The Rev. Henry Lyons
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USDA wants money back from firm Lyons heads
By CRAIG PITTMAN
©St. Petersburg Times, published August 23, 1997
A company led by the Rev. Henry J. Lyons is being investigated by the U.S. Justice Department after an audit concluded that the company squandered $150,000 in taxpayers' money.
The money was supposed to help poor black farmers in Alabama. Instead, auditorsfound the money went to preachers and lay people.
The government agency that handed over the money to Lyons' Minority Enterprise Financial Acquisition Company, or MEFAC for short, has tried for months to get it back, with no success.
Meanwhile the company is being sued by its own former treasurer, who contends he was kept in the dark about its finances.
"To me the big issue is, where did the money go?" said the former treasurer, Colorado businessman Garret Barry.
Barry believes that more than $600,000 went into MEFAC in an 18-month period, some of it from the government, some from investors and some from 41 churches that paid $295 each to attend a MEFAC symposium at Kansas City's Ritz-Carlton Hotel.
MEFAC was the brainchild of the Rev. Hyman Jarrett, a Kansas Baptist pastor, who told reporters two years ago he envisioned the company as a national effort to uplift black neighborhoods.
"We want to change the whole face of blighted areas of urban America," he said. "No longer can we afford the luxury of standing in our pulpits moaning and groaning the Gospel. We've got to build housing, day care centers and shopping centers so we can employ our own."
Barry, who said he lost more than $25,000 of his own money in the company, said he and Jarrett designed MEFAC so that two church groups, Lyons' National Baptist Convention USA and the National Baptist Convention of America, would each own 26 percent. Together Lyons and his counterpart at the other church group, the Rev. E. Edward Jones, would control the direction of the company.
Lyons became chairman of the board, Jones executive vice president and Jarrett the president. Jarrett did not respond to repeated requests for comment.
A videotape MEFAC produced -- paid for by the Federal Home Loan Mortgage Board, which is still waiting for MEFAC to make good on its promise to build 50,000 new homes -- begins with a gospel choir singing the company's theme song: "God will guide us and MEFAC leads the way."
Lyons, who has boasted of putting his convention on firm financial footing, also praised MEFAC's promise on the tape: "There is a better day, and all we have to do is lay claim on that day."
Some of those involved in MEFAC also hold positions with Lyons' convention. Lyons appointed Jarrett as "national economic empowerment director" in January 1995 and named as Jarrett's assistant Walter Cade, now director of the convention's Baptist World Center in Nashville.
Jones said he and Lyons were particularly impressed by the business acumen of Jarrett's closest adviser, a staunch Catholic named Leroy Tombs Sr. A friend of former Kansas Sen. Bob Dole, Tombs made his fortune with government contracts providing food to the military.
Tombs said he served as an unpaid consultant to MEFAC, but Barry said records show Tombs was paid thousands of dollars. Jones said Tombs, who helped lobby the U.S. Department of Agriculture for a $250,000 grant, is now MEFAC's treasurer.
In December 1995, USDA official Wilbur Peer wrote to Jarrett that his agency could give MEFAC $250,000 and sent a copy of the letter to Tombs.
How important was Tombs' influence? "You do the best you can to make things happen," Tombs said.
Peer, who also spoke at the Kansas City symposium, is not allowed to comment on MEFAC because of the continuing investigation, USDA officials said.
Former USDA official James Tatum, who said he helped Peer put the MEFAC program together, said the USDA needed a way to make poor black farmers aware of what it could do for them.
MEFAC offered to provide that outreach by sponsoring workshops and passing out brochures through the churches. The plan was to try a pilot program in Alabama, then expand it nationally, Tatum said.
Peer's letter to MEFAC looked ahead to that national focus, but in language unconnected to farming. Working together, he wrote, would "provide our churches, pastors and members with jobs, training, financial resources, franchising opportunities (and) shopping centers."
The USDA sent MEFAC a check for $75,000 on Feb. 2, 1996, and then another for the same amount on April 26, 1996. Before MEFAC could collect the remaining $100,000, the USDA's inspector general put a stop to the operation.
Auditors found that MEFAC "did not conduct any of the regional workshops . . . or maintain accounting records," Inspector General Roger Viadero told Congress. The money was "ultimately used, in part, to benefit pastors and active lay persons," he said.
It is not known whether Lyons received any of the federal money. Viadero's testimony named no names. USDA officials have refused to make the audit public because "information contained in this audit has been referred to the Department of Justice and a decision concerning enforcement action is pending."
Barry said Cade received thousands of dollars from MEFAC after the USDA money came in. Cade said he knew nothing about the USDA.
USDA officials say anyone connected with the company's ownership and management, which includes Lyons and the National Baptist Convention USA, will be held responsible for repaying the debt.
Glenn Younger, a Denver lawyer representing Lyons' convention in connection with MEFAC, said he could not comment.
Prompted by the inspector general's audit, in December 1996 J.B. Chaffin of the USDA began writing a series of letters to MEFAC demanding the return of the $150,000. So far, Chaffin said this week, he has "never heard a peep" in response.
Barry says he has encountered a similar stony silence. After the August 1995 Kansas City symposium Lyons and the other directors seemed uninterested in holding any more meetings, even though he wrote to them demanding they convene, he said.
Then he received a notice from the Internal Revenue Service that said MEFAC had not filed any tax forms or paid any taxes. MEFAC's attorneys have conceded the company has paid no taxes for two years.
In January 1996 Barry resigned as treasurer, complaining he had been unable to get any financial information about the company.
"After the money started coming in," Barry said, "they refused to have an accounting of where the money was coming from and where it was going."
Last December Barry sued MEFAC, Jarrett and the two Baptist groups, accusing them of breaching their fiduciary duty. He has also accused them of joining a Tennessee man in stealing the idea for MEFAC to set up the Revelation Corp. of America. The trial is set for October.
Lyons was apparently aware of problems with MEFAC, but took no action to clean house. Instead, nearly a month after the first USDA payment, Lyons faxed to his Revelation partners a letter he said had also been sent to Jarrett.
In it, Lyons complained about MEFAC's "unfair business practices, refusal to return phone calls on the part of your office and outstanding bills that met with no response by you or your representatives."
He wrote that he would be withdrawing his convention's support from MEFAC, although he did not explain what that meant.
"I trust that Dr. Walter Cade will understand that I have no choice," Lyons wrote. However, Cade continued receiving payments from MEFAC.
Barry's attorney, Todd Vriesman, called Lyons' letter "legally naive" because Lyons did not sell his convention's 26 percent interest in MEFAC or resign as chairman. Jones said he told Lyons "on numerous occasions" that his letter would not free him or his convention from his responsibility for MEFAC.
Three months ago court papers filed by Younger, the Baptist convention's Denver attorney, agreed that the convention is still part-owner of MEFAC and Lyons is still chairman of the board. MEFAC's attorney took the same position.
Had Lyons been serious about getting out of MEFAC, Jones pointed out, he would have avoided getting his convention embroiled in Barry's lawsuit, an entanglement that apparently has caused Lyons great distress.
According to court papers Younger filed on July 22, Lyons has been so upset by Barry's lawsuit that he "is unable to sleep, eat regularly or complete his work and other responsibilities in timely fashion" and is now under a doctor's care.
In fact, on the day Lyons was supposed to travel to Denver last week to give a deposition in the case, Younger filed with the court a doctor's note that said: "Due to Rev. Henry Lyons' physical condition he is unable to travel at this time."
Last week Lyons flew to Minneapolis. This week he traveled to Jacksonville for a revival meeting.
-- Times staff researchers Barbara Oliver and John Martin contributed to this story.
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