Watchdog group: Church violated federal tax law

A complaint alleges that the Living Word Christian Center arranged sweetheart deals for its senior pastor, helping him buy a plane and home.

9 Feb 2007 // WASHINGTON - A Washington watchdog group alleged Thursday that the Living Word Christian Center in Brooklyn Park illegally arranged lucrative deals for its senior pastor that allowed him to buy a plane and a house in Florida.

The group, Citizens for Responsibility and Ethics, says in a complaint to the Internal Revenue Service that the church violated federal tax law that forbids insiders from benefitting from a charitable organization. Between 1999 and 2004, the group says, the church made eight loans worth $1.9 million at favorable rates to its senior pastor and founder, James (Mac) Hammond.

Hammond could not be reached on Thursday, but the church released a statement saying that all contracts and financial transactions are reviewed by its law firm and audited by its accounting firm and that it makes every effort to comply with tax laws.

"Living Word and those outside professionals involved in the conduct of our financial affairs remain confident any fair review of our dealings will reveal the validity of our effort to consistently be an accountable and honest ministry before God, our congregation and our community," said the Rev. Marc Redman, associate pastor.

The complaint alleges that Hammond bought a plane from the church, partly on credit, and then leased it back to the church. The church's lease payments to Hammond each month were twice the amount Hammond paid the church to buy it, according to the complaint.

"Pastor Hammond and the LWCC have shown a disturbing pattern of violating federal tax law and the IRS has done nothing," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.

What some records show

Records show Hammond has two Florida condos worth more than $3 million. He pays no taxes on a home in Plymouth that has a pool.

A Lexus and a Porsche are registered under Hammond's name, as well as three boats. A home near Brainerd valued at more than $500,000 is used as a retreat and is church property, a church spokesman said recently.

In a recent interview with the Star Tribune, Hammond said he keeps track of the personal use of his jet and repays the church.

Flight plans gathered by Fboweb.com show that Hammond, who flies his plane himself, makes many trips to cities where other prominent Word-Faith ministries are located. But he also uses the jet to travel to his condos.

The Washington group said the case came to its attention after a blog, Minnesota Monitor, provided it with loan documents detailing transactions between Hammond and the church.

It's the second complaint the organization has filed with the IRS involving the church and its pastor. In October, it accused Hammond of violating the prohibition on churches engaging in electioneering activity.

The complaint was filed after Rep. Michele Bachmann, R-Minn., who was then running for Congress, made a speech at a service. During an introduction, Hammond told church parishioners he would be voting for Bachmann.

A Minnesota spokeswoman for the IRS said the agency had no comment on either complaint.

"We can't confirm or deny a complaint," said Carrie Resch, who works in the St. Paul office of the IRS.

According to a tax guide published by the IRS, charitable organizations jeopardize their tax-exempt status if they provide "a substantial benefit to private interests" or engage in activities that benefit "insiders," which can be defined as ministers, church board members, officers or employees.

Examples of prohibited activities include the payment of "unreasonable compensation" to insiders and the transferring of property to insiders for less than fair market value.

Hammond and his wife are two of the seven members of the church's board of trustees, making them "insiders" under federal tax law, according to the complaint.

'To educate the public'

Citizens for Responsibility and Ethics is a nonprofit watchdog group that tries to focus public attention on government integrity and "to educate the public about dishonest or disingenuous government officials."

In some of its other recent cases, it sued the National Archives and Records Administration to gain access to White House visitor logs, and it sued the Department of Homeland Security for allegedly violating the Freedom of Information Act.

"We will help Americans use litigation to shine a light on those who betray the public trust," the organization states on its website.