CHAPTER I
WHO RUNS THE STORE?
The Wall Street Journal called
him "one of the kings of the nation's postal landlords. . . . Dr.
Davenport, the Long Beach Post Office collector, claims neither rich yield nor
tax benefits motivated him. It's the bidding that appeals to him, he says. 'I
love to get in just barely under the next guy." 1
That may have been so, but when
his empire collapsed in 1982, millions were missing in the 69-70 million dollar
fraud and neither Davenport nor his wife would tell the court where they had
spent or sent their part of the millions. Also, the real landlord of those post
offices turned out to be the Seventh-day Adventist Church with several hundred
of its leaders and divines helping the Doctor launder his actions and money
through the church's laundry.2
It is an incredible story, even for a people who had just been caught with its prophet lying about her gifts and her material.3 It ranks in size with the Catholic Church financial scandal and perhaps would have received greater attention if both stories had not broken in the news at about the same time. The Doctor and his partner, the church, fleeced banks, insurance companies, financial institutions, the Internal Revenue Service and the elderly poor of the church out of millions; yet no one involved in the crime was fined, no one went to jail and no one of significance was fired from his job, even though the theft of a loaf of bread or a stolen bike can and does bring a fine or prison sentence.
The Doctor still drives his Mercedes 380SL and the church still talks about holiness, while its divines implicated in the caper still retain their same positions, still maintain their innocence and still continue to exercise authority and control over the purse strings of its members.
The detailing of Davenport's activities is bizarre enough in itself, but compared to the undercover moves of the divines of the Adventist Church, they pale into insignificance. To understand them fully and to see the enormity of the deceit practiced and the fraud participated in by the church and its leaders and clergy, one must realize the claims of those clerics and their church.
First it must be noted that these leaders were responsible for keeping before the membership the shortness of earth’s time and history. Every world event, great or small, was noted by them as a sign of the end. This could often take a monthly or yearly apocalyptic view. Yet these same leaders were investing their personal money as well as the church’s in Post Office leases that could and often did run to twenty and even thirty years in length, with no possibility of cancellation. Did these men really believe what they preached to others that each day, week, month or year might bring the end of all things?
These leaders were foremost in preaching the poverty of Christ, at least for others. When the bankruptcy creditor list was released it was revealed that many of those men had invested for themselves or for their church, not thousands or tens of thousands, but even hundreds of thousands and millions. Where did these men of the vow of poverty for themselves and their church get this kind of money? Were they using church funds or their own personal use and then repaying it after they collected the interest on those funds? Were federal taxes paid on their personal amounts or did they wash their money, along with the church’s so that no tax was paid? None of these questions have ever been answered publicly.
The church and its leaders teach that its clergy should have no conflict of interest while in service to its people. Yet the evidence will and does show that most of the investors speculating with the church’s money had personal amounts invested with that same man who was either a partner for the church or a vendor with it. Often the clerics would receive “finder’s fees” for merely transferring the church’s money from one account of the church to another of Davenport’s, both of which they either controlled by their vote or actions; or, as evidence showed at the court hearing, they used joint accounts with the Doctor for these transactions.
For years the church has opposed speculation by its members. It has talked against investment in the stock market, while investing and losing millions in it. It has preached that all surplus funds, both personal and collective, should be used to “finish the work” of the church, not be put at risk for individual profit. Yet time and evidence has shown that Davenport and the way he had the divines did his business was one of the greatest risks that the church could have taken. Many of its leaders knew this, but, like players in musical chairs, believed they could get out before the collapse came, which some actually did.
There is no doubt that crimes were committed, serious crimes for which severe penalties could be assessed. Judge Finney, one of the members of a committee appointed to study the afterglow of the Davenport matter, stated that if some of the culprits in the Davenport scandal had appeared in his court they would and could have ended up with prison sentences.4 How then could such events come to pass in a church whose members believe that their leaders should and do represent Christ and whose characters they believe, when perfected in God's sight, will bring the end of all earthly time? Were these simple holy men, innocently lead to their embarrassment by a cunning con man, as some would have the public believe, or were these leaders and divines part of a vast crime of great magnitude?
The detail of facts is not pleasant but as I stated in The White Lie these facts are presented here for all those that would rather believe a bitter truth about their church than a sweet lie. A crime was committed by all those leaders and individuals who were involved with, or knew of, the Davenport matter. To involve one's self in fraud, conflict of interest, manipulation or cover up is a crime. Even the failure to report a crime is a crime in many instances. The fact that the Davenport matter was and continues to be hid from public or private view shows clearly that those involved in or with knowledge of events recognized they were involved in a crime, else why should they hide the facts of their knowledge or involvement?
Finally, it is glaringly clear that the hypocrisy of the Davenport debacle equals the hypocrisy of the Ellen G. White lie. Adventists teach that they above all others fashion their lives and actions by the writings and counsels of their prophet, Ellen G. White, yet the Davenport fiasco went against all the counsel she ever gave whether that counsel was "inspired" or not. With respect to other areas of her advice, the world could plainly see that the leaders of her church only give lip service to her writings for themselves, while seeking to enforce it upon their membership. Discipline, the key and essence of the writings of Ellen White, was completely lacking for the leaders in the Davenport matter."
Some might be tempted to reason that enough has been written and explained about the church's involvement with Dr. Davenport and that the sooner the whole matter dies out the better for all concerned including the church and those leaders who would like to cover their trail. Those who reason thus overlook several things:
1. Nothing has really changed in Adventism except the cosmetics of the system. Most of those same men are in the same positions, doing the same things as they had done before.
2. There is no evidence that real change will come. The crimes committed by the clergy of the church were moral and spiritual crimes and as yet there have been no sincere confessions of those crimes. After all, in spiritual matters the church itself teaches that the leopard cannot change its spots or the Ethiopian his skin; no more can those who are accustomed to do evil change.5 All the facts show that those divines had been accustomed to doing evil for a very long time.
3. Some of the names that were made public and received minor embarrassment were only functionaries, while some of the big names and fish got away. It would have been better for all to be brought to the bar of justice in some court of law where the innocent could have been cleared and the guilty punished.
4. Many voices were raised for years against the practices of the church and its divines. These individuals should at least be recognized for the honest heroic part they played and how they suffered for their honesty.
5. Finally, people both inside and outside of Adventism should be given at least the opportunity to rethink their involvement emotionally, theologically, and financially in a system where those same men connected with Davenport still make the church's decisions in these other areas of involvement.
In an article entitled "Bad Business: The Davenport Fiasco," Tom Dybdahl, writing for Spectrum, does a fine job of reconstructing the backdrop that led to the Davenport connections and the Adventist church. He said:
Davenport himself was born in Bakersfield, California, in 1913. His
father was an Adventist doctor who had been a pioneer missionary to China.
Young Donald decided to follow in his dad's footsteps, and in 1940 he graduated
with an M.D. degree from the College of Medical Evangelists in Loma Linda.
Early in his career as a
general surgeon, Davenport developed a little sideline - building post offices.
"I was tired of standing in line for packages," he told the Wall
Street Journal in 1968, "so I asked the fellow why they didn't build a
bigger building. He said, 'Why don't you?' and I said I couldn't, it was the
government's. He said I could - so I did." 6
It made a good story in the Journal but Donald was far more interested in building post offices than just for collecting stamps or saving time. It was very clear to those involved with the Doctor that his purpose was to make money first for himself, and, if any was left over, for others and the church. Secondly, he had set up his program to avoid taxes, and was suggesting shelters, and said so in a letter to his clients in 1968:
There are two expressions which come to my mind which have been used by
big business people and the Internal Revenue Service and they are as follows:
1. Tax "avoidance" is perfectly legal.
2. Tax "evasion" is perfectly illegal.
. . . Several of you folk have
quite a sizable account with me and the interest on this, coupled with your
income, has put some of you in a very high tax bracket and this has taken away
a lot of the benefits of this program and so I have been on the search for
something which I think would help and I have been in touch with the Internal
Revenue Service, Taxpayer's Office, Los Angeles, and I have come up with a plan
which is perfectly legitimate, perfectly legal and will help some of you, . . .7
Several times in the letter he tells his investors what a wonderful fellow he is and why he is doing all this for them:
This is what I propose to do
now. I will send a letter to each one of you. It may be just in the form of a
card, advising you how much interest you could (he supplied the underline)
receive, if you elected to have me send you a check. . . . . ~ . you may say
you do not want any of that money. Then, I will not send you a check. I will
keep a record for you and that interest will accrue and will bear interest also
so when you do decide to receive it, you will receive the interest you have
deferred plus the interest which has accumulated on that money. 8
(Ed. note: This footnote numbering is not in the
original manuscript. It is my best
guess at what the writer intended. )
. . I would state sometime
around the 1st of October, you will receive a letter from me telling you what
you could have earned if you elected (again underline supplied by Davenport) to
take your interest this year and then it is your obligation to tell me if you
want all of the money, part of the money or none of the money. 9
No wonder with the ability to write letters like that, one of the attorneys said after reading it that "that fellow Davenport comes across as a hell of a guy!"
But he wasn't fooling everybody. By the time 1978 rolled around he had improved his technique, but the game was the same, only more sophisticated eyes were reading his mail. He wrote Attorney Jerry Wiley at the USC Law Center the following:
Dear Dr. Wiley,
Dr. Raymond Moore of the Hewitt Research Foundation asked me to send
you a copy of the letter which I sent out regarding the 16% special purpose
account.
I think that you will find this letter self explanatory and if you have
any questions, please do not hesitate to contact me. 10
In his letter he was soliciting funds, though he denied it, but he does lay down the policy whereby he again can make the people rich by "unusual opportunity" for one year and it paid very excellent returns. But Wiley was asking questions and in his return letter of January 6, 1978 he lays them out:
A. My first concern is whether it is legal for us to receive 16% per
annum on a loan in California. . . .
B. . . . I would want to know
who has access to the securities; what the securities are; and whether they
have been pledged for any other collateral activities. . . .
C. . . . . Additionally, I suppose a thorough fuduciary (sic) would ask
for references of satisfied prior lenders to contact as well. 11
Davenport's response was a classic. It said:
This letter is in response to your recent inquiry about loaning me some
money for the 16% special purpose project. I wish to advise you that just this
morning I have received all of the funds that I wish to have allocated to this
project. So, I will not be in the market for any more funds. 12
The rest of the short letter was full of chattiness which said either nothing or everything to those who read it. Wiley was more concerned for the church than he was concerned legally. He was a church elder, member of the Loma Linda board, chairman of several church boards, and he knew from these experiences trouble lay ahead. The Spectrum Journal reported:
About the same time, Jerry Wiley, an Adventist attorney and currently
an associate dean at the University of Southern California law school looked
into the doctor's business affairs for three clients who were having difficulty
recovering their money. He came up with a rather startling analysis:
Davenport's empire was an elaborate scheme, which would work only as long as
there was cash from new investors coming in to cover the payments to old
investors. He shared his findings with Neal Wilson, then president of the North
American Division. Wilson expressed considerable doubt that anything was wrong,
but he promised to take up the matter with Kenneth Emmerson, the General
Conference treasurer, and Cree Sandefur, Pacific Union Conference president.
But again, nothing seemed to change. 13
Neal Wilson's hearing did not seem to improve after he was elevated to the office of General Conference President. Jerry Wiley wrote again to him on March 18, 1980 the following:
On another matter, you will recall that some years ago I came to you
with the problem of Dr. Davenport. The people calling me, and others in
Southern California, have led me to believe that that issue has now reached
crisis proportions. Once again, I offer my services to the church in helping to
solve this problem even at this late date. . . .While I will be in Dallas
briefly during the General Conference session, I expect you will be entirely
too busy to have time for quiet reflective talk on the Davenport matter, so I
offer my services at some other time if you wish. 14
Still, without hearing from Wilson, another letter was sent in May of that year.
On another matter, the Tennessee
Conference appears to be getting extraordinarily poor legal advice in terms of
the responsibility of trust organizations and trustees for the investment of
funds. This issue undoubtedly arises out of the Davenport matter. If there is
any way in which I can be of service on either of these items, please do not
hesitate to call on me. 15
Almost as if it were deliberate, the only thing that came from headquarters and Wilson was silence. Still Jerry tried one more time by calling, but the General Conference was non-attentive. Perhaps they still remembered the letter Wiley had sent to President Harold Calkins of the Southern California Conference in 1976, where he said as strong as he could:
As you may recall, both Robert M. Peterson, Esquire, and I have expressed
detailed concerns about the legal structure, and management of the Southern
California Conference's Trusts and Deferred Giving Programs as operated by the
Association. . .
Please note the next to the last paragraph in the left hand column
concerning the investigation launched by the Oregon attorney-general's office.
Unless the Association has changed its operating practices considerable, we are
no less vulnerable today then we were 18 months ago.16
It is hard, now that events have taken their course, not to believe that Wilson did not want to take any action in the Davenport matter and did not until events, which were partly of his own making, overtook him.
It was not just Jerry Wiley who was trying to get Neal Wilson's attention in the Davenport matter. Men high up in his own office were knocking at his door without much success. Elder Kenneth Emmerson, treasurer of the General Conference, had been fighting a losing battle with Robert Pierson, former President of the General Conference, who, it turned out, was a friend and creditor of Davenport. In a footnote of Spectrum Vol. 12, it was reported:
As far back as September 1967, the General Conference treasury became
concerned, leading Emmerson to ask Robert Osburn, as assistant treasurer, to
investigate church investments with Davenport. During the years following, in
numerous treasurers' councils, trust services advisory meetings, the treasury
insisted that church organizations follow established guidelines.
Unfortunately, although at least one union began withdrawing its investments,
many others simply ignored the guidelines. Emmerson's letter of April 6, 1979
to W. J. Blacker, Loma Linda University vice president for financial affairs,
reflects a decade of treasury's continuing concern with Davenport. Noting that
he had recently heard that Davenport was approaching Loma Linda regarding an
investment "scheme," Emmerson wrote: "To put it mildly, I was
alarmed, concerned and almost angered over the thought that anyone at Loma
Linda University would even entertain such an approach . . ."
Interestingly, Loma Linda University President V. Norskow Olsen was a friend -
and creditor - of Davenport. 17
In a paper entitled "A Tale of Three Presidents, An Adventist Tragedy", by a Jack Eartherall, written in June of 1982, President V. Norskov Olsen is given a section where his friendly relationship with Dr. Davenport is given airing. It would seem from the facts that Olsen received special treatment as well as special interest while serving in the interest of both the Medical School and Dr. Davenport. According to the reports of the court prepared by the bankruptcy court, Davenport owes Olsen $45, 000 in principal and a disputed amount of interest. What he seems to have gotten for that investment was shown in a letter from Davenport to Elder Burt Pooley, treasurer of the Montana Conference, in which he said:
I had several calls from Loma Linda University from the president and
the comptroller wanting me to help them get a $7,000,000 to $10,000,000 line of
credit because their payments on Medicare and medical (sic) are late and it is
causing them all kinds of problems." 18
Emmerson, the treasurer of the General Conference, had received a letter from me on February 16, 1979, just prior to his letter to Loma Linda and Elder Blacker. In it I said:
Yesterday one of my leading laymen came to me about the Don Davenport
matter and the involvement of the church. It is now clear that it is becoming
more and more known that there are serious problems in this area. I am sending
you a copy of a letter that I sent to the President of the General Conference
about the matter. I had hope by calling the attention of the church to its
delicate position that perhaps the men involved would draw back and encourage
others to do likewise. This has not been the case. In fact just the opposite
has been true and we seem, in some cases, to be encouraging disaster. While the
list I presented was an old one, the new list is even more expansive and
involved on a personal level, while the church's role has not been abated and
the usages of funds in the matter continue to grow in some areas. The total
amounts of both personal and denominational monies would, I believe, horrify
the most liberal of our members, while the collateral risk escalates. I have
wondered since writing, if the persons in the work that are on the list and
have encouraged others to invest, as well as involving the Conference, are
willing to guarantee the risk factor with the less sophisticated investors,
who, through confidence in the brethren, have risked part if not all of their
savings in this venture.
It would seem the place of the Church to monitor its own actions and
its own personnel before other agencies are forced to do it for us. If at this
time, with the problems we are having in religion and sects in California, the
S.E.C., the I.R.S. and the State Attorney Generals Office should become
involved, the implications could be enormous for the church.
Inasmuch as it all started here in California and in this Union, it might
be well if you would contact Jerry Wiley, the attorney on the Loma Linda Board,
a man that has been concerned for some time about this affair and has expressed
to Church officials these concerns. It would seem that time is not our ally,
and to do little or nothing could be disastrous. 19
We may never know if my letter to Emmerson affected his thinking and his letter to Elder Blacker of Loma Linda, but we do know that the letter I wrote affected his thinking because he wrote to my president, Harold Calkins, on April 10 of that year and sent Jerry Wiley and me a copy. To Harold Calkins, he said:
I have read with a great deal of interest the correspondence between
you and Walter T. Rea, and I have been constrained to write just a few lines to
you inasmuch as he mentions me in the second paragraph of his letter to you
under the date of April 3. I presume he is referring to the correspondence we
had as it might concern Dr. Don Davenport.
I am entirely sympathetic with him and his position as concerns Dr. Davenport;
and certainly, Harold, both you and I are concerned over the Loma Linda
University development program as well as the Paradise Spa. Thankfully, it
looks as though the Paradise Spa situation will be cleared up rather shortly,
and I am sure all of us are going to have a praise service to the Lord once
that has finally been taken care of. It is most unfortunate that some workers
in the past have been so imprudent and lack concern that they would get an
institution into the situation that the University found itself about the time
that some of us were taking over our present responsibilities. 20
This part of the Emmerson letter holds a lot of fascination for me because of the reference to the Paradise Spa. Elder Blacker of that same Loma Linda and I had had a run-in about that business before the letter from Emmerson. On my vacation in Tennessee a year or two before, I had mentioned the Spa in a sermon in one of the churches. In the audience was a retired General Conference under-treasurer, and at the mention of the spa he had spoken out rather loudly "that's not true, brother," and I said that it was true and continued with the sermon. Upon returning to my home in California, Elder Blacker, then the President of the Pacific Union, sent for me and showed me a letter he had received from that retired treasurer. It said that he thought I was dangerous and should be stopped from saying things about the spa. I had taken several laymen with me and Elder Blacker proceeded to apologize for the spa. It was true, he admitted, that women, wine and song had been rumored to be connected with it, but that President Pierson had asked that the saloon be closed on Saturday, the Adventist Sabbath, which he somehow felt was a step forward. That spa had been giving the church a lot of trouble for some time-- some thought that it was tantamount to an Adventist brothel and that the reason the church did not give it away or shut it down was that it might put some of our girls out of work. Davenport even got into the act when he wrote:
I know very well about the millions of dollars that were spent for the
Spa in Las Vegas and that too has been swept under the carpet as well as it
could be by the Church's religious broom. I have been asked to help unload that
deal out there and I have done the best I can and it is impossible, but nobody
says anything about that.21
Blacker and I had clashed on other things. One was the information I received that he and some of his cronies from the Union had just happened to buy an orange grove which just happened to be next to the land that just happened to be given free to the State of California where the new Veterans Hospital stands in Loma Linda. It just happened that the group or committee that gave that land to the State that just happened to be next to Blacker's land included Elder Blacker. All of this was recorded in the San Bernardino Recorders Office. When I asked for an explanation, I was assured that it just happened that way and not much money was made in the conflict of interest deal. It was therefore no wonder to me that slacker of Loma Linda did not or could not understand Emmerson's concern about the Davenport conflict of interest problem.
The rest of Emmerson's letter reveals how little attention the General Conference and Wilson was paying to him or how far gone the system was in matters of morality as Emmerson conceived of it or both:
Now concerning Dr. Davenport.
Recently I had a meeting with the Southern Union brethren concerning
this particular activity as well as with the North Pacific Union men; and most
recently I had the opportunity of talking with the Officers of Loma Linda
University on this matter. As of the present moment Loma Linda University is
not involved with Dr. Don Davenport in any way. However, I had heard that they
had made some overtures to the Doctor and were even, as I understood it, giving
some consideration to becoming involved. I took the opportunity to write a very
strong and straight letter to the Vice President for Financial Affairs, sending
copies to the Board Chairman, the University President, and two or three of my
colleagues. In the letter I stated that they should have nothing whatsoever to
do with Dr. Davenport or any of his financial "schemes." I further
pointed out to them that if this should occur, they should expect a very strong
reaction from the General Conference and that it would, without a doubt, very
seriously affect the financial backing of the General Conference to Loma Linda
University. I pointed out that they should have no dealings whatsoever--
financial or otherwise-- with the Doctor; and although I did not explain why in
the letter, I did have the opportunity to talk personally with these brethren
and explain why.22
Once again in the letter he said that he appreciated very much the position I had taken concerning Dr. Davenport, but at the end said, "It is the operating committees and boards that will have to take the actions needed to disassociate themselves from their relationships with Dr. Davenport and his program." 23 It was an interesting letter in the light of what was to continue and especially a later letter that Emmerson signed along with Wilson and Bradford. It was issued a few months after his letter about me, dated August 10, 1979 and was sent to Union Conference presidents and treasurers, General Conference department heads and chief financial officers of the North American Division. It started by saying:
Investigation and discovery procedures have been initiated by certain people to determine what relationship exists between the Seventh-day Adventist Church organization and Dr. Donald Davenport. Demands have been made that pressure be exerted upon leadership and organizations to withdraw immediately from any involvement that may be discovered. The General Conference is being asked to make full disclosure and issue a public statement as to what extent the Church is involved by way of investments in the Davenport post office and telephone company projects. AS WE HAVE CAREFULLY LOOKED AT THIS MATTER, WE DO NOT FEEL THIS IS PRUDENT OR NECESSARY AT THIS TIME. (Emphasis supplied) Up to this time we have not felt to get entangled in this controversy, . . We do not wish to overreact even at this date . . .24
The real question is why would Emmerson write to Calkins in the early part of the year stating that he was against Davenport involvement on any church level, that all should stay out of it or get out of it and then a few months later sign along with Wilson and Bradford a letter toning down this position. Was the first letter to Calkins and me only a C.Y.A. letter (as attorneys say "Cover Your Ass Letter”) in case things went wrong in the future? Or was he pressured, because of position, by others in the General Conference to go along with a softer approach, which was actually the approach taken later when the whole matter came to a head?
CHAPTER I FOOTNOTES
1. Noel Epstein, "Buying Post Offices is Profitable Ploy, Many Investors Find," The Wall Street Journal (February 15, 1968), Eastern Edition, p. 1.
2. Art Wong and James Nickles, "After the Fall: An Adventist's Bankrupt Empire," The Sunday Sun, San Bernardino, California, (4 articles May 30, 31, June 1, 2, 1982).
3. Richard N. Ostling, "The Church of Liberal Borrowings," Time Magazine, (August 2, 1982) p. 49; Kenneth A. Briggs, "7th-Day Adventists Face Change and Dissent," New York Times, (November 6, 1982) p. 1.
4. Adventist Forum, Pleasant Hills Church, Pleasant Hills, California, 1984.
5. Jeremiah 13:23.
6. Tom Dybdahl, "Bad Business: The Davenport Fiasco," Spectrum, Vol. 12, No. 1, (September, 1981) p. 51.
7. Donald J. Davenport to Dear Friends, September 19, 1968, p. 1.
8. Ibid., pp. 2-4.
9. Ibid., pp. 3-5.
10. Donald J. Davenport to Attorney Jerry Wiley, January 4, 1978.
11. Wiley to Davenport, January 6, 1978.
12. Davenport to Dr Raymond Moore, (cc to Jerry Wiley) January' 6, 1978.
13. Tom Dybdahl, "Bad Business: The Davenport Fiasco," Spectrum, Vol.12, No. 1, (September, 1981) p. 53.
14. Attorney Wiley to Neal Wilson, March 18, 1980.
15. Wiley To Wilson, May 16, 1980.
16. Wiley to Harold Calkins, October 12, 1976.
17. Tom Dybdahl, "Bad Business: The Davenport Fiasco," Spectrum, Vol. 12, no. 1, (September, 1981) p. 53.
18. Jack Eartherail, "A Tale of Three Presidents, An Adventist Tragedy," (June, 1982).
19. Walter Rea to Kenneth H. Emmerson, February 16, 1979, p. 1
20. Emmerson to Harold Calkins, April 10, 1979.
21. Davenport to Robert H. Pierson, April 18, 1977.
22. Emmerson to Harold Calkins, April 10, 1979, p. 1
23. Ibid., p. 2.
24. General Conference letter from Neal Wilson, C.E. Bradford, Kenneth H. Emmerson, M.E. Kemmerer to Union Conference Presidents and Treasurers, General Conference Institutions Heads and Chief Financial Officers, North American Division, August 10, 1979.