Christian Research Institute (CRI)

Hank Hanegraaff Lawsuit*

Christian Research Institute's Hank Hanegraaff had been accused of financial fraud and other criminal activities. A lawsuit was filed ("wrongful termination suit") on March 7, 1994, in Orange County Superior Court, California. The suit alleged that Hendrik (Hank) Hanegraaff, president of CRI, was guilty of numerous ethical lapses, financial theft, tax fraud, and a shocking list of other criminal activities and deceptive practices. The plaintiffs also charged CRI and its president and officers with violation of the federal racketeering act, defined as a criminal conspiracy or a "combination." Some of the details of this suit follow:

1. Brad Sparks, formerly a top researcher on the staff of CRI (from 1992-1994) and assistant to Hanegraaff, stated in the suit that Hanegraaff and his wife, Kathy, had pocketed over $750,000 in bloated "salaries and benefits." This while CRI's rank and file employees "typically earn[ed] poverty-level income of approximately $13,000 per year!"

2. Sparks, who left CRI in "good standing" in 3/94, according to a CRI exit counseling form (included as documentation in papers filed), noted that CRI enjoys non-profit organization status by the IRS, but had fraudulently used its tax exemption privileges to provide tax exempt "cover" for the Hanegraaffs' own personal, profit-making business, Memory Dynamics, Inc., a Georgia corporation, which was conducted out of the couple's home. Sparks' suit charged that the Hanegraaffs had repeatedly bled the ministry's bank accounts to feather their own nests. For example, "defendant Hanegraaffs have sought to conceal their total six figure income by the device of separating out major categories of personal expense such as the estimated $50,000 per year 'pastor's housing allowance.'" [Hanegraaff reportedly lived in a $730,000 house in an exclusive gated community in Orange County, California; CRI's board allegedly loaned Hanegraaff the $100,000 down payment.] The financial details provided by Sparks to support his lawsuit were convincingly documented. Some 14 pages of fine print were contained in the lawsuit.

3. According to Sparks, CRI even leased two automobiles for the Hanegraaffs, almost entirely for their personal use, unrelated to ministry business. One of the most unsavory charges of corruption detailed by Sparks was that CRI deceptively claimed to be a "church" merely to deceive the IRS and state taxing authorities, as well as mislead those who donated money for its activities. (Hanegraaff told Charisma magazine in early 1994 that he considers himself a charismatic and holds ministerial credentials with Chuck Smith's Calvary Chapel denomination.)

4. The suit claimed that Hanegraaff was personally paid by Harvest House approximately $500,000 in royalties for the book Christianity in Crisis even though "the book was researched, edited, and partly written by two full-time CRI staff members (including plaintiff Brad Sparks) and several part-time members." Additional allegations stated that Mr. Hanegraaff's own, for profit company, Memory Dynamics, Inc., then turned around and sold huge quantities of that same book to CRI for a handsome gain for Hanegraaff.

5. The court suit further alleged that the Hanegraaffs "have used full-time CRI employees to support and conduct the Memory Dynamics business, including mailings and manning of sales booths." The Hanegraaffs were also said to have used CRI vehicles to transport Memory Dynamics' personnel and materials. When CRI's shipping department supervisor, Mary Cook, protested, she was fired on 7/6/93. Sparks also alleged Hanegraaff used CRI's confidential donor mailing list for his own private business, and that CRI lied to donors by continuing to promise that their names and other personal information remained confidential.

6. Craig Nelson, CRI's Director of Broadcast Media, "was fired in retaliation" for making complaints against Mr. Hanegraaff, specifically relating to Hanegraaff's use of free radio advertising for his personal gain on CRI's Bible Answerman program. The suit also named many of the employees and staffers said to have been "wrongfully terminated" because they challenged Hanegraaff's unethical conduct. They included former research director Dan Schlesinger (who reportedly accused Mr. Hanegraaff of "mixing private business with CRI ministry"), Jerry Kissler, Mark Hoover, Craig Hawkins, Michael Buesing, Perry Robinson, Dennis Green (former marketing director), and Anthony Horpel (former seminar director). The court pleading also said that Rob Bowman, a former CRI senior researcher, was terminated after "he refused to let Mr. Hanegraaff plagiarize Bowman's work to publish two books under Hanegraaff's name."

7. The lies and deceit alleged in the suit were of monumental proportions, considering the fact that CRI is a section 501C(3), tax-exempt, non-profit "church" and ministry, which was at the time of the alleged infractions a member of the National Religious Broadcasters' Evangelical Council for Financial Accountability (ECFA). ECFA members are required to maintain a high ethical standard of conduct.

8. To avoid the strict financial ethical standards of the ECFA (specifically the conflict of interest clause -- see #4 above), CRI resigned from the organization. The suit contended that CRI then lied to its donors and radio listeners by claiming that it was still a member of the industry group. CRI was also said to have continued its use of the ECFA's seal of approval on its catalogs, order forms, and other materials to solicit contributions.

9. Other serious charges leveled in the lawsuit included assertions of "racketeering." One violation claimed was that the organization "solicited and misappropriated charitable contributions across state lines and international boundaries." Mail fraud and wire fraud were said to be involved, including the illegal interception and seizure of fax telephone communications intended for others.

10. It was also alleged that Mr. Hanegraaff misled CRI donors into contributing money which may have ended up in the coffers of Hanegraaff's profit-making company. Also, the court suit claimed that Mr. Hanegraaff's own wife, Kathy Hanegraaff, was paid a generous salary by the ministry as a full-time "CRI Director of Marketing" when, in fact, her job primarily was "a cover for conduct of personal business ..."

Could the long list of crimes and dishonest conduct alleged by Brad Sparks be corroborated by others? A 6/6/94 letter from John Wanvig (a Christian attorney) to Hanegraaff was signed by 24 former staff members. The letter also asked Hanegraaff to meet with them. Hanegraaff refused to meet and, instead, counter-sued Sparks for libel. In addition, the Group for CRI Accountability was organized in 1994 and included some 35 former CRI staff members who publicly demanded Hanegraaff's resignation. They said that Hanegraaff did not have the theological training, the communication skills, nor the ethical standards to lead CRI. The suit against Hanegraaff was scheduled for trial in July 1995, but was "settled" (see 9/95 Update below).

[Most of the information in this report was derived from articles in The Christian News and Flashpoint.]

[9/95 Update: The 9/11/95 Christianity Today reported that the CRI lawsuit was concluded following Christian mediation in July, 1995. The parties signed a statement, which said, in part, "The parties acknowledged that the allegations were based on misunderstandings as well as incomplete information. ... It was determined that there is no liability on the part of CRI, Mr. Hanegraaff, or Mr. Sparks for any wrongdoing." Both parties dropped their legal actions against each other, and CRI agreed to pay about $20,000 of Sparks legal expenses. However, the ad hoc Group for CRI Accountability (see above) continued to press its concerns; according to its spokes-person Rob Bowman, "Most of our concerns are too well documented not to be true ..." Privately, Sparks was reported to tell friends that it was either settle, or be spent into bankruptcy by Hanegraaff and CRI.]

[4/96 Update: Brad Sparks Response to the Passantinos -- The following are excerpts from a letter by Brad Sparks, former CRI Researcher and plaintiff to the above detailed lawsuit. It is a reprint of an open letter responding to a 2/16/96 statement released by Bob and Gretchen Passantino.]

This is an interested observer's reply to the Passantinos' belated February 16, 1996, attack on the first three issues of On The Edge (OTE) published in September, October, and November 1995. I do not know who the journalist-author(s) of OTE are, but I think it is quite understandable that they choose to remain anonymous to avoid taking $400,000 worth of abuse from CRI. I should know because I, along with my wife and children, were punished for publicly speaking out. We suffered from Hank Hanegraaff's $400,000 of harassment from an international secular law firm (Gibson, Dunn, & Crutcher) (according to figures given in CRI's audited annual financial statement for June 30, 1995), as well as from an unknown amount CRI spent for a private detective agency (Allied Management Resources), which was conveniently withheld from the audit report.

That was approximately how much CRI donor money was spent by Hank without the donors' knowledge or approval of such shocking amounts (roughly 10% of the CRI budget), all to protect Hank from accountability for his use of CRI money and resources for his books and seminars in the first place. It apparently does not even include an unknown amount of money spent on Hank's and CRI's countersuit against me [Brad Sparks] (undertaken without even a pretense of Matt. 18 action), which the audit report also conveniently failed to mention. And it doesn't include any amounts spent in July 1995 after the cutoff date of the audit (such as the $20,000 settlement).

I was forced to settle my case because of the abuse and vicious tactics engaged in by Hanegraaff and CRI -- such as bringing up the murder of my mother to shock and degrade me. CRI has certainly taught the cults a thing or two using all this CRI donor money to frustrate and harass me with high-priced lawyers and private detectives. If my case was so "baseless" and "frivolous," as Hank and his minions claim, then how come with all these hundreds of thousands of "ministry" dollars to pay $200- to $300-per-hour attorneys, they still couldn't even prove it "baseless" in a court of law? How come Superior Court Judge Richard Luesebrink flatly refused to throw out even a single portion of my case on January 13, 1995, when CRI attorneys from two separate law firms presented two motions to have it thrown out and failed? Did you ever hear Hank admit that on the radio? No, instead Hank falsely claimed on the radio October 18, 1994, "this groundless lawsuit has long ago been set aside by the courts," and he continued to echo this bizarre, twilight-zone claim in fund raising appeals for months afterward until the two sides settled it -- it was never "set aside by the courts" as "groundless" at any time.

When I read the Passantinos' Internet statement someone faxed me, I was surprised to read that according to them, these OTE articles were journalistic atrocities, "worthless," and reflecting "absolutely no journalistic responsibility or evidentiary substantiation" whatsoever, filled only with anonymous "vitriol, gossip, innuendo, and bitterness," slanderous, and "replete with unnamed [sic] sources, supposition, and allegations, none of which are substantiated by any named, identified, or evidenced material." Whew! That's a pretty heavy load of allegations in a statement that itself is "replete with un[n]amed sources" used by the Passantinos, betraying just a wee bit of the same things on their own parts, methinks. I wondered if I had read the same articles they claimed to have read. So I went back to those first three issues of OTE and here is what I found:

Instead of the anonymous slander in OTE claimed by the Passantinos, I found six named sources (three from Hank's side, including Hank and his attorney) and what seem to be only two unnamed sources, both reportedly connected with CRI and Hank Hanegraaff -- unless we are to count every change of wording describing these two sources as separate individuals. In that case, do the Passantinos really wish to contend that OTE has as many as 10 anonymous CRI sources? Do they want to concede there are that many "moles" inside CRI who are so outraged at Hanegraaff that they supply inside scoops to publications such as OTE? I didn't think so. But it's a ticklish dilemma they will have to resolve.

Moreover, I found these first three OTE issues made specific reference to 15 different books and articles, gave 43 specific page number citations, plus quotes and references by date to four Bible Answerman (BAM) shows. All this in just 9 pages of OTE articles! If anything, this seems to represent quite a lot more documentation than I usually see in popular writing. What popular newspaper or magazine have you ever read with that many bibliographic references in just 6,600 words or so of main text altogether?

The succeeding issues of OTE, in February and March 1996, made reference to eight named sources (five of whom are on Hank's side), one of whom was an unnamed source at Word Publishing in the February issue, but was named in the March issue (this was Jennifer Haney of Word 's Publicity Dept. who had said that Hanegraaff's books were on indefinite hold while his contracts were reviewed). There may be about four new unnamed sources in addition to the two CRI sources from previous issues, depending on whether or not some descriptions refer to these existing sources or not: (1) "independent reliable source"; (2) "member of a radio management team"; (3) "additional source inside Word"; (4) "Southern California-based ministry source." These new issues of OTE reference 12 books and articles and two more dated BAM broadcasts.

Speaking of "unnamed sources," the Passantinos themselves repeatedly refer to and rely on numerous UNNAMED SOURCES in their own statement, perhaps 12 or more unidentified sources altogether:

(a) Passantinos' UNNAMED Word Books editorial sources (plural means two or more). As to the "falsity" of OTE's "charges" about Hanegraaff's book projects (which they leave nebulous so that you won't know that OTE reported that a Word source said Hank's books were on hold or canceled), they refer to "our own editorial contacts with Word Books," who are left unnamed, unidentified, and conveniently anonymous.

(b) Passantinos' UNNAMED Board member/ex-CRI employee (one). Another charge of "falsity" they level against OTE is "the presence on our own organization's Board of Directors of a former CRI employee listed in this publication (against her knowledge or will)," another unnamed, unidentified and conveniently anonymous person.

At least OTE named this person (whoever she is) in its name list of 105 CRI employees who have been churned out under Hanegraaff through massive and traumatic "attrition" and "turnover." Does she deny that she left CRI or not? Does she deny that at least 105 CRI employees have left under Hanegraaff under either favorable or unfavorable terms? Does she deny that a major subset of these 105 or more CRI employees were fired or forced to resign after pointing out ethical issues, or not?

(c) Passantinos' UNNAMED "any and all" CRI-employee sources who supposedly cleared Hank (two or more?). Did they actually contact any? Or did they just have "access" to them?

(d) Passantinos' UNNAMED "hostile ex-employees" they imply they contacted as sources who purportedly vindicated Hank (two or more?). But maybe they didn't actually contact any such "hostile ex-employees" and only wanted to lead readers into thinking from their weasel-wording that they did because they had such glorious "freedom to contact." So who are they?

(e) Passantinos' UNNAMED sources who are "attackers" of Hank, but who allegedly cleared Hank (two or more?). Same thing. Maybe they only want you to think they contacted such persons, but they didn't really because they know full well that some or all of the charges are true and they can't stand to face the truth-tellers.

(f) Passantinos' UNNAMED "variety of sources" defending Hank (a "variety" must mean three or more?). Since their set-up EMNR Board meeting on Easter weekend, April 15, 1995, the Passantinos say "we have continued to collect information and evidence from a variety of sources regarding those and other charges against Hank." Well, who constitutes this unnamed "variety of sources"?

The Passantinos say that in "authentic journalism, anonymous attributions are rarely used." What does that say about their own statement?

The Passantinos completely misunderstand the settlement of the two lawsuits: (1) the countersuit by Hank and CRI against me, which they omit to mention, and (2) my lawsuit.

The joint settlement statement says in the first three sentences [that] there was a "mediation process" between the two sides and issues were discussed. As a result, "the allegations" or issues discussed in the mediation just mentioned were found to be based on "misunderstandings and incomplete information." Nowhere does this document say that ALL allegations or issues had been "cleared up" as based on misunderstanding or incomplete info, nor is there any listing of resolved charges and/or the explanations as to how they were resolved. The settlement agreed there was no legal liability for any wrongdoing (i.e., likelihood of winning the case) by me, or Hank, or CRI, but it doesn't say how this was determined, and it is a conclusion that obviously applies to both sides.

As a matter of fact, the only such charges I am aware of which were resolved in that fashion were three misunderstandings on Hank's part about my role as some kind of conspiratorial mastermind, as listed below. (Remember, Hank slammed me and the Group for CRI Accountability in his October 17 and 27, 1994, CRI fund-raising letters as "the forces of darkness," "a group of accomplices," "diabolical," etc. By the way, how much money did Hank make off of these hysterical, Robert Tilton-like, demonize-the-enemy fund raising tactics?):

(1) I knew nothing in advance about Christianity Today's August 15, 1994 cover story on Christian radio which recounted the charges against Hanegraaff. I had not been interviewed for it; I did not initiate contact with CT in the first place; and CT had last contacted me in March 1994 when the suit was filed, but never contacted me again (until after the settlement in 1995 of course).

(2) I never had any contact whatsoever with [Flashpoint] by phone, mail, or otherwise (that remains true to this day). The quotes that [Flashpoint] used in [its] July 1994 newsletter to sound like [it] had interviewed me had actually been taken from a newsletter I had written and attached as an exhibit to my lawsuit. I have never been interviewed by [Flashpoint].

(3) I have never put anything about CRI or Hank on the Internet or any other computer network (and that's true to this day, but I will now have to try to get this copy posted on Internet), if for no other reason than that I have never been on Internet ever, because the phone wiring in my office at home shorted out in March 1993 and ruined my modem. I have not been on-line anywhere since that time.

In conclusion, the Passantinos must be reading documents from another universe. What they're talking about in connection with the OTE newsletters and my lawsuit does not resemble reality as I know it and see it.

Brad Sparks
April 22, 1996

Biblical Discernment Ministries - Revised 3/98