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Home / Fraud Findings / 2008 / Not-for-Profits are No Stranger to Occupational Fraud / The Audacious Pastor 2-08

The Audacious Pastor

A trusted church leader embezzles more than US $700,000 from his congregation.
Gordon Heslop, DBA, CIA, CMA, LLB (Hons)
Assistant Professor, Department of Accounting, Economics, and Finance, Texas A&M

Most fraud cases are not unique. Once in a while, however, a fraud can be surprising. And occasionally, one will be so
audacious that it is literally jaw-dropping. Such is the case with the fraud committed by Dr. Randall Radic, a former church
pastor in a small California city.
To say Pastor Radic was a well-educated man would be an understatement. He had a bachelor's degree in classics, a
second bachelor's degree in biblical studies, a master's degree in ministry, and two doctorates one in theology and one
in sacred theology. Radic posted Bible study essays on a Web site and had published a book on healing and prayer, Mystic
Rhythms, using the pen name Maximus Confessor. The erudite pastor also served the community, helping the city develop
a municipal swimming pool where he was a swim coach.
Radic had been the local pastor for 10 years, preaching to a congregation primarily composed of senior citizens in their 80s
and 90s. He had a reputation as a good pastor, and members of his church raved about his sermons. In addition to the 90year-old chapel where the small congregation met, the church also owned a house, which was provided to Radic free of
charge.
Unfortunately for his trusting congregation, Radic took advantage of his church's devotion and generosity. The pastor's first
breach of faith occurred when he prepared fraudulent documents that appeared to give him title to the parsonage. Radic
used the residence as security to take out approximately US $200,000 in personal loans. But pledging the Lord's property
as collateral for individual gain wasn't enough to quench the trusted pastor's financial appetite. Radic followed this up by
forging papers that gave him the power to sell the nearly century-old church building, which he then did to a husband
and wife investing team for US $525,000.
Radic's fraudulent activities only came to light when the leader of the church's board received a call from a local bank
informing him that Radic had purchased a new luxury automobile for US $102,000. Surprisingly, the pastor did not hide the
vehicle; rather Radic and his fiance his eighth brazenly drove it around town. Radic also used the ill-gotten proceeds
to buy himself a laptop.
Radic resigned after the church director was notified about a bank account in a nearby city in the church's name, which the
church had never approved. After the director informed police about his incriminating finding, the pastor was arrested and
pled guilty to felony grand theft by embezzlement. Radic was forced to return the car and all proceeds still available from the
sale of the church. He paid restitution of US $50,000, and US $360,000 was seized from the account he had opened.
However, of the more than US $700,000 he illegally obtained through his fraudulent ownership of church properties, Radic
had spent more than US $200,000.

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The church later regained all legal rights to the church building, but it lost tens of thousands of dollars in transaction fees.
The church buyer's insurance company reimbursed the husband and wife investing team for their losses.
Regaining the pastor's residence has proven to be more difficult. An investment company bought the parsonage to avoid its
foreclosure when Radic fell behind on his personal loan payments, and began to rent it out. Adding to the scandal, the vice
mayor of the city was sued by the church, and separately by the title insurance company, for notarizing the forged
documents that Radic used to gain control of the property.
Before trial, Radic spent six months in jail and, despite a potential sentence of 16 months, that is all the time he will likely
serve. In a strange twist of fate, Radic made a deal with the local district attorney to provide testimony in a murder trial in
exchange for time already served and the dropping of nine other felony charges.
In jail the pastor met an inmate who was awaiting trial for killing a woman. It was a death penalty case, and Radic claimed
the man told him something incriminating. Although Radic was a pastor, he was not this man's pastor, and so the
confidentiality rules protecting a person's discussions with his or her clergy did not apply.
Radic was released from jail and will likely avoid further criminal charges, but he still faces several lawsuits by those hurt by
his fraud, including the investor who bought the parsonage, the couple who bought the church, a title company, and a
notary public. Still living in the same town, Radic has displayed what many would call "gall." He created a blog detailing how
he stole from the church. He tried, unsuccessfully, to find an agent for a book entitled Snitch. The book described his
jailhouse activities and how he became an informant to receive a lighter sentence. Additionally, Radic has succeeded in
signing a deal for another book, The Sound of Meat, which he describes as a "mostly true" memoir. Many now call him
"Father Felony," while he calls himself "Daddy Radic."
Radic is described by his attorney as being "very remorseful and regretful about the situation." The attorney stated: "I think
he made some egregious mistakes. But in an imperfect world ... people behave imperfectly. He has been devastated by it.
He had a dark side, and at that particular point, that prevailed." Radic's own summation was, "I used to try and save souls
without ever examining my own."

LESSONS LEARNED
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All organizations, including charities, must constantly be alert and vigilant because anyone, even those in the most
trusted positions, can commit fraud. Of all the positions in society, the clergy ranks among the most highly trusted.
Although still small in overall percentage, there is a growing number of clergy, as well as highly positioned corporate
leaders and businessmen, who are falling afoul of the law. Because so much faith and trust is put in these people, the
old adage "trust, but verify" is a must for all internal auditors to remember.

While performing audit procedures, internal auditors should be aware of any observed lifestyle changes, which can
be a clear hint of fraud. While specific lifestyle audits are not carried out in the United States, as they are in some
countries, a sudden public display of a much higher standard of living should arouse attention, especially if the person
is employed by a charity for a relatively low salary. In this case, the fact that the pastor was no longer living in the
parsonage, or was driving a very expensive automobile, should have raised suspicion.

In any organization, especially those such as a church or a charity, where one person serves as the public face or
leader of the organization, separation of duties is vitally important. Internal auditors can help reinforce the
organization's positive image by ensuring that the public face is not the sole decision maker on business and financial
matters. Additionally, institutions with which the entity deals, such as banks, should be made aware of the identity of
the people who hold such positions of responsibility.

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In any organization composed largely of senior citizens, the increased potential for financial abuse directed against
the organization or its members should be recognized. One possible protection is the use of a financial professional
such as a certified internal auditor or a certified public accountant to protect the organization's interests.

Background checks are not foolproof. While they may explain that a person does not have a criminal record, they do
not reveal what is within people's hearts, their weaknesses, or the possibility that they may engage in future behavior
that is detrimental and costly to the organization. Sometimes this behavior begins without warning. The best
protection against it is a well-thought-out system of internal controls, including checks and balances that can either
prevent or detect fraud in the very early stages.

For all not-for-profit groups, an address other than the physical address of the group's facility should be used for all
correspondence purposes. Having someone other than the public face of the group holding the organizational
authority can help prevent any communication from being intercepted by that public face.

To protect property owners, a system should be developed for handling transactions relating to real estate. When
documents are filed changing the ownership or the debt level on a property, a written communication should be sent
by mail to all affected parties at their address of record. In this way, the owner would be able to respond immediately
to any fraudulent transaction.

Notary publics, in witnessing documents, should ensure the documents are legitimate. Someone with local
knowledge should know that the church would not sign over the parsonage to the pastor. In such a case, the notary
public should ask for some proof of the transaction before accepting the assertion of the party before him or her.

To comment on this article, e-mail the author at gordon.heslop@theiia.org.

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