The former controller of the financially ailing Clinton Christian School has charged in U.S. Bankruptcy Court that the directors of the school's parent organization fraudulently concealed $167,000 in assets and secretly paid back thousands of dollars to preferred creditors.
J. Alan Olmstead, who last January was dismissed as the chief financial officer of Bible Baptist Inc., the corporation that runs the private school, made the charges recently in a court motion to have a trustee appointed to oversee the corporation's financial reorganization.
Bible Baptist Inc., which in addition to the southern Prince George's school, runs a church un Upper Marlboro and a bookstore, filed for Chapter 11 bankruptcy proceedings on Nov. 11, 1979. The corporation listed $1.3 million in debts and slightly less than that in property assets.
The church fell upon hard times in 1976 and 1977 when it was unable to repay the owners of matured debentures. The school's tangled finances have been contested in and out of court ever since.
Bible Baptist's attorney, Howard Heneson, said, "I have no idea what his [Olmstead's] specific allegations are. I've never seen them. He has made all sorts of threats to the directors of the coporation in the past."
Heneson asserted that the corporation will eventually "pay back 100 cents on every dollar of debt that it owes."
Olmstead has claimed previously in court that Bible Baptist owes him $19,296 for his services as controller between October 1978 and January 1980. The corporation has disputed that claim.
In his court motion, Olmstead made eight accusations. The most serious charge is that the church's current pastor, Ray Childress, and onetime corporate legal counsel, Irvin Dross, falsely listed several creditors in the school's financial reorganization papers. The creditors, Olmstead charged, had already been paid. The alleged deception, Olmstead said, overstated the school's debt by $167,000.
Olmstead further alleged that $27,000 of the concealed money was distributed in three payments to "wrongfully preferred creditors and insiders." He alleged, for examply, that a falsely concealed $10,000 payment was made to the father-in-law of one of the directors of Bible Baptist Inc. Another wrongfully hidden $10,000 payment, he charged, went to a business partner of Dross'.
Dross and a law firm associate were also accused by Olmstead of deliberately concealing $49,600 in payments to two couples who held Clinton Christian debentures.The debentures, a type of bond paying 8 percent interest, were sold at the school's founding in 1966 and several times in succeeding years. Attached to Olmstead's motion is a photocopy of the two checks for the alleged payments.
The remaining $90,000, Olmstead charged, was "deliberately omitted" from Bible Baptist's financial records for the purpose of preventing creditors from regaining the money. Olmstead stated he did not know where the alleged money is.
Dross flatly denied the accusations. "What Olmstead has said is totally false, and he knows it," he said.
The payment money was derived from the sale of a part of the Clinton Christian campus, according to Dross, Creditors agreed to the sale and to the payments, he said.
The Clinton school, one of approximately 55 Christian schools in the Washington area, received wide publicity in May 1978 when it attempted to deny a diploma to the class valedictorian because he drank a beer the night before graduation. In the face of a court suit brought by the student's parents, school officials relented and allowed the youth to graduate. s
Last fall the school expelled a 10th-grade girl for wearing slacks to a school football game and riding briefly on the all-male team's bus.
No one contacted who was familiar with Bible Baptist or Clinton Christian agreed with Olmstead's charges.
"I think the school did a lot of dumb things financially, but they were done out of ignorance, not in any attempt at fraud," said Larry Harbel, the Clinton school's finance director for the 1977-78 school year. "I approved of their [Clinton Christain's] work. I just couldn't approve of the way they had gone about it." Harbel has worked for 15 years as an insurance company accountant.
"They were just stepping out on faith all the time," asserted another source familiar with Bible Baptist's operations. "They would spend all kinds of money and then expect the Lord to bail them out. Well, sometimes the Lord don't bail you out."
Harbel attributed the school's financial difficulties in part to the founder of the school, John Macon, who was removed as pastor last year. Macon, he said, knew little about proper financial accounting and did not hire anyone who did. Harbel said Bible Baptist's board of directors usually followed Macon's wishes.
At the very time that debentures bought by Clinton Christian School parents were coming due in early 1977, Macon was driving -- at the school's expense -- a Lincoln Continental, complete with a telephone.
The luxurious automobile, many school sources said, symbolized Bible Baptist's deeper troubles. They said Macon had not made provisions to pay back the borrowed money that fueled Clinton Christian's growth.
"The size of their debt was not really untenable. The trouble was that it was very poorly structured. When I came to Clinton Christian in 1977, 25 percent of the debt was coming due within two years," Harbel said. Had the debt repayments been scheduled over a 15-year period, he claimed, the school could have avoided financial trouble.
Macon was eased out as pastor by the board of directors in the spring of 1979 because creditors were refusing to deal with Bible Baptist as long as he was president. Macon became director of the now-defunct Eastern Association of Christian Schools.
Macon said that the school's financial difficulties were caused by the refusal of area banks to grant Bible Baptist long-term financing, and a sewer building moratorium in Prince George's County that interrupted the school's building program. Macon also blamed the "meddling" of news media in the disciplinary incidents for damaging the school financially.