During nearly three decades as pastor of the Full Gospel Church of God by Faith in Wyandanch, New York, the Rev. Sherman Roberts preached a message that included excoriating young men for obsessing over their appearance and expensive possessions.

“I’m tired of seeing $60 hairdos on $6 heads. I’m tired of seeing $75 sneakers on feet going nowhere but to the corner,” Roberts said in a 1989 sermon quoted in Newsday.

In 1994, the newspaper reported, he condemned self-centeredness: “We live in a world where the first law is self-preservation.

But after Roberts died last spring, church elders discovered the pastor might not have practiced what he preached, according to fraud allegations filed in federal court.

Members of the denomination’s board of directors learned during their trip to the Long Island funeral that church buildings were being foreclosed. Further digging suggested that Roberts might have set up a secret shell company to which he transferred the buildings, mortgaging them for $700,000, the denomination now alleges in a lawsuit against the lender.

While Newsday and other papers covered Roberts’ role as a religious and sometimes questionable community leader, no news media picked up on the allegations that he defrauded his church.

Religious finance experts say the lack of public knowledge is not surprising, considering the insularity of church communities. But they say the motivation to keep graft secret, combined with lax financial controls, makes such betrayals as common as sin.

“It’s very difficult to suggest something like an internal control in the church. If you do, it’s taken like a suggestion that there might be people in the organization you couldn’t trust,” said Carol Johnson, an associate dean at the Spears School of Business at Oklahoma State University. “So they become sitting ducks for everything.”

Johnson co-wrote a 2012 study, “Fraud in Houses of Worship: What Believers Do Not Want to Believe,” which found the three key harbingers of fraud – financial pressure, opportunity and a culprit’s ability to rationalize bad behavior – are “more pervasive in houses of worship” than in other types of organizations.

Denomination files lawsuit

After 27 years in the pulpit, Roberts had gained the deep trust of his parishioners and supervisors. Even after he mortgaged two church properties, taking out hundreds of thousands of dollars in loans, his congregation, his church directors and the denomination’s overseers didn’t realize anything was wrong, according to legal filings.

It was not until after the funeral, in October, that the Jacksonville, Florida-based Church of God by Faith denomination filed a lawsuit against Carver Federal Savings Bank, also listing as a defendant Full Gospel Church of God By Faith Inc., the name Roberts allegedly gave his shell corporation.

The suit claims that in 1999, Roberts set up a corporation called Full Gospel Church of God by Faith. The following year, he borrowed $350,000 in that corporation’s name. He also bought a $325,000 house in his and his wife’s name.

The denomination said in its lawsuit that “Pastor Roberts dissipated the loan proceeds so that none of them benefitted” the church. In 2009, it said, he borrowed another $700,000 to pay off the first loan and obtain additional cash.

Churches often keep quiet about fraud allegations. Church of God by Faith is no exception.

The denomination’s website for the Church of God by Faith in Wyandanch includes no suggestion that anything is amiss, even though the church’s phone is no longer in service. A person answering the home phone of church elder Eric Meade said the church was still holding services.

Church of God by Faith Bishop James McKnight Jr. did not respond to requests for comment. There was no response to a message left at the phone number listed in the name of Roberts and his wife.

The bank involved, Carver Federal Savings Bank, did not respond to a request for comment. In the pending litigation, it stated that it had no legal obligation to verify the real estate paperwork Roberts used to borrow money.

Church fraud not closely tracked

Churches worldwide lose $50 billion per year to internal crime – more than what they spend on missionary work, according to a new report by the Center for the Study of Global Christianity at Gordon-Conwell Theological Seminary.

But that is a very rough estimate. Concrete information is sparse because “many times, churches try to settle things internally,” said Bert Hickman, a senior research associate at the South Hamilton, Massachusetts, center.

The center reached its estimate by assuming that 7 percent of total giving to Christian causes was stolen. That’s an accounting industry formula for typical fraud loss.

Tom Lichtenberger has a front-row seat to church fraud as assistant vice president for property claims at Brotherhood Mutual Insurance Co., a church insurer. Of 16,000 Brotherhood-insured ministries that suffer losses annually, about 30 claims relate to internal fraud.

Churches, he said, tend to keep quiet about embezzlement.

“If you think about a lot of churches, they have a family atmosphere, as in: ‘That family member is needing discipline.’ Or, ‘He needs to be brought back into the fold,’ ” Lichtenberger said. “That’s not something you like to air in public.”

Nonprofit organizations typically must file documents called Form 990s with the IRS, which allow members of the public to review salaries, expenditures and other financial information. Churches do not.

In some cases, “members have no idea what the church has in terms of assets,” said Johnson, the Oklahoma State associate dean. “There’s just almost no regulation of them.”

For their study, published by the Association of Certified Fraud Examiners, Johnson and her colleagues interviewed those responsible for overseeing finances at 132 U.S. houses of worship.

Among church leaders, 13.4 percent reported their organization had been defrauded during the previous five years. But Johnson and her co-researchers came away believing the leaders were vastly underreporting fraud – either because they were deluded, lying to surveyors or a combination of the two.

Affinity fraud, in which predators exploit trust among members of their cultural, social or interest group, is among the most intractable forms of financial crime.

“Anytime that somebody is in a group where they are perceived to be very similar to you, you tend to let your guard down,” Johnson said.

Making matters worse for churches, it’s common for leaders to hire family members and close friends for clerical and financial jobs, increasing opportunities for collusion.

Johnson and her co-authors also concluded that churches underreport fraud because covering up scandals may be better for business. Who wants to donate to an organization known for losing money to criminals?

Meanwhile, for many churches, belief in miracles seemed to extend to the arena of financial controls.

“Despite generally poor levels of controls, none of the respondents – even those in organizations that had experienced fraud – felt their organizations were extremely vulnerable,” Johnson and her colleagues wrote.

Secular for-profit and nonprofit organizations sometimes ward off fraud through audits, which may allow them to catch scammers before they complete their damage while also sending a warning that future schemes might be exposed.

But “churches are rarely audited,” Johnson said. “Their internal controls are so poor that a genuine audit would be close to impossible.”

Everyone should have access to the facts. Yes, I want to help!

This story was edited by Amy Pyle and copy edited by Nikki Frick. Matt Smith can be reached at msmith@revealnews.org.