This is mighty discouraging. BuzzFeed News reports on the details behind a lawsuit accusing the Knights Of Columbus, the international, US-based Catholic fraternal organization, of falsely inflating membership numbers so it could continue to profit from its life insurance business. The lawsuit claims that local Knights chapters were told by headquarters that they could not purge their rolls of members they believed were dead or inactive — and that local chapters had to come up with the dues money for these “phantom Knights,” or face being kicked out of the organization.
BuzzFeed spoke to a number of Knights about the situation, and reports evidence backing up the lawsuit’s claims. Excerpt:
In its court filings, UKnight says they have spoken to “numerous” local councils that tell the same story as the members who spoke to BuzzFeed News, being forced to keep “phantoms” on their rolls and and pay their fees to the state and national organizations. The lawsuit cites examples: a New Jersey council that listed having 316 members, but in reality had only 54; a Texas council that attempted to purge 80 members who hadn’t paid dues in years, but were told by Knights above them that they were only allowed to remove eight. Another council tried to remove half its listed membership due to inactivity — about 200 members — but were denied by leaders on the state and national level.
Councils set their own membership fees, which can vary from around $30 to $100. If a council had 200 phantom members, the paying members could be forced to cover anywhere from $6,000 to $20,000 in extra dues. Often the local chapters just gave up and paid the extra dues themselves, the men told BuzzFeed News. Sometimes the Knights paid out of pocket for the phantom members; other times they were forced to dip into the money they had raised for charity. (The Knights of Columbus councils hold frequent fundraisers to keep the organization and its charitable works afloat.)
“Why should our fundraising money go to pay dues?” McAtee said. “It should go to do our charitable works, the main reason the Knights exist.”
Eventually McAtee was so disturbed and disillusioned by this, he said, that he resigned from his post. Now, years later, he is considering filing a lawsuit over the issue, and talking with his fellow Knights about disbanding his local Knights chapter all together.
“If you follow the money, you will find the truth, and that’s what I did,” McAtee told BuzzFeed News from his home in Mobile, Alabama. “It’s time for it to come to a screeching halt. I mean, this is just simply not right.”
We’ve all heard about the Knights of Columbus, but I bet not many of us outside of the organization knew that it was not only a charitable fraternal organization, but also
a major life insurance company. In 2017, the Knights sold $8.78 billion in life insurance to its members, and the Knights’ website says it has a total value of more than $100 billion of life insurance coverage. In 2017, [KofC leader Carl] Anderson made an annual income of $1.4 million, down from $2.2 million in 2014.
“As a result of these revenues, [Knights of Columbus] Supreme and its executives, in contrast to the local councils, sit among the world’s elite power,” the lawsuit argues.
The Knights say they have 1.9 million members in the world, but the lawsuit alleges they are inflating this number by about 30% in order to keep its insurance rating high and keep selling more policies. In its website’s FAQ under “Is the Knights of Columbus financially strong?” its response is that the Knights have “42 years of superior ratings for financial strength” and currently is rated A+ by the insurance rating agency AM Best.
So why is this such a big deal? More:
As well as Catholics in general, men with Knights life insurance seem to be growing older without new young customers to replace them, three insurance agents for the Knights of Columbus told BuzzFeed News. Membership sheets of nearly 100 members provided to BuzzFeed News from different chapters of the Knights showed that the majority of those insured with the Knights were more than 50 years old, and many were in their sixties and seventies. If younger people aren’t buying policies and paying into the life insurance pool as those insured with the Knights grow older and die — or from the point of view of life insurance, stop paying into their funds and collect life insurance claims — the Knights will find themselves giving out more money than they are taking in.
BuzzFeed reporter Ema O’Connor goes on to quote the judge in the case complaining in a May pretrial hearing that the Knights have resisted her efforts to get basic financial data from them. The judge said, according to the court transcript, “All that has done to me is make me wonder if there’s something there … it makes me wonder what’s going on.”
It’s important to recognize that the Knights of Columbus distributes tens of millions of dollars annually on charity, like disaster relief. The lawsuit’s does not claim that the Knights fail to do this. The lawsuit is limited to claims about the Knights’ overall membership, and how alleged membership inflation has falsely kept the Knights’ insurance business rating high.
On the Knights’ insurance business page, Supreme Knight Carl Anderson says that the order’s insurance business has experienced “17 consecutive years of growth.” He explains it thus:
I firmly believe that our moral compass has helped guide us through a turbulent decade and an uncertain economy. While other companies were making ethically questionable and unnecessarily risky decisions, we were not. While others were looking for novel ways to do business and to increase profits, we were not….We stayed true to our principles and knew that if we did the right thing for the right reasons, we would get the results that we wanted — and we have.
Supreme Knight: The Knights of Columbus is not like “most insurance companies” because we are not concerned with profit in the way a traditional business is. Our “bottom line” is different. It’s not a question of how much money we made; it’s a question of how many Catholic families we protected. That is our mission.
The lawsuit — here’s a link to the filing — challenges this narrative. It goes to trial on Monday in Colorado. Depending on what comes out in the proceedings, we may learn that the Knights of Columbus’s leadership exploited the little guys in the thousands of chapters around the country, and turned the respected organization into a front for an insurance scam. If the lawsuit’s allegations stand up in court, that means that some of the proceeds taken in by this tax-exempt organization have really been going to keep the insurance business alive on false, Ponzi-like premises — and, it would appear, to keep paying the big salaries of the organization’s leadership.
In this screenshot for the federal 990 form the K of C filed in FY 2017, we see the salaries of the top leadership of this non-profit, tax-exempt charity, including the board of directors. Notice that Archbishop William Lori of Baltimore was paid $125,000 as a director of the Knights, for one hour of work each week as the Knights’ “Supreme Chaplain” (plus nine hours weekly for “related organizations,” which means … what, for an archbishop?).
Are any of this blog’s readers involved in their local Knights’ chapter? If so, what does these allegations sound like to you?
Aside from the many good works the Knights do, the organization has also been active in socially conservative political causes. If the court finds for the plaintiffs in this lawsuit, the loss of the Knights’ leadership’s credibility will be a blow to social-conservative political fortunes.
UPDATE: Kat Blomquist, a spokeswoman for the Knights Of Columbus, reached out to me with this statement:
“Recent media interest in a contract lawsuit with a company aspiring to be a vendor of the Knights of Columbus has focused on our organization’s membership retention processes. Some of the claims made by this company were dismissed early in the case, but some media reports are reporting inaccurately and failing to mention these facts. We look forward to responding to the remaining contract issues before a jury in the coming weeks, but in light of incorrect news reports we believe we must stand up for the integrity of the Knights who are driven by its mission of supporting fellow members and their families and helping those who are not able to help themselves.”
Blomquist clarified in a subsequent e-mail that the racketeering claims were dismissed by the court in 2017, but BuzzFeed did not report this. This is important. If the court dismissed the claims not related to the contract issues, then where does this leave the BuzzFeed story? That is, if the court dismissed the claims of the lawsuit that have to do with membership retention, and dismissed them because the judge found them unpersuasive (as opposed to, say, irrelevant), then that dramatically undermines the case the critics cited in the BuzzFeed article make.
Stay tuned. If you find any more detailed information on this, send it to me.