Sign Up!


Updated 1/10/2013
2011 Form 990

Updated 6/22/2011
3ABN sued
over Tommy!

Added 3/14/2010
Can 3ABN Survive?

Added 11/16/2010
Judge Rejects
Plea Deal

Updated 4/2/2010
Tommy Shelton

Must Read:
Mom in Pain #1

Mene, Mene,
Tekel, Parsin

The Actual Lawsuit
IRS Criminal Investigation

Can 3ABN Survive THIS litigation???

< Prev.Next >

What litigation, you ask?

Reportedly, Jim Gilley and 3ABN received a demand letter from the law firm of Manly and Stewart on or about August 18, 2010. There are indications that 3ABN then explored the possibility of settling the claims of the victims of admitted pedophile Tommy Shelton without a lawsuit being filed.

Reportedly around December 2010, Manly and Stewart asked Jeff Anderson to serve as local counsel for the upcoming lawsuit.

Both law firms are often in the news:

Save 3ABN will continue to bring you coverage as events unfold.

Can 3ABN Survive THIS litigation???

Settle or die would seem to be the options for 3ABN as the days tick toward an inevitable collision with the law firms of John Manly and Jeff Anderson, battle-hardened predatory pedophile litigators.

There is virtual silence on the 3ABN side regarding any ongoing consideration of the demand for settlement, and no leaks in the wall either, a rather unusual institutional feat. It would clearly indicate that a very narrow number of officers and directors are even aware of any ongoing negotiations.

Some have speculated that there is a fracture in the board evidenced by the recent resignation of Dr. Walter Thompson as the Chairman of the Board after two decades as only the second 3ABN Chairman. Dr. Thompson is said to remain on the board and simply resigned the chairmanship, and sources simply explain it as a combination of age and growing infirmity that has impacted his ability to travel as frequently as before. But he has been traveling to promote his most recent book, and recently spent substantial time in Loma Linda to promote his latest release.

There is no word on a replacement, officially or unofficially. Some have proposed that Danny Lee Shelton is intending to take the position of Chair. There has not yet appeared any documentation to give clarity to the appointment of a new chair, and with the pending battle with the Manly-Anderson team it is unlikely anyone is running for the position, and Danny Lee Shelton could pick it up by default.

Given the pending hostilities and the probable collapse of negotiations, the board needs to take a very proactive position in a way it has only marginally done for the past twenty years. In fact, it is likely the directors will be defendants, and it would be unwise to leave that defense to Danny Lee Shelton and James Gilley with the counsel of Gregory Simpson since they could become liable for very substantial sums that could prove overwhelming.

3ABN is certainly moving forward with the execution of its business plan as if no disaster is imminent. The Urban Channel has an appointed General Manager, and rumors seem to point to a pending new wedding for Danny Lee Shelton with that new General Manager, the Naturopathic Doctor, Acupuncturist, and Ancient Chinese Medicine practitioner, Yvonne Lewis-Bradley-Booth* turned General Manager following a warm relationship with Danny Lee Shelton for more than a year, and an old friend of C.A. Murray since at least the early 1990's. Clearly they see no imminent danger, despite vicious efforts to suppress witnesses in the Virginia pedophile criminal trial of long alleged and now admitted pedophile Tommy Ray Shelton.

Sources at the General Conference (GC) and Adventist Risk Management (ARM) unanimously assert that ARM does not see any liability regarding these claims despite several church employees having served as directors over the years. Since there is not any current litigation and ARM would be invoked upon the need to defend officers and directors that were direct employees, and then subrogate those claims against 3ABN if they failed to reimburse legal fees and judgment awards, it is not surprising that ARM would be denying any claims liability at this point. Also, given the size of the claim and since liability is not yet apportioned, it is clearly not a "priority" for risk management.

The fact that ARM is not at the table and participating in any mediation process would suggest that any negotiations at this time are doomed to failure since:

  1. 3ABN is unlikely to be willing to meet Manly and Anderson's demands.
  2. 3ABN is unlikely to be financially able to even seriously consider an eight figure demand without the help of the officers and directors, and ARM.
  3. Counsel for 3ABN is not known to have the experience in structuring these kinds of settlements.
  4. Counsel for 3ABN has every incentive to let Manly and Anderson serve all the parties, advance the litigation agenda, and reopen the hourly billing deluge upon 3ABN for this sure-to-be-massive addition to the firm's billable hours in 2011, obviously hoping that individual directors elect to have his firm represent all of them in the action, an unlikely and controversial (not to mention, ethically challenged) effort on the part of Attorney Simpson and company due to several potential conflicts.

However, based upon expert review, it is these experts' assessment that 3ABN alone is unable to even remotely meet any demand in the eight-figure range. And 3ABN's attorney does not have sufficient experience to prepare a "structured settlement" proposal to fit 3ABN's situation. And it is clear that the board, with several millionaires that have served over the years, have yet to seriously enter the fray.

Since there is no evidence that 3ABN has Officers and Directors' Legal Liability Insurance to cover officers and directors from claims that Attorneys Manly and Anderson are most certain to assert, we must fall back to 3ABN's bylaws whereby 3ABN agreed to indemnify directors for their defense costs and any judgments of the courts. That agreement would be contingent upon 3ABN having either sufficient cash-flow or sufficient assets that they can either sell or leverage (borrow money against) to meet the costs of this litigation or any pre-litigation settlement.

While there are some who believe that the IRS Form 990 annual report is an indication of the ministry's real value, an auditor and an investment banker were recently asked to assess the ability of the ministry to resolve these claims on its own. They were both quick to point out that the stated assets are significantly inflated in the current economy. These are assets that were largely acquired prior to 2007 and real property values alone have dropped in Southern Illinois by nearly 40%. The furnishings and equipment, including electronics, production equipment and communications equipment is probably worth about 20 cents on the dollar, even less at auction. And when one considers the liability to various Trust Department trust instruments, it is unlikely they have more than a mid to high seven figure real net worth at the present time for hard assets as collateral.

However, the board could conceivably leverage the entire business, a process Adventist Health Systems (AHS) did with impunity via industrial development bonds, a concept that Director Larry Romrell, Director Ellsworth McKee and former directors Garwin McNeilus and Stan Smith would be familiar with. However, leverage was the bane of AHS and would create a serious dilemma to most of the directors who would be far less likely to accept leverage as a financial solution, particularly when they are the ministry created to "counteract the counterfeit," and counsels to the SDA church discourage borrowing.

Any leverage option would require a look at another valuation approach that would relate to the value of the business and good will as an operating entity, and what its sale or merger value would be. The first issue of sales value is complicated and delimited because getting any privatization of a non-profit in Illinois past Attorney General Lisa Madigan's office is extremely unlikely without a huge tax penalty. As a non-profit, 3ABN assets would have to be sold and the proceeds (if any were available after liens and judgments) distributed to another non-profit, limiting the salable value or merger value of the company.

The other problem is that the combinations of litigation, and a significant downturn in the economy, has eaten into 3ABN's income from gifts and sales of products. The current affect on wills and trusts is not clearly known but is unlikely to have been positive. With a deteriorating balance sheet and income and expense ratios, an investment banker is not likely to be able to loan a sufficient sum to meet even the present value of a demand under a structured settlement.

Most non-profits end up "merging" or are liquidated to another non-profit. Given that ARM may well be the largest potential creditor and is a part of the 501(c)3 qualified General Conference of Seventh-day Adventists, they and the North American Division (NAD) may well have a very large incentive to work out a "liquidation merger" into the NAD, which is sponsoring parent of the HOPE Channel. This is a good reason for these church entities to have been at the table for any negotiated settlement from the beginning.

For all the above reasons, it is highly unlikely that a leverage solution is viable. Leveraging would also, in fact, bring into controversy the assets that purportedly back the various trust instruments and other financial commitments based upon the 3ABN assets, the disclosure of which would leave state oversight entities (it varies by state) clearly having to deal with a consumer fraud concern in the event 3ABN defaulted on these trust instruments to the investing parties. They could require a bond or even order them to cease and desist from providing trust instruments to that states' consumers as has happened in Washington State and elsewhere.

While we have not yet seen the subject complaint from Manly and Anderson, we have observed prototypes in other jurisdictions done by Jeff Anderson and would presume the complaint will be similar with specific complaints for Racketeering, Personal Injuries, Negligence, and Fraud. A typical case seems to go into great detail regarding background to build a foundation to support the various tort offenses such as RICO violations under 18 U.S.C. §§ 1962(c)–(d), sexual abuse, battery, breach of fiduciary duty, vicarious liability (respondeat superior), negligent retention and supervision, fraud, conspiracy to commit fraud, and the inevitable intentional infliction of emotional distress.

Once the complaint is served, given the track record of the flamboyant Manly and the doggedly persistent Jeff Anderson, you can safely assume this case will cost MILLIONS to defend, and is unlikely to settle for less than a mid-eight-figure sum as new plaintiffs emerge from the woodwork and transactional details lay bare the years of cover up for Tommy Ray Shelton.

It is likely financial issues will be exacerbated by the publication of this massive litigation and gifts will begin to dry up, wills and trusts will think twice or cancel, and constituency support in the Seventh-day Adventist Church becomes uncertain at best.

Assuming they have good counsel it is very likely they will have to consider very seriously bankruptcy court protection, making it highly probable the broadcasting board may be forced to elect to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Given the devastating effect this would have on credibility with the stockholders in the pews, it is very likely this would turn into an orderly liquidation as I do not see that they would be able to develop a successful reorganization plan.

The result is likely to mirror the massive cross-fire of claims we saw in In re: Boston Regional Medical Center where at last count there were 76 claims and cross claims, and many a director paid dearly for the ignorance and failure to oversee and supervise the management of this century-old original SDA Medical Institution whose very site was chosen by Ellen G. White and where Dr. John Harvey Kellogg mentored his surgical and medical skills.

The saddest part of this arduous journey is that we approached the directors to deal with the issue in late 2006 and were virtually and distinctly ignored. Without 3ABN to protect them, it is likely the directors themselves will find themselves defending against the claims from their own pockets for charges that could have been so easily handled in a Christ-like way and been largely resolved four years ago. But, the officers and directors dug in their heels with pride-filled hearts and had to ask, "Who are these people to question us?"

NOW they must deal with a far more powerful Gentile force . . . . C'est la vie, and may the Lord have mercy on their souls.

G. Arthur Joy

* For Yvonne Lewis-Bradley-Booth and Danny Lee Shelton, this would be at least the third walk down the aisle for her and the fourth for Danny, and will be the subject of a future release. Photo contributions will be accepted.

< Prev.Next >
Not © 2011