The bankruptcy of a California doctor turned real estate developer, who relied heavily on his Seventh-day Adventist Church to get his financial empire off the ground 15 years ago, may leave units of the church holding the bag for millions of dollars.
Court papers filed in Los Angeles by Dr. Donald J. Davenport list 27 Adventist units and institutions among his creditors, along with 27 banks, six insurance companies, a number of medical colleagues and about 200 individuals, the majority of them fellow Adventists.
Ernest Ching, a California attorney who says he now represents a dozen individual Adventist creditors, estimates that the claims of creditors may run as high as $40 million. Robert Shutan, Davenport's attorney, confirmed that amount as "a ballpark figure." Shutan would not comment on the assets of his client.
ya precise picture of the amount of church funds involved is impossible to draw at this point, partly because of the Adventists' traditional close-mouthed stance toward internal troubles and partly, according to Elder Charles E. Bradford, vice president for the church's North American Division, because of considerable confusion as to what the situation really is.
Also caught in the Davenport bankruptcy is an unknown number of individual church members who deposited their savings with trust funds maintained by units of the church, which in turn invested these funds in the Davenprot enterprise.
Although he has branched out in recent years to development of office buildings, Dvenport began his financial empire by building post offices, most of them in the burgeoning California communities, then leasing them back to the government. He generated funding for his enterprises through loans secured by mortgages on his properties.
One concern of some creditors is that their loans may be secured by second, rather than first, mortgages on Davenport properties.
For example, in 1976 the credit union of Southern Missionary College in Collegedale, Tenn., an Adventist school, loaned "about $85,000" to Davenport, according to manager Carol Herrell. It was secured by a mortgage on a postal substation in Riverside, Calif., according to Herrell.
The Potomac Conference of the Seventh-day Adventist Church with headquarters in Staunton, Va., holds a 1972 "first deed of trust," as first mortgaes are known in California, on the same Riverside property, according to conference treasurer Marvin Griffin. He refused to say how much money was involved in the 1972 loan.
Both Griffin and Herrell expressed full confidence that their respective institutions would not suffer as a result of the bankruptcy.
In another instance, Shirley Burton of the Pacific Union Conference, one of the church's largest units in this country, based in suburban Los Angeles, said her organization had loaned $1.5 million to Davenport and received mortgages on five properties as securities.
she said that on review it appeared that three of the five mortgages held by the Union Conference may be on property on which someone else holds a first mortgage.
Under rules of the bankruptcy court, Davenport is supposed to file his full financial position and a complete listing of creditors and the amount owed each by next Monday. However, Shutan said yesterday, "There is no way we can have that within 10 days" of the original filing. Shutan added "we will have to get additional time" from trustee Irving Sulmeyer, a Los Angeles attorney who has been appointed to oversee Davenport's reorganization under the bankruptcy petition.
The initial document Davenprot filed last Wednesday listed 10 unsecured creditors, with a total of $5.3 million owed, plus a list of names and addresses of some 260 additional creditors, without specifics of amounts owed.
Davenport's Adventist institutional creditors consist largely of area and regional conferences of the church. Bradford has issued a formal statement saying that no funds of the General Conference, the central international organization of the church, are involved. Nevertheless the General Conference, which has world headquarters in Takoma Park, has retained both a loaw firm and an auditing firm in California to investigate.
"We are doing our best to resolve the situation by getting the facts out . . .by a full disclosure of everything," Bradford said.
Among the individual creditors listed in ydavenport's initial bankruptcy petition are at least 36 former treasurers or other high officials of units of the Adventist church. Like most of the institutional officials contacted yesterday, none would discuss their involvement with Davenport.