The PTL Bankruptcy Case: Sex, Drugs and the Gospel – Not Your Ordinary Bankruptcy Case | Nelson Mullins Riley & Scarborough LLP
Columbia, South Carolina is hot during the summer, so the city adopted the motto “Famous Hot” a few years ago. Temperatures frequently exceed 100 degrees in summer. On June 12, 1987, the PTL Club filed Chapter 11 cases in Columbia, adding heat to the already hot city.
The Praise the Lord Club, or “PTL”, was a tele-evangelism organization created and, for a time, controlled by Jim and Tammy Bakker. The Bakkers met at the University of North Carolina and worked as evangelists for various ministries until they started the PTL Club in 1974.
The PTL Club’s broadcast facilities were located in Charlotte, North Carolina, and the production facilities, along with a planned hotel and resort called Heritage USA, were located just across the border at Fort Mill, South Carolina. At the heart of the facility was the pyramid-shaped Crystal Palace.
Prelude to bankruptcy
As the popularity of the PTL club grew, so did the organization’s expansion plans in the Fort Mill area. The PTL Club developed a theme park/family resort, which was to be anchored by a 500-room hotel, the Heritage Grand Hotel. In exchange for $1,000 contributed by each of the approximately 160,000 “PTL Lifetime Partners”, the Club has promised these partners three nights a year at the hotel. Problematically, these promises could not be kept with the existing installations.
Following issues with the FCC and IRS, Jim Bakker was allegedly involved in fraud in the handling of PTL funds, but no action was brought before bankruptcy proceedings began. The events of PTL are widely covered by the press, and the new moniker “Pass the loot” rivals “Praise the Lord”. As a result of these controversies, donations began to dwindle.
On March 19, 1987, following the disclosure of a payment to a church secretary, Jessica Hahn, Jim Bakker resigned from PTL and was replaced by Southern Baptist Reverend Jerry Falwell. Ms. Hahn alleged that Bakker drugged and raped her in 1980. Bakker alleged that the sex was consensual, but it was clear that PTL funds were used to pay Hahn.
When the payoff for Hahn and the FCC and IRS troubles came to light, Reverend Falwell authorized the filing of a Chapter 11 petition.
Much like the founders of the PTL Club, the Club’s bankruptcies were anything but ordinary. For example, the following unique issues have arisen in PTL Club bankruptcies that may never recur:
- Ministers were appointed like the majority of Chapter 11 administrators;
- 11 USC § 342, notice of the case was given by first class mail, in national newspapers, and on live television during PTL television broadcasts;
- A local theater was rented and used for the meeting of creditors;
- One of the contradictory actions was “filed” by the plaintiff in a national newspaper a week before the actual filing of the complaint with the bankruptcy court. The defendant was frustrated to read extracts in the press without having access to the complete document;
- The Court created a special committee for those claiming life partner status, while leaving open the question of whether or not they had creditor status;
- The Examiner donated to the club on live TV;
- There was controversy over the version of the Bible used to swear witnesses;
- The debtor’s estate funded an additional assistant clerk just to work on these cases. A special deputy clerk’s oath was prepared, making it clear that although the salary was paid by the debtor’s estate, the deputy clerk was accountable to the clerk of the court.
- Round-the-clock security was handed over to the presiding judge after multiple death threats were received against him. The court clerk’s office received about two duffel bags daily containing mail on the PTL case, all of which had been X-rayed for bombs after the death threats were made against the presiding judge.
By the time the cases were filed in 1987, the United States Bankruptcy Court for the District of South Carolina had only one permanent judge and an exhausted clerk’s office staff that had been reduced by three due efficiencies in closing deals. The judge, J. Bratton Davis at one time had the highest caseload in the nation. At that time, Chapter 11 cases carried the same weight as Chapter 7 or 13 cases, and no accommodation was made for the size of the case. Due to a conflict with Judge Davis, Judge Rufus Reynolds of North Carolina was assigned to the case. South Carolina was not a U.S. Trustee district until 1987, but the U.S. Trustee cooperated with the Court and assisted whenever possible.
The PTL Club cases eventually became Chapter 11 liquidation cases following the departure of Jim Bakker from the PTL Club television program. His departure severely affected revenues, ending hopes for a successful reorganization. The case was closed in December 1992.
The PTL Club cases, involving clerical infidelity, deeply held religious beliefs and national media attention, show how unique bankruptcy cases can be. These cases are a showcase of how bankruptcy courts can solve a myriad of legal and non-legal issues creatively by dealing with unforeseen issues. There may never be another case like the PTL Club cases, but that doesn’t mean we can’t yet glean valuable insights into the court’s flexible approach to resolving these many difficult situations. .