the plague, Fairfax approved its loans to PTL without investigating longstanding allegations of questionable fund raising and other improprieties inside Bakker's ministry, according to M. David LeBrun, the former Fairfax vice president for commercial real estate who processed the PTL loans.

And there was much more going on beneath the surface at PTL. Unbeknownst to the Maryland bank, at the same time that Fairfax was advancing funds to PTL the ministry was beginning to pay hush money to Hahn.

Fairfax's second loan to PTL, for $2 million, was made on Feb. 28, 1985, according to records entered by Fairfax in the PTL bankruptcy case in Columbia, S.C. Coincidentally, the day before, PTL wired $25,000 to the California law firm of noted trial lawyer Howard Weitzman, one of whose partners had set up a trust fund for Hahn. It was the first installment on up to $265,000 in payments made by PTL over the next several months in an effort to buy Hahn's silence about her brief sexual experience with Bakker.

LeBrun said it was difficult for Fairfax officials to assess PTL's creditworthiness.

"When you're talking about putting a loan on a hotel for a private religious theme park, there's no precedent, there's nothing to follow, guideline-wise," LeBrun said. "We knew they had problems. But we were told there was a lot of vindictive press out of Charlotte, that there was a lot of local politics that we would never understand."

In effect, LeBrun said, Fairfax officials listened to PTL's assurances that nothing was amiss at the ministry, and accepted them. "They really fooled us," LeBrun said. "They took us into their confidence and then they abused us."

In a recent interview, Berman said that even though PTL has filed for bankruptcy reorganization, Fairfax's' loans to PTL are so well secured by the Heritage USA properties that his thrift, now a federally insured institution with more than $400 million in assets, has nothing to be worried about. Fairfax is the second-largest of PTL's creditors, after church builder and prime contractor Roe Messner.

But with exclusive title to the most valuable of Heritage USA's properties -- the hotel, the adjoining Victorian shopping mall, and the now-famous water park -- Fairfax stands at the head of the creditors' line and has been receiving monthly court-ordered payments from PTL of between $60,000 and $70,000, slightly more than half of what would be due under its notes.

PTL is attempting a court-supervised financial reorganization under Chapter 11 of the bankruptcy act, which would permit the ministry to continuing operating while it repays all or part of what it owes. And even if PTL is ultimately liquidated, Berman said, Fairfax will eventually get its money back.

"I think Disney, Marriott, Helmsley, lots of people might be interested in that property," Berman said. "Any time a loan is in default, you're concerned. ... But we're in good shape ... everybody is going to get paid."

According to two former PTL officials, however, Berman has expressed considerably more anxiety about his loans in private. One of those officials said Berman suggested at one point last spring that the ministry "bring back Jim Bakker" to raise the money needed to meet payments to Fairfax. Berman denies it.

In addition, some skeptics note, nobody ever has tried to sell a Christian amusement park before, so there is no telling how much the Heritage USA properties really are worth.

And there's a question of whether customers will still come to the park without a Bakker or Jerry Falwell -- briefly Bakker's successor as head of PTL -- to attract them. Without PTL's avowed religious theme, "Who in the world is going to want to own a 500-room hotel in Fort Mill, S.C.?" wonders Gene Boyett, who formerly was PTL chief financial officer under Falwell.

Whether or not the thrift recovers its funds, Fairfax's loans to PTL have raised a host of questions inside Maryland's close-knit banking fraternity. First and foremost, how did such a strange marriage ever happen? Why would a banker like Berman, known as a hard-nosed real estate developer, risk $12 million of his depositors' money on a television evangelist with a history of controversy?

The story, according to persons familiar with the transactions, began in the summer of 1984 when PTL was badly in need of fresh cash to complete the Heritage Grand hotel in time for its scheduled Christmas opening. Bakker's finance officers hired a Greensboro, N.C., broker to find a lender, but the broker was running into stiff resistance.

"Bankers were always a little nervous about us," said Mark Bergund, a former PTL vice president under Bakker and financial director of the Heritage Village church. "Once {Bakker} got up and said on TV, 'If we don't get X dollars by the end of the month, we'll be off the air.' It scared the bankers. It scared the mortgage broker. She'd say, 'I'm trying to sell this loan and Jim's saying the world is about to come to an end.' "

Yet Fairfax, growing rapidly like many other Maryland thrifts, was not frightened by the Bakker pitch. On the contrary, LeBrun said, Fairfax's loan committee was "fascinated" by PTL and "very impressed" by Bakker's grand plans to turn Heritage USA into a nationally prominent religious theme park.

Adding to the bank's fascination was PTL's willingness to meet Fairfax's stiff terms: hundreds of thousands of dollars in loan fees, an interest rate of 15 1/4 percent, and a pledge of the main Heritage USA properties as collateral. The hotel alone cost more than $40 million to build, four times the $10 million Fairfax was advancing in its first loan.

There was, however, one nagging question in the mind of LeBrun and others at Fairfax: What would happen to PTL's ability to repay the loans if something happened to Bakker, the master fund-raiser? Bergund sought to put their minds at ease with an only slightly jocular presentation.

"We have three main scenarios," Bergund recalls telling Fairfax officials. "One: Jim Bakker dies. If he dies, we have almost $40 million in life insurance on him. You get paid off and we're taken care of.

"Two: he's in an accident and seriously disabled. Now imagine, you bring that man out in a wheelchair, and this may sound awful to say, but there's a sympathy factor that's going to be fantastic {for raising money}. Three: he runs off with a woman. Worse, he runs off with a man."

Bergund often used such humor as an ice-breaker for visiting bankers, but Fairfax officials did not consider the final scenario a laughing matter. Indeed, the prospect of a "scandal" that could bring down Bakker and PTL was "a prime worry and concern," said LeBrun. "It was frightening because of the fact that here was a multimillion {dollar} tax-exemption organization that existed by the grace of the IRS. Who knows what could happen? You're taking a man's word on a lot of things."

Such were these concerns, LeBrun said, that he actively tried to get scandal insurance on the thrift's PTL loans, approaching Lloyd's of London and other insurance companies. However, LeBrun said, the costs turned out to be prohibitive and the "idea just died."

After the February 1985 loan, according to Bergund and LeBrun, there were further discussions about an even larger $38 million loan to PTL -- a proposal that was finally scuttled that spring when the Maryland savings and loan scandal exploded. At that point, Fairfax, along with other state-insured thrifts, was forced to seek haven from the Federal Savings and Loan Insurance Corporation. Federal examiners poured over Fairfax's books and, according to LeBrun and others, raised no questions about the thrift's exposure to PTL.

There was no hint of problems with the PTL loans until this spring, when Bakker resigned in disgrace and turned over his ministry to Falwell. Contributions nosedived amid disclosures of other alleged sexual and financial improprieties by Bakker, including the use of millions of dollars in PTL money to pay huge bonuses and to fund the lavish life style of the PTL founder and his wife Tammy Faye.

By late May, PTL was on the verge of filing for bankruptcy reorganization and Berman was becoming anxious, according to ex-PTL officials. In a phone call and a personal visit to PTL last spring, a belligerent Berman demanded that his loans be repaid, threatening to get a court order attaching PTL's income if the ministry did not repay its debts, according to two former PTL officials.

"He {Berman} came down to see me just before we filed for Chapter 11, threatening me, saying, 'We'll attach all your income,' " recalls Harry Hargrave, former PTL chief operating officer under Falwell. "He was putting a lot of pressure on us, saying that if we slipped over to being late {on the loan} the feds would come in and ... and make it difficult for him to operate."

Jerry Nims, the PTL president at the time, recalls a similar conversation -- with an additional twist. Berman urged as one solution that PTL "bring back Jim Bakker" as a means of raising the money to pay its debts. Nims balked, he said, countering that such a move was impractical given Bakker's confessions of moral turpitude and new findings of other alleged improprieties by the PTL founder.

"We're not talking about morality," Nims said Berman then told him. "We're talking about money."

Berman, in an interview, hotly denied these accounts, saying he was never worried that the PTL loans would affect the health of Fairfax. As for Bakker, Berman said he had no interest in what happened to him. "I wouldn't know Bakker if I stumbled on him."