LYNCHBURG,VA., AUG. 26 -- The Rev. Jerry Falwell's political organizations and his Old-Time Gospel Hour religious ministry made loans to each other totaling more than $2 million during the past four years, according to a published report.
Falwell's Liberty Federation lent the Old-Time Gospel Hour $1.2 million in the seven months ending Jan. 31, The News & The Daily Advance reported in its Thursday editions. The ministry made a loan of $318,441 to that political organization in the same period, the newspaper said.
Before last week, Falwell had insisted that the religious ministry was separate from his political organizations.
Falwell said today that the board of directors of "Old-Time Gospel Hour" and the Liberty Federation "have through the years agreed when funds were available to make loans available in an arm's-length, businesslike manner. These loans are always paid in full as approved by the directors and management.
"This is both legal and ethical," Falwell said. "Any criticism of such aboveboard practices is pure and simple nitpicking."
Financial documents obtained from government agencies and confirmed by documents provided by Falwell show that the ministry and political organizations have had extensive business dealings.
The newspaper reported earlier that the political organizations also made grants totaling $6.7 million to the religious ministry over the past three years. Internal Revenue Service regulations do not prohibit such transfers unless the recipient of the funds has misled the donor.
Falwell told his congregation Sunday that the political organizations had simply raised funds for the religious ministry. The financial documents depict a more complex business relationship between the organizations.
The documents show that the organizations loan money back and forth and have done about $500,000 in other business with each other over the past three years.
In addition, the political organizations' boards of directors include only two members who do not serve on the board of at least one of the parts of Falwell's religious empire, according to tax documents.
When he formed the Moral Majority in 1979, the boards of his political and religious organizations were separate, but common directors were added over the years, Falwell said.
"It is purely a means of simplifying management and operations," Falwell said. "These men know my philosophy and know what I'm trying to accomplish."
He also said the Gospel Hour can do production and other work for the political organizations more cheaply than outside businesses.
Falwell said he kept the mailing lists of the organizations separate because many of his political supporters would not want to contribute directly to a religious ministry.
In 1986 the Liberty Federation, the successor to the Moral Majority Foundation, borrowed $233,000 from the Gospel Hour at a 10 percent interest rate while it was giving grants of more than $1.8 million to the religious organization, the financial statements show. The interest rate is about the same as the Gospel Hour was paying on its latest bond issue.
In 1983, the Moral Majority Foundation lent $300,000 to the Old-Time Gospel Hour at 12 percent interest. At the time, the ministry was paying up to 15 percent on its bonds.