WAKE FOREST, N.C. (ABP) — An unusual gift of a car to an aide of Paige Patterson — which observers say may violate tax laws — is causing a stir on the campus of Southeastern Baptist Theological Seminary.
Jason Duesing, personal aide to Patterson when he was president of Southeastern, now fills the same role for Patterson at Southwestern Baptist Theological Seminary in Fort Worth, Texas, where Patterson became president Aug. 1, 2003.
But before Duesing left Southeastern in the summer of 2003, he was given title to a 2002 Pontiac Grand Prix that belonged to the seminary. In exchange, Duesing's father-in-law later made a contribution to the seminary of $6,500 — about half the value of the car — and was told the gift was tax-deductible, according to receipts and letters from the seminary.
Ryan Hutchinson, the seminary official who arranged the gift — and later sale — of the car, is still in his role as vice president of administration at Southeastern. Meanwhile, two of the employees who later inquired about the transaction have been dismissed, though the administration says for other reasons.
Paige Patterson, who was president of Southeastern when the transaction took place, denied any involvement. But Hutchinson, as well as the seminary's trustee chairman, told Associated Baptist Press that Patterson knew about the transaction when it occurred.
“Before a decision was made, it was discussed with Paige Patterson,” Hutchinson said.
Details of the car deal spread among faculty, students and employees on the Wake Forest, N.C., campus in recent days, prompting letters and complaints circulated to the seminary community and news media.
Current President Danny Akin, in an impromptu appearance in seminary chapel Oct. 21, denied allegations of “unethical or illegal” business practices. Akin said the seminary's auditing firm will validate the school's financial integrity when it presents its findings to trustees Oct. 25, which ABP has confirmed from auditors McGladrey & Pullen of Raleigh.
Akin accused those who are spreading the allegations — some via anonymous letters — of being “carnal, unspiritual, mischievous persons.” Anyone accusing the seminary of financial misconduct “is badly misformed or they are a liar,” he said twice in his chapel address, recorded and posted on the school's website.
Akin told the chapel audience that Stephen Prescott, a popular professor in the seminary's undergraduate college, will not have his contract renewed after this semester. But Akin denied the departure of Prescott had any relation to the allegations about Duesing's car. In a later interview with ABP, Akin declined to comment on the reasons for
Prescott's departure, saying it was a private personnel matter.
Prescott, a professor of history hired to a two-year contract by Patterson, got involved in the controversy more than a year ago. He was one of two attorneys on the faculty who were consulted by seminary comptroller David Armstrong in August 2003, when Armstrong raised questions about the propriety of the car transaction.
The 2002 Pontiac was purchased by the seminary in November 2002 for $13,398 for use by visiting faculty. In May 2003, the six-month-old car was given to Jason Duesing by Hutchinson, according to an Oct. 20, 2003, memo from Armstrong to trustee Terrence Collier of Pound, Va. The title of the Pontiac was signed over to Duesing June 23, 2004, also by Hutchinson.
“He and his wife were getting ready to have a baby, and we wanted to help him out,” Hutchinson told Associated Baptist Press Oct. 21. Asked if other employees had been given cars, he said he didn't know. “We help employees in many different ways,” he said.
When Armstrong asked Hutchinson about the transaction July 31, 2003, he was told the car was sold to Duesing for $6,500 and paid for with a donation, although there was no record of the transaction in the seminary's accounts, according to Armstrong's memo.
Armstrong reportedly asked Hutchinson where the payment for the car was. In an e-mail response July 31, obtained by ABP, Hutchinson said, “We have already received the income for the Grand Prix through the development office.”
The $6,500 contribution by Don Pearce was made with a check dated June 5, 2003, and labeled as “unrestricted.” Pearce was issued a tax-deductible receipt June 13, according to seminary documents. He was not identified as Duesing's father-in-law, nor did the contribution record make mention of the car.
According to a certified public accountant experienced with non-profit tax laws, such a donation — if exchanged for an asset of value — would be illegal. Mark Schou, a CPA unrelated to Southeastern, said the transaction could entail “at least three [IRS] violations” if the seminary didn't report the car as taxable income for Duesing, if Duesing didn't report it as income on his tax return, and if Pearce claimed the donation as a taxable deduction.
“It's not necessarily wrong to give an employee a gift, but it has to be reported,” said Schou of Jacksonville, Fla.
Other problems arise if the payment for the car was misrepresented as a contribution or if the car was sold but for less than the fair market value, Schou added. “You're getting into some fraud issues.” Having a family member involved makes matters worse, he said. Even if it were legal, he said, “it smells bad.”
It is not known if Duesing reported the car to the IRS as income or if Pearce claimed the $6,500 as a tax deduction.
Neither Duesing nor his father-in-law returned repeated phone calls about the car and contribution.
Akin declined to discuss the details of the car transaction. “I have no comment about any of those things,” he told ABP. But he acknowledged a “mistake” was made in accounting for the car sale. He said the seminary's auditors, at his request, conducted a thorough investigation, adding: “Our audit indicates this institution has conducted itself with integrity at every point.”
Akin said Hutchinson was not punished. “I don't usually discipline people for correcting mistakes,” he said.
Pearce was sent another letter later in the year explaining the $6,500 was not tax-deductible, according to seminary documents. And Hutchinson told ABP the financial office issued Duesing an IRS Form 1099 “at the end of the year,” indicating part of the car's value was taxable income.
Asked if Pearce knew his contribution was being used to buy a car for his son-in-law, Hutchinson said, “I can't comment on that.” He said he did not receive Pearce's check and didn't issue the receipt. “Our financial office received the gift.”
Hutchinson said Patterson knew the car was being given to Duesing early on. Hutchinson also has talked about the situation recently with Patterson “as friends,” he said.
Patterson declined to talk about the transaction or to say when he found out about it. “I was not involved in it at all and I don't want to comment on it at all,” he told ABP. “That's for Dr. Akin and the auditors to deal with.”
“The former president knew about that transaction,” said trustee chair Tim Lewis, a pastor from Troy, Ill. “It happened before he [Patterson] left. I didn't know until the interim president, Dr. Neal, told me about it. I became aware of this issue in the fall [of 2003].”
Lewis, trustee chair for the past two years, said he is convinced the disputed contribution was an innocent bookkeeping mistake. “There's nothing illegal about it,” he said. “When it became clear that this wasn't a gift, then we sent off a letter saying it wasn't a tax-deductible gift.”
As for Pearce's role, Lewis said, “I have no idea why he would write 'unrestricted' on that check.”
New procedures have since been put in place to clarify some accounting guidelines that “weren't very clear,” Lewis said. “There was a thorough discussion with Ryan [Hutchinson] about where mistakes were made.”
According to Armstrong's memo, Hutchinson said Duesing was later issued a Form 1099 — which reports compensation to the IRS — for $1,000, the difference between the $6,500 payment from his father-in-law and the car's value according to an assessment obtained by Hutchinson from “an independent car dealership” July 31.
But the Kelley Blue Book value for the 2002 Grand Prix three months later was $10,215 to $12,612, Armstrong wrote.
“It was certainly a little bit less than the book value,” trustee Lewis said of the car sale. “But that's happened before with a vehicle that we sold.”