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Post date: May 15 2014

A.G. Schneiderman Announces $1.7 M Settlement For NYC Church After Pastors Take Illegal Loans To Purchase Homes

Manhattan-based Glad Tidings Tabernacle Placed Under Interim Administration By Church Hierarchy

Schneiderman: The Free Exercise Of Religion Is Not A License For Ministers To Line Their Own Pockets

NEW YORK – Attorney General Eric T. Schneiderman today announced that his office has reached a settlement that returns $1.7 million to Glad Tidings Tabernacle, Inc., related to illegal loans taken against church funds by husband-and-wife pastors Donna and Carl Keyes to fund their lifestyles, including the purchase of a New Jersey home. Under the settlement, the Keyeses are required to return the $1,230,000 they took and failed to pay back. Former Executive Pastor Mark Costantin must return more than $480,000, money he illegally borrowed from the Manhattan-based tabernacle and failed to repay. Under New York law, it is illegal for officers and directors of a not-for-profit or religious corporation to take a loan from the entity they serve. 

“Carl and Donna Keyes and Mark Costantin abused the trust of their congregants and used Glad Tidings Tabernacle as their personal bank,” Attorney General Schneiderman said. “As with any not-for-profit entity, those who run religious organizations are bound by the requirements of New York law governing the administration of charitable assets. The law forbids officers and directors, and that includes ministers, from taking any loans from the entity they serve -- much less loans to finance personal expenses and lifestyle choices.” 

The agreement with the Attorney General's Charities Bureau bars the couple and Costantin from serving as fiduciaries of any religious or not-for-profit corporation in New York. Under the settlement, the tabernacle, a ministry of the international Pentecostal organization The Assemblies of God that is now located in Harlem, will be governed for at least two years by an interim board appointed by the Assemblies of God New York District. This temporary board is designed to restore Glad Tidings to its independent status as an operationally and financially sound institution.  

An investigation by the Attorney General’s Charities Bureau found that, beginning in 2008, Donna Keyes, 56, Carl Keyes, 57, and Mark Costantin, 45, made a series of illegal loans to themselves. These loans violated their fiduciary duties to Glad Tidings and caused the waste of church assets. The investigation also determined that Glad Tidings' board of directors breached its fiduciary duties when it allowed these loans.

In 2008, the investigation found, the Keyeses borrowed nearly $1 million in a series of three loans from Glad Tidings and used the money to buy a home at 35 Brookville Hollow Road, in Stockton, N.J. The loan came on the heels of a 2007 sale of the Glad Tidings Tabernacle's former house of worship on West 33rd Street, which generated a multi-million dollar gain for the organization. 

Though the couple committed to repay Glad Tidings, the Keyeses, who served as the tabernacle's co-senior pastors and chairs of the board of trustees, failed to make a single loan payment. Instead, they arranged to have Costantin, the tabernacle’s former executive pastor and executive director, give up Glad Tidings’ ability to foreclose on the home to enable the Keyeses to take out an approximately $512,000 bank loan on their home. Rather than use the proceeds from this new loan to pay off their debt to Glad Tidings, they arranged for the church to make payments on their new mortgage. When the Keyeses sold this property in 2013, they used a portion of their proceeds to pay off the bank loan and pocketed the rest. 

In March 2008, Glad Tidings also loaned $500,000 to Aid for the World (“AFW”), a New York not-for-profit corporation founded and controlled by Carl Keyes. Carl Keyes used some of the money loaned to the charity to pay for traveling expenses incurred by family members. AFW funds were also used to pay for a new BMW that the couple purchased. Of that loan, $400,000 was never paid back. 

The investigation also found that Costantin, who facilitated the Keyeses’ transactions, received improper financial benefits from Glad Tidings, arranged by the Keyeses. In February 2009, the couple authorized a $755,000 loan from Glad Tidings to Costantin for the refinancing of his home at 49 Hambletonian Road in Chester, N.Y.  In September 2010, Costantin had Carl Keyes execute a “Satisfaction of Mortgage,” which ended Glad Tidings’ ability to foreclose on the property and enabled Costantin to obtain another mortgage on his property and more cash.

Glad Tidings' board failed to stop this illegal conduct. After the church’s 2007 property sale, the board established an investment committee to purchase a new home for the church. The only active members of this committee were Carl Keyes and Costantin.  The other members of the committee, and the board as a whole, failed to do anything about the blatant conflicts of interest, review any of the relevant paperwork, or examine whether the church could legally lend church assets to these fiduciaries. 

Under the settlement obtained by Attorney General Schneiderman, the Keyeses must pay full restitution to Glad Tidings of $1,231,105, which includes the total sum borrowed plus interest on the loans. Costantin is required to return $482,397.53, that part of the loan he failed to return to the church plus interest. Carl and Donna Keyes and Costantin are permanently barred from acting as a fiduciary of any New York not-for-profit or religious corporation. Three other members of Glad Tidings’ former board will pay $50,000 for the costs of the Attorney General’s investigation and are subject to a similar ban for a period of five years. 

As an additional part of the relief obtained by the Attorney General, Glad Tidings has replaced its old board and is now under the supervision of the New York District Assemblies of God. The interim board of trustees has responsibility for and control over the tabernacle's finances and is comprised of ministers appointed by the New York Assemblies of God District, including District Superintendent Dr. Duane Durst and representatives selected by the district superintendent. This supervision will continue until the District, with the approval of the Attorney General’s office, determines that Glad Tidings can appropriately resume autonomous self-governance. Under the agreement, $210,000 in funds that were obtained by the former board will be returned to the interim board for the benefit of Glad Tidings.  

The investigation of this matter was conducted by Assistant Attorneys General Elizabeth Ann Fitzwater and Rose Firestein of the Attorney General's Charities Bureau and Senior Enforcement Counsel David Nachman of the Executive Division. The Charities Bureau is led by Bureau Chief James Sheehan, and the Division of Social Justice is headed by Executive Deputy Attorney General Alvin Bragg.

A copy of today’s settlement can be viewed here.