It has emerged that the ground-breaking Candace Conti case has taken another intriguing twist. As was reported in a previous article, following their courtroom defeat the Watch Tower Society was forced by the Alameda County Court to, in effect, guarantee that it would be in a position to pay the full multi-million dollar award due to Candace Conti in the event of losing their appeal.
Initially, this “guarantee” came in the form of a court-imposed ban on the buying or selling of property until the appeals process was over. However, the Watch Tower Society is heavily dependent on selling its lucrative Brooklyn portfolio to generate much-needed funds, even selling Brooklyn properties at far below the asking price in some instances. Indeed, it is thought that the relocation of the World Headquarters from Brooklyn to upstate New York is motivated primarily by the need to free up funds. The Society therefore chose to circumvent this ban by electing instead to provide a surety bond by way of guaranteeing payment of damages (plus interest) in the event of losing their appeal.
Now the Society appears to be pleading poverty, implying that it cannot afford to produce the required $17.3 million dollars by way of surety without using property instead of cash. Before reading further in this article, I would encourage you to download the motion filed by Watchtower by clicking on this link. By all means, familiarize yourselves with the contents, and please consider anything I write in this article as my own observations and speculation in regard to this development.
Some have pointed out that the Society’s main objection is, not that they cannot afford the bond, but that they are afraid of being unable to recover the $86,386 bond premium from Candace Conti if they win their appeal. I am no legal expert and can only interpret what I read according to my own limited understanding, so I am willing to stand corrected if I unknowingly misinterpret the precise wording used in the court documents.
I believe it is noteworthy that Watchtower has specifically motioned for a reduction in the bond if they are not allowed to offer real estate as surety. There is a difference of some $6 million dollars (presumably allowing for costs and interest) between the amount of damages awarded and the total bond amount.
Though a comparatively small amount, this $6 million dollars might well be the difference between relative prosperity and catastrophe for the Watch Tower Bible and Tract Society of New York. The precise accounting figures of the Society are highly secretive, so only they will know whether this is the case.
In any event, the Society wants this $6 million difference reduced, and I believe it more than likely that the “immediate irreparable harm and hardship” refers, not just to payment of the $86,386 premium and their chances of recovering this amount in the future, but to the financial consequences if the bond needs to be paid in cash without the bond amount being reduced, which Watchtower is motioning for.
Bear in mind that, once the premium is paid, the first bond payments must also be delivered only weeks later. In that respect, payment of the premium is the “road of no return”, which is why the Society is anxious to find an alternative to paying in cash well before the premium payment is due.
I believe this is why Watchtower claims this would cause “immediate” harm. Surely any harm suffered by the Society by paying and subsequently losing the $86,386 premium could never be considered “immediate” since the appeal decision is still a future event. The appeals process has yet to be won or lost! So why use the word “immediate”? Note the wording in the document highlighted below…
Again, if I am wrong, and things are not as serious as I suggest, then I am willing to stand corrected. However, I believe it is important to allow my readers to hear both sides of the argument, and form their own opinions.
The Patterson Gamble
In any case, perhaps more amazingly, the Society is prepared to put their Patterson complex (The Watchtower Educational Center) on the line over this judgment, offering it as surety rather than starting the bond payments. However, in behind-the-scenes discussions this remarkable proposal has been declined by Candace’s legal team, so the matter must now be decided by a Judge. Candace’s team understandably want cash to be used as surety, not shaky property assets during times of economic uncertainty.
The payment of the $86,386 bond premium is due on November 15th, and the first installments of the bond itself follow soon thereafter. As mentioned, the Society has therefore filed a motion asking the Judge to either reduce the cash value of the bond, or allow them to substitute real estate (namely, Patterson) as surety for the judgment.
Many Witnesses will no doubt be shocked at the thought that the organization, said to be enjoying Jehovah’s blessing, is in such a perilous predicament that it is quite possibly only $17.3 million dollars away from meltdown! They will be just as amazed to learn that the Society is seeking to effectively put Patterson on the gambling table, to be given to Candace Conti if Watchtower loses its appeal and cannot pay the damages in full. See the document below…
Many have argued that the Society can easily afford the awarded damages and may well be bluffing in order to maneuver the situation in their favor. Indeed, there is nothing unusual in offering property assets in lieu of cash payments if it is possible to do so. However, it seems strange that, with so much pride at stake and the world looking on, the Society would effectively plead poverty unless their circumstances were indeed dire.
It is even more inconceivable that Watchtower would rather gamble with its prestigious Patterson complex (in which it takes considerable pride), and risk handing this over to Candace Conti if they lose on appeal, than cough up the $17.3 million in hard cash if this is available to them. It therefore seems highly likely that the Society IS indeed in financial turmoil, as their recent unprecedented spate of branch closures would seem to suggest. Their money is mostly tied up in property that they are finding it difficult to sell-on during these economically challenging times, and producing millions in spare cash just isn’t as easy as it once was.
The clock is ticking, and they have less than a month to sort this out. Watchtower’s lawyers have had conversations with Candace’s Conti’s legal team who have refused to yield on the issue. Now it is for the courts to decide on November 8th whether Watchtower can be allowed to put Patterson on the gambling table rather than pay a single dollar in actual money up front. If the Judge refuses to let them take their gamble with Patterson, and insists on the surety being paid in cash, the Society will have no choice but to pay the bond in full or drop their appeal – which is a strong likelihood if their circumstances are indeed as dire as their motion seems to suggest.
Why are they in this mess?
Many will wonder why the Society is in such peril when it outwardly appears to be prosperous. The publications have long given the impression that the organization is enjoying seemingly unlimited global expansion. However, as explained in a previous article, there is a deep underlying problem causing the Watch Tower Society serious financial difficulties.
The problem lies with the fact that growth in wealthier, developed lands is slowing down to a near standstill. It is the brothers in these lands who the Society counts on to contribute the most by way of donations to support the worldwide work. Meanwhile, the growth in poorer third-world countries remains relatively buoyant, but the needs of the brothers in those countries must be sustained by diverting much-needed funds from wealthier countries – funds that are slowly drying up. This causes a huge imbalance that is completely unsustainable for the Society in the long-term.
Forced by this disparity in contributions, the signs are that the Society has already entered a period of downsizing. Last year saw a 16% reduction in branch offices from 116 to only 98, and all indications are that the 2012 report will show a further reduction in this figure. By closing branches and reducing operations in various countries the Society is lowering its operating overheads and freeing up property to be sold in order to generate much-needed funds.
The problem is, the world is going through a period of unrivalled economic downturn, meaning that property cannot be sold at anywhere near the prices the Society would like to realize. In Brooklyn, many properties have been sold well below the initial asking price, because Watchtower is anxious to get its hands on much-needed cash more quickly.
In addition to the branch closures, there has also been a noticeable reduction in printing commitments since 2005. Magazine pages for the Watchtower and Awake! have been halved in that period in a further cost-cutting measure. Few would be able to offer justification for such drastic actions unless these were motivated by financial concerns, with paper and ink an increasingly costly means of distributing information in the age of the internet.
Forced to the brink
Now it appears the Candace Conti case is pushing the Society even deeper into financial instability. Many, myself included, believed it would take damage awards from multiple child abuse cases to seriously threaten the Society’s financial prosperity. However, following this latest startling development, it is becoming increasingly apparent that the Society is fighting their appeal, not just to save face over their doctrinal stance on child abuse, but for their very survival!
Only time will tell whether things are really this desperate, or whether this is just an elaborate and reckless piece of strategizing on the part of the Society. Much will be learned on November 8th when the Judge reaches his decision. If he refuses to allow the Society to pay their surety in property assets, they will have a decision to make. They can either abandon their appeal and hold on to their money, or cough up the money, fight on with their appeal, and leave themselves in a financially precarious position. Win or lose, the Candace Conti case has formed a blueprint for future legal action, and more lawsuits are waiting downstream threatening to further sap the Watchtower’s over-burdened finances.
Failure to comply with the law over their reckless child abuse policy, which hinges on a mistaken application of the “two witness rule”, has long been the Achilles heel of the Watch Tower Society. Now it appears the consequences of this negligence are catching up with them.
Speculation aside, one thing that cannot be denied is that the Society is desperate enough to gamble with Patterson, its greatly esteemed educational facility and home of the Gilead School, and risk losing it to Candace Conti if the appeal fails and they cannot pay the damages. Even if the judge allows them to use this as surety instead of cash, many thinking Witnesses will wonder why their hard-earned contributions, donated for the purposes of furthering the worldwide preaching work, are being used to defend the Society’s out-dated, neglectful and damaging policies regarding their handling of child abuse.
To read a partial translation of this article in Italian, please click here (scroll down).
To read this article in Hungarian, please click here.