Thursday, April 22, 2004

Feds take over probe of pastor in N.Ky.

Finances of church at heart of case

By Jim Hannah and Cindy Schroeder
The Cincinnati Enquirer

NEWPORT - Federal authorities Wednesday took over the investigation into the finances of First Baptist Church of Cold Spring.

State prosecutors said they would give the U.S. Attorney's office all the information a Campbell County grand jury has gathered during a three-month investigation.

The criminal investigation at First Baptist Church of Cold Spring:
•Jan. 5: Fifth Third Bank contacts church members, concerned about some transactions that had occurred in the church's construction account.
Jan. 23: Former church treasurer Darryl Neltner writes to Kentucky State Police to say church money had been spent on gambling. He identified up to $600,000 in what he describes as questionable transfers.
•Feb. 6: Kentucky State Police detectives serve search warrants at both the home of Rev. Larry Davis, pastor of the church, and at the church. Court documents say police were looking for both paper and electronic financial records.
•March 10: Fifth Third Bank calls the note on the church's $4 million construction loan.
•March 17: The congregation fires anyone holding a position at the church that had attended an alternative worship service, calling their behavior "unchristian."
•March 24: The congregation votes to put up more collateral to avoid a foreclosing on its year-old sanctuary.
•March 25: Church member Darlene Barnes of Fort Thomas is called before a Campbell County grand jury. Other current and former members of the church called before the grand jury in recent weeks include Neltner; former chairman of the deacons, Ted Wallace, and current chairman of the trustees, John Roseberry.
•April 4: More than 100 former members of First Baptist Church of Cold Spring vote to form a new church. The new church will meet in a vacant sanctuary about a half-mile from First Baptist and will be called Christ Baptist Church.
•April 21: Federal law enforcement officials take over probe.
At least five people have been called before the grand jury, dozens of subpoenas have been issued for financial records, and state troopers have searched the church and parsonage after the congregation's former treasurer wrote to police Jan. 23 with concerns about how the pastor, the Rev. Larry Davis, was handling church money.

"My office has suspended its investigation," Campbell County Commonwealth's Attorney Jack Porter said. "If there is any prosecution in the case, it will be done by the U.S. Attorney's Office."

Porter said the decision was reached after comparing state and federal laws concerning bank fraud, plus the Internal Revenue Service already was investigating whether to bring federal tax fraud charges.

"Federal statutes are a lot more broad and have higher penalties. It's good for the case."

The U.S. Attorney's Office for the Eastern District of Kentucky in Lexington confirmed its investigation Wednesday, but spokeswoman Wanda Roberts would not elaborate on its scope or how long it might take.

Although Davis has never been named a suspect or indicted, he hired Northern Kentucky lawyers Patrick Hanley and Jim Morgan. Hanley, a former assistant U.S. Attorney in Ohio, declined to comment on how the transfer of the case to federal authorities might affect his client.

Davis' lawyers said he has refused to let the investigation get in the way of his pastoral duties.

"Under the circumstances, (Davis) is doing remarkably well," Morgan said. "It probably has affected him in any number of ways, but he is a pretty strong individual, and he is coping with it as well as I could expect anyone to cope with it."

Morgan said the transfer of the case to federal authorities had been discussed for several weeks: "The only thing that really makes a difference to us is that we get some resolution to this as soon as possible." Davis did not return phone messages Wednesday left at the church, and no one answered his home phone. Most of the more than two dozen subpoenas have sought information on credit card and bank accounts for Davis and his wife, Connie.

"They're certainly looking at everything, including the financial records of the church and Davis' financial records," Morgan saidMonthly financial statements released by the church show money from accounts controlled by Davis was spent at the MGM Casino in Detroit, an Internet gambling site and services providing tips to sports bettors.

The transactions caught the attention of Fifth Third Bank, which holds the church's $4 million construction loan. The bank called the note March 10 and threatened foreclosure. Two weeks later, the church renegotiated the loan and agreed to put up more collateral to avoid a threatened foreclosure.

The investigation has caused a deep rift within the church's congregation. In late February, about 200 members of the church started conducting worship services at a vacant church about a half-mile away. Three weeks ago, more than 100 former members voted to form a new church, Christ Baptist Church.

"Those that have stayed are certainly committed to the (First Baptist) Church (of Cold Spring) and committed to Dr. Davis," said Harody Mendez, a church trustee and close friend of Davis. "I think we had over 1,000 for our combined service on Easter."

The Kentucky Baptist Convention's 2004 directory says First Baptist Church of Cold Spring has 1,652 members.

Before questions were raised about the handling of church finances, the church and its pastor were best known for helping organize evangelist Billy Graham's first Greater Cincinnati crusade in a quarter-century.

"Our support has never wavered for Dr. Davis," Mendez said. "I think we're all ready for the investigation to be over."


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