The president of the Seventh-day Adventist Church says that some church leaders "may be guilty of a conflict of interest and possibly other infractions" in dealings with a California developer whose bankruptcy last year left a debt of more than $21 million to church members and institutions.
Writing in the Aug. 19 issue of Adventist Review, SDA president Neal C. Wilson said that a church-commissioned 624-page report on what has come to be called the Davenport Affair shows the "picture is a sad one."
Dr. Donald J. Davenport is a California physician-turned-financier who over several decades used his church ties to persuade fellow Adventists and units of the church to loan him money for his real estate ventures.
By the time his financial empire toppled last summer, Davenport also had involved dozens of California banks and several insurance companies.
Wilson, in his message in the Adventist Review, indicates that the Davenport affair and the church's handling of it have rocked the 571,000-member denomination. "There has been a tendency to lose confidence and trust in leadership," he wrote. "A credibility gap has been developing. For this we truly are sorry, but until we had the report it was not wise or prudent to say much."
Church officials at the world headquarters in Takoma Park had fended off inquiries pending the completion of the full report by a Los Angeles-based law firm, Gibson, Dunn and Crutcher.
Unrest among church membership also had been fed by reports in unofficial lay-edited publications circulated among the closely-knit membership of the church alleging conflicts of interest on the part of some church executives.
The same publications had for years warned against investing in Davenport's ventures because of alleged irregularities.
The conflict-of-interest charges revolve around church fiduciary officers and other leaders who lent personal funds to Davenport at vastly inflated interest rates -- in several cases up to 80 percent, according to the bankruptcy trustee's report. At the same time, church funds under their control were loaned to Davenport at more modest, conventional interest rates, according to the trustee's report.
Wilson makes only an oblique reference to this situation in his Adventist Review statement, noting that "in the minds of some individuals and organizations, present gain seemed to outweigh all other considerations, and they were willing to gamble with the future well-being and integrity of the church."
Wilson declined to make public the long-awaited church report "at least for the present." A special review commission has been named to study the material, he said, "and until this commission has made its analysis based upon the fact presented in the report, access to it will be restricted as confidential and privileged legal data."
The commission has been directed to determine by the end of the year "whether church policies were violated, and if so, was it a conflict of interest, dishonesty or incompetence" and make personnel recommendations accordingly, a church spokesman said. Policy and administrative recommendations are to be completed by June 30, 1983.
Since the collapse of his empire, Davenport has returned to the practice of medicine in Southern California. Among his assets seized during the bankruptcy procedings was a lavishly furnished Beverly Hills condominium that has been featured in Architectural Digest.
Although most Adventists follow their church's admonition to live simply and avoid personal adornments, even to the point of not wearing wedding rings, the Davenport bankruptcy papers showed insurance for furs valued at $25,000 and $425,000 in jewelry. Neither the furs nor the jewelry has been recovered by the court.
In his statement, Wilson speculated that "from the best information available at this time... we cannot anticipate any substantial portion of the money [owed by Davenport] to be recoverable."
Ernest Ching, a California attorney and a church member representing more than a score of individual and institutional victims of the financial debacle, said he agreed with that estimate.