Religion: Money Mystery

Just like other Americans, U.S. churchmen have been shaken by the twin terrors of inflation and stock market losses. But the losses are rarely as calamitous as those sustained by the Roman Catholic Diocese of Reno and the Massachusetts-based province of the Missionaries of Our Lady of La Salette.

So far, a thick murk of confusion, conjecture and reticence has obscured the full dimensions and exact nature of the Reno-La Salette financial disaster. According to the National Catholic Reporter, the progressive lay weekly that broke the story last week, the Reno diocese and the La Salette fathers both faced bankruptcy after losing as much as $15 million — the exact amount is not known — in a $25 million investment operation called the St. Joseph Trust Fund. Other investors, including an unidentified Canadian diocese and a Canadian women’s religious order, may have lost another $6 million or more.

The fund was apparently started as an investment scheme for religious organizations about five years ago by Father René Sauvé, a La Salette priest with a good reputation as a money manager. Father Sauvé has refused to talk about the fund, but it seems to have been a commonplace investment operation: church groups would raise money by borrowing or selling bonds, expecting that the return on the invested proceeds would be high enough to leave a profit over and above the costs of interest and amortization. Bishop Joseph Green of Reno saw the plan as a way for his poor diocese to meet rising expenses. He raised $3.5 million through the sale of bonds, some $800,000 of which went to diocesan expenses, $200,000 to pay for underwriting costs and $2.5 million to the St. Joseph Trust. The La Salette fathers, who have thus far been silent, are thought to have raised as much as $15 million through bonds and private loans for investment in the fund.

Glamour Issues. Sauvé worked with the Chicago brokerage house of McMahon and Hoban in setting up and operating the fund. But just what the St. Joseph Trust invested in remains a secret, though one story indicates a heavy purchase of glamour electronics issues. The Securities and Exchange Commission reportedly found illegalities in some of the investment activities, but no evidence of fraudulent intent.

Whatever the investments of the St. Joseph Trust, they began to go awry about two years ago, but no one will say how or just why. After the situation be came serious, a church official from Rome is said to have put a freeze on the fund, which reportedly sank to less than a tenth of its original worth.

For Reno and the La Salettes, the story seems to be winding down to an unexpectedly happy ending. The Archdiocese of San Francisco came to Reno’s aid, issuing a call for help from other U.S. dioceses that brought good tidings: about $1 million in outright gifts and longterm, low-or no-interest loans in amounts ranging from $25,000 to $1 million. Similarly, the Conference of Major Superiors of Men, an umbrella organization for U.S. male religious orders, has organized an effort to bail out the La Salettes. Still, that leaves a number of investors whose fate is still unknown, and whose traffic with Mammon may well have left a much more bitter legacy of lost hope, faith and money.