Bishop Thomas D. Jakes, impeccably attired in a gray suit and polka-dot tie, holds court in an opulent conference room dominated by floor-to-ceiling windows that overlook 400 acres of church-owned land. These days there is much for which he is thankful. As head of the 191,000-square-foot, 8,000-seat Potter’s House-one of the nation’s most prominent nondenominational churches-Jakes is adept at juggling lucrative projects.
Over the years, he has enhanced his ecumenical leadership with enviable business acumen. At present, he is rejoicing about a multimillion-dollar deal with Sony Pictures to produce nine movies, following the breakthrough success of Woman Thou Art Loosed, Jakes’ 2004 drama based on a self-help novel he wrote about confronting abuse, addiction, and poverty. He’s equally thrilled about the August opening of his $11 million state-of-the-art building that will house Clay Academy, a private Christian school Jakes founded in 1998. And there’s much more in the pipeline: a new book due out on Mother’s Day called Mama Made The Difference; a movie that will hit theaters this fall; a mega conference scheduled for July; and Capella Park, a $150 million residential development featuring 1,500 single-family homes that will break ground this spring. As Jakes rattles off these ventures, he can hardly contain his enthusiasm.
The 48-year-old pastor oversees two kingdoms, divided by a carefully constructed firewall, which separates his church responsibilities from his business enterprises. The Dallas-based Potter’s House is the $45 million sanctuary that houses Jakes’ megachurch, with roughly 30,000 congregants. His $15 million for-profit media empire, T.D. Jakes Enterprises L.L.C., also based in Dallas, owns the rights to most of Jakes’ published books, plays, record label, and the movie Woman, Thou Art Loosed!
To avoid conflicts, Jakes employs two staffs and uses different accounting systems and financial institutions-one for the Potter’s House and one for T.D. Jakes Enterprises. Two sets of accountants perform separate compliance audits. By embracing the gospel of entrepreneurship and sound business practices, Jake says he’s answering God’s calling. “Economically empowering minorities is a critical part of my mission,” he proclaims.
Jakes represents a growing number of black megachurch ministers who pursue business interests while shepherding the ecclesial flock. Megachurches, defined as houses of worship with more than 2,000 members, have become major players in the economic and business development boom that has revitalized inner-city communities nationwide. In today’s environment, many pastors function as CEOs, developing and executing strategic plans that utilize financial and human resources to achieve objectives.
GENERATING MEGADOLLARS
The line between church and business is often blurred as ministries grant pastors oversight powers of both for-profit and nonprofit ventures. Churches with business interests must guard against letting the bottom line become the greatest influence of the ministry, says Preston N. Williams, a retired Harvard Divinity School professor who holds sessions for pastors on economic development. According to Williams, pastors must develop a series of safeguards, including annual compliance audits, appointing a compensation board to determine salaries and budgets, hiring outside financial firms to oversee finances, and establishing 501(c) 3 nonprofit corporations to manage economic development initiatives. The absence of strict procedures can easily lead to questionable practices and financial malfeasance.
Jakes agrees and says he exercises tight fiscal control over an entity that employs 360 full-time staff members and 4,000 volunteers. The Potter’s House, for example, includes a compensation board that determines Jakes’ salary and approves all budgets, including last year’s $15 million MegaFest conference that drew roughly 200,000 attendees to Atlanta. Only after gaining board approval can the executive management team, of which Jakes is a part, allocate expenditures. “Scrutiny from the press doesn’t do anybody
any good, because the press doesn’t do audits. The scrutiny should come from the IRS and it should come with facts,” says Jakes. “Compliance audits are so thorough that if I bought you a Coca-Cola on my church card, it would show up in the audit. If you’re going to be here for longevity’s sake, you have to do things right.”It’s this strict attention to expenditures that has enabled Potter’s House to retire its $45 million construction loan in less than four years. Its solid financial infrastructure has also been responsible for funding close to 100 ministries, ranging from grief management and debt consolidation to Texas Offenders Re-Entry Initiative, a rehabilitation program for ex-convicts. In the capacity of CEO, Jakes initiated the formation of Metroplex Economic Development Corp. to purchase 400 acres of land for $4 million for the development of Clay Academy and Capella Park.
To secure the flow of revenue for his far-reaching endeavors, Jakes employs what he calls the three Ps: partners, corporations that help fund programs and initiatives; products, items that are sold to the public for proceeds, which are returned to the church; and people, congregants who make significant contributions to the church. In 2004, the last audited year, the breakdown for Potter’s House revenues was as follows: 43% from tithes and offerings, 22% from national ministry offerings, 18% from conferences, 15% from product sales, and 2% from the church’s international pastoral alliance.
Potter’s House also receives its share of corporate sponsorship. Unlike traditional church revivals, last year’s wildly popular MegaFest conference was financed by major corporations such as Coca-Cola, St. Joseph’s Aspirin, and American Airlines. These companies provide financial assistance in exchange for the opportunity to promote their product lines. And although the conference lost money on registration because many participants skip the costly daytime seminars and workshops, opting instead for free evening events, the financial impact it has on host cities is undeniable. The conference brought more than $150 million to the city of Atlanta.
Clay Academy has encountered similar fiscal challenges. Tuition has never covered administrative costs but Jakes says the service it provides to the community is too important to abandon. “We didn’t start the school to make a profit,” he says. “We just want to be able to break even, but at this point this hasn’t happened. We’re hoping that the PTA will come to our rescue and help raise additional funds to subsidize the cost.”
Church resources are buttressed by the tithing of millions across the globe, philanthropic contributions, as well as sales from tapes of Jakes’ sermons. “The parishioners we see today are vastly different from the ones 25 years ago. They have more money and are more diverse,” Jakes says. “We are pastoring to the equivalent of a small city. That power is in part a reflection of the size and sophistication of many modern, large churches.”
REBUILDING A COMMUNITY
It’s that kind of power that allowed Pastor Anthony G. Maclin’s church, Sanctuary at Kingdom Square, to purchase Hampton Mall for $13 million in 2004. The old mall, located in Capitol Heights, Maryland, a neighborhood known for its high-crime rate, was little more than empty storefronts and pothole-ridden parking lots. The church plans to transform the 254,000-square-foot shopping center, renamed Kingdom Square, into a 3,000-seat sanctuary, complete with a school, a day care center, bookstore, hair salon, and spa. The funds for the estimated $15 million renovation were raised partly from church offerings, but the largest portion came from bank loans that congregants will repay. Profits earned from the church’s businesses are used to
been a major economic impact on the surrounding community: Since the church purchased the mall, several new businesses, including Long John Silver, Family Dollar, and International House of Pancakes, have moved to the neighborhood.
In many ways, Maclin serves as the CEO of Kingdom Management, the for-profit entity established by the church to manage the mall. As head of a 30-member church board composed of deacons and trustees, he presides over annual meetings to approve the $8 million budget for both the church and Kingdom Management. Each year, Maclin is obligated to release a complete financial report to his 5,000-member congregation. In keeping with this, he has hired an accounting firm to review financial statements for both entities. Maclin also sits on the board of directors of the Collective Banking Group, which is instrumental in helping churches secure loans to construct sanctuaries and redevelop strip malls.
Founded as Glendale Baptist Church in Washington, D.C., in 1927, the church was originally located in an old wood-frame building. In 1995, it relocated to Capitol Heights after a $1.1 million renovation converted the showroom and garage of an abandoned Chevrolet dealership into a spacious sanctuary. Since the move, the church has been involved in development projects, gaining financing through drives and bank loans. In 1997, the church purchased an old technical-school building for $1.2 million and turned the structure into a gym, credit union, bookstore, day care, and hair salon. In 2000, Maclin’s church transformed a seedy nightclub into an even larger sanctuary and concert hall. The church recently sold those properties for more than $6 million. “From an economic perspective, the African American church has always been a leader in the community,” Maclin says. “Who else in our community has the resources? We are trying to erase the blight in the community by creating our own jobs and recycling money in the African American community. The scriptures say that we should be lenders and not borrowers.”
A QUESTION OF TRUST
Like their more notorious corporate counterparts, some who work in the ministry are not above engaging in skulduggery to achieve results. At times the misuse of funds and resources is so flagrant it calls into question the privileges afforded to church leaders. Rev. Henry Lyons, for instance, former president of the National Baptist Convention, one of the largest organizations of black clergy, was charged with racketeering and grand theft after the home he shared with a mistress was burned to the ground by his wife. In 1999, Lyons was convicted of grand theft and racketeering charges in Pinellas-Pasco County, Florida, for stealing funds from NBC and the Anti-Defamation League. He is currently preaching at a new church in Florida.
In 2005, The Atlanta Journal-Constitution reported that Bishop Eddie Long, minister of New Birth Missionary Baptist Church in Lithonia, Georgia, may have violated Internal Revenue Service regulations by accepting compensation totaling $3.07 million in the use of property and salary from a charity he helped oversee. During a four-year period, he reportedly received a 20-acre, six-bedroom home estimated at $1.4 million; use of a $350,000 luxury Bentley; and more than $1 million in salary, including $494,000 in 2000. J. David Epstein, Long’s tax attorney, denies any improprieties on the part of his client, insisting that the church and the charities have come to the aid of millions. Moreover, Epstein asserts, several independent compensation committees, including New Birth’s and a national accounting firm, sanctioned Long’s compensation package.
Established in 1984, New Birth has more than 25,000 members and nearly 50 ministries. It
owns 250 acres of land that boasts a 10,000-seat cathedral; the Family Life Center; the Christian School of Excellence; and a variety of programs and activities such as conferences, concerts, theatrical productions, and educational classes. “They are baseless allegations,” maintains Long in an exclusive interview. “When you grow and become this kind of power base, a lot of things are done to discredit you. There is no indictment. The IRS is fine with us.”Long says his woes are partly due to a misunderstanding that many people have about the role and function of the modern day megachurch. “The megachurch is a new thing,” says Long, who manages an annual budget of $30 million to $40 million. “When you talk to Bishop Jakes, Bishop Charles E. Blake, and Kirbyjon Caldwell, you will find that we have entered into something that there is not a lot of history about, but at the same time we collaborate with one another to realize that we have a great power base economically, and we have a great voice in our community that has to be heard. One of Dr. King’s legacies is economic empowerment, but the message that is getting out is that we as ministers are trying to chase money and that is not the case.”
According to John Walker, chief creative officer of Chitwood and Chitwood, a Tennessee-based accounting and financial company that represents more than 4,000 churches, many large churches now have net incomes in the hundreds of millions of dollars. Although some compare pastors of today’s megachurches with Fortune 500 CEOs, pastors are not held to the same level of regulatory standards and financial accountability.
Large public companies must file regular quarterly documents with the Securities and Exchange Commission and are subject to investigation. Many large churches with community development enterprises have no such watchdog. Churches are tax-exempt, although many large ministries file 990 tax returns for church-related community and economic development ventures. Most church pastors and board members “are good people,” Walker maintains, “but they have not had training necessary to maintain financial transparency and therefore are not adept at keeping sound financial records.”
Chitwood and Chitwood has overseen Long’s financials for a decade. Walker maintains that Long has “excellent record keeping and audit records. “They don’t pay any cash out of the offering buckets. You must submit a purchase order and check request in order to purchase something,” he says. “Then the check is disbursed and signed by the business staff. All offerings are collected and deposited into the church bank account. Receipts are given to people who make donations to the ministry.”
WALL STREET MEETS THE PULPIT
Kirbyjon Caldwell, pastor of one of the nation’s largest Methodist churches, has spent years building a reputation for trustworthiness. His Houston-based church, Windsor Village, which has 15,000 members, comprises nine nonprofit organizations and is known collectively as “The Power Connection.” Each nonprofit is a separate entity with its own board and budget.
The key to this network is the Pyramid CDC, which manages The Power Center. Through Pyramid CDC, the church turned a once-dilapidated shopping center into a thriving business strip, developed affordable housing, and is in the process of building a 234-acre planned community. The independently managed 501(c)3 organization also supports the community through an AIDS ministry, an emergency shelter for abused children, a private school, and other community organizations.
Caldwell sits on the board of one of Windsor’s nonprofits. He maintains that independent boards-operated mostly by volunteer entrepreneurs and local executives-provide the checks and balances necessary to ensure financial integrity. Caldwell says that not everyone immediately grasps
the spiritual purpose behind the Power Center and Windsor Village’s other economic development programs, but he hopes to change that through the church’s philanthropic endeavors. “I think one of the real demons in today’s society is poverty,” he says. “We should do whatever we can do to address social disparities.” Caldwell calls it “taking the sanctuary to the streets.”
His style includes a bit of Wall Street savvy. Before Caldwell became a pastor, the Wharton Business School graduate was an investment banker. In the late 1970s, he heeded the call of the ministry, walking away from a lucrative salary and dreams of corporate success. But not entirely. Caldwell’s church began with 25 members but grew quickly. Over the years he took risks. He purchased The Power Center, an abandoned 104,000-square-foot center in the neighborhood. Initially, the real estate venture, a $6.6 million investment, did not appear to be lucrative. But Pyramid CDC raised a portion of the money and took out a loan to broker the deal.
Under Caldwell’s leadership, The Power Center has become a buzzing shopping center that is now home to a J.P. Morgan Chase Bank branch, a private school, a family health clinic, a pharmacy, an optical center, office suites, and a large banquet facility. The Power Center pumps about $14.5 million into the local economy annually, attracts 9,500 shoppers monthly, and employs 257 people.
Despite those who question mixing businesses and faith, church leaders like Jakes, Maclin, Long, and Caldwell represent the black community’s only line of defense against apathetic politicians and failing institutions. They are the last bastion of social entrepreneurs, creating businesses that appeal to congregants’ spiritual needs and providing jobs within African American communities.
“Some people say that is not in the Bible,” says Caldwell. “Almost one-half of the parables in the New and Old Testaments deal with money. We are representing in the 21st century what the Lord said and did in the New Testament.”
HOW TO HOLD YOUR CHURCH ACCOUNTABLE
Churches must institute a strong system of checks and balances to ensure that those at the helm are held accountable for the financial dealings of the ministry, says Danny Freeman, author of Building Wealth through Spiritual Health. The following are some recommendations:
Churches with budgets over $250,000 should hire an outside firm to conduct annual financial audits and share the information with parishioners, recommends Daniel Borokoff, leader of the American Institute of Philanthropy in Chicago.
Pastors should grant authority and leadership positions to laypeople within their congregations who have the expertise to help govern church-affiliated businesses and nonprofits, says Preston Williams, a retired Harvard University Divinity School professor.
To avoid conflicts of interest, an outside board of directors should monitor church businesses and all executives of church-affiliated business should be fully disclosed, says Freeman.
John Walker, chief creative officer at Tennessee-based Chitwood and Chitwood, says a pastor should be paid a regular salary not compensated by a pastor’s aid club fund committee. He believes it’s unethical to pay cash out of the offering bucket to an evangelist or to use one offering basket for pastor and one for the church. Good financial accountability has record keeping that tracks how money is collected and distributed and leaves a paper trail of receipts.
The use of fundamental business principles are essential for church deacons and trustees. “Good financial operating procedures make sure that the funds are extended properly and consistent with ministry priorities and overall financial posture,” says Stanley Featherstone, a deacon at the First Baptist Church of Glenarden in Prince George’s County, Maryland.