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First AME pastor's spending examined

John J. Hunter used church credit cards for personal items, an audit finds. He denies any wrongdoing.

November 30, 2008|Teresa Watanabe | Watanabe is a Times staff writer.

The pastor of the First African Methodist Episcopal Church, one of the oldest and most prominent black congregations in Los Angeles, used church credit cards to pay for at least $122,000 in personal expenses over a three-year period, including jewelry, family vacations, clothing and auto supplies, according to documents and church sources.

The spending came to light during the course of an independent audit and Internal Revenue Service investigation into the financial affairs of the pastor, John J. Hunter; his wife, Denise Brown Hunter; and the church, according to people connected with the church, who spoke on condition of anonymity because they feared retaliation.

Earlier this year, field officials in the Los Angeles office of the IRS' criminal division issued summonses to two banks and a charge card company to testify and produce financial records involving Hunter and the church, documents obtained by The Times show. IRS officials would not respond to questions about the status of their investigation.

In an interview Saturday, Hunter, 51, said he has signed an agreement to repay the church, though he would not confirm the amount owed or the details of the payment plan. He also denied any criminal wrongdoing and said he was working with tax authorities to repay his back taxes.

"I may owe [the IRS] some money, but I absolutely have never done anything criminal," Hunter said. "I have nothing to hide. To the extent I have any responsibility, I have fully embraced it and all of these matters have been addressed."

Hunter and Irma Brown Dillon, a church finance official and Los Angeles County Superior Court judge, said that stronger accounting policies have been put in place, including more frequent audits and guidelines on appropriate use of church credit cards.

"Some things were probably inappropriately charged to the church credit card, but all of these issues have been resolved," Brown Dillon said. "The church is not going to suffer any losses."

Hunter was appointed in 2004 to the storied church, historically the city's epicenter of African American political and social activism. With 19,000 registered members and a $25-million budget encompassing more than a dozen corporations, the church has been a de rigueur stop for Democratic political candidates over the years, including Bill Clinton, Al Gore and President-elect Barack Obama.

In August, a law firm representing the church sent a letter to Hunter demanding repayment of about $122,000 plus $6,000 in interest, according to a follow-up letter from the firm dated Sept. 4 and obtained by The Times. In response, Hunter proposed a nine-year repayment plan featuring monthly installments of $1,408 with 3% interest, according to the letter.

But the church's attorney, Gary M. Slavett of the Beverly Hills firm of Holtz, Slavett & Drabkin, wrote that Hunter's proposal could jeopardize First AME's tax-exempt status. That's because public benefit corporations cannot make loans to their directors or officers without approval of the state attorney general, he wrote.

Slavett declined to comment on the letter, citing requirements for attorney-client confidentiality. But he and Hunter said the church's tax-exempt status remained intact.

Separately, sources familiar with the case said the church's executive board had rejected Hunter's nine-year proposal and the two sides had agreed to a four-year repayment plan. Hunter and church finance officials declined to disclose details of the plan.

It was not clear how Hunter, who receives a six-figure salary and use of a $2-million church parsonage in Encino, would repay the money. In addition to his debt to the church, he also faces a substantial debt to the federal government. Tax authorities have filed federal tax liens totaling more than $309,000 against Hunter and his wife, according to documents obtained by The Times.

Hunter said the bulk of the back taxes owed are mostly unpaid Social Security taxes, penalties and interest spanning 17 years. He said he had legally opted out of the Social Security system, as ministers are allowed to do, but that the IRS had no record that he had done so and assessed the taxes. He opted back into the system a few years ago, he said.

Allegations of financial mismanagement have dogged the pastor since his tenure at First AME Church in Seattle from 1998 to 2004. More than 30 Seattle church members formed a "Save Our Church" committee to protest what they alleged were improper charges on church credit cards and tax evasion by Hunter. In a series of 2005 interviews, Hunter dismissed the allegations and categorically denied any wrongdoing.

"There's nobody who's a leader who doesn't have enemies," the Boston University Law School graduate said at the time. "You have to make decisions. You can take the easy road, or you can take the right road."

The Seattle allegations traveled to Los Angeles with Hunter, causing a ruckus here.

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