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FALWELL'S FINANCIAL FALL

Financially overextended and entangled in failed church bonds and business ventures gone awry, the Rev. Jerry Falwell is $73-million in debt. And the empire he built here in this city in the Blue Ridge Mountains is teetering on the edge of disaster.

The Baptist minister who gained fame in the 1980s as the founder of the Moral Majority and religious point man for the Reagan Revolution appears to have fallen victim to some of the decade's excess.

Falwell built and borrowed extravagantly in the early '80s, filling the campus of his Liberty University with dormitories and libraries, a huge indoor sports arena and a 12,000-seat football stadium.

He recruited faculty to teach a fundamentalist agenda and brought in top-of-the-line athletic coaches such as former New York Yankee Bobby Richardson and Sam Rutigliano of the Cleveland Browns. He poured money into the school's football, baseball and basketball teams.

But it has not gone well for the silver-haired, 60-year-old Falwell. In a recent interview in the turn-of-the-century mansion that serves as his office at Liberty, Falwell sought to put the best face on things.

"We don't look at this as a calamity, we see it as a temporary hardship," he smiled. "We're not on the rocks. We've weathered the crisis. Within a year we'll be back, stronger than ever."

Falwell is a big man, broad as a linebacker on the Flames, the pugnacious football team that has won distinction for his school. But he seemed small and more than a little weary as he stood beneath a blank scoreboard in the school's cavernous sports arena recently to deliver the latest bit of bad news.

"While we don't understand this, we know that God doesn't make mistakes," Falwell told the 4,000 fresh-faced undergraduates gathered for their weekly convocation.

The cash-strapped school had lost its latest lawsuit _ and a hoped-for $20-million settlement _ against a securities firm over one of a series of bond issues gone sour.

Falwell told the students he was at work on a plan to pull himself and the school out of debt. "We're going to cry a little bit," he said. "But we'll pick up and we'll walk on."

It looks as if it's going to be a long and costly walk through a mine field of past mistakes.

The Thomas Road Baptist Church, from which Falwell has broadcast his Old Time Gospel Hour for nearly 30 years, is now in the hands of the Resolution Trust Corporation, the federal agency charged with salvaging the assets of failed savings and loans.

The church had been used as collateral 11 times on loans and bond issues since 1981. The largest of these was an $8.5-million loan from a Texas securities firm tied to failed S&L magnate Charles Keating's Lincoln Savings and Loan. The church became the property of the RTC when Keating's firm went belly up.

Falwell has fallen behind on his payments and is trying to come to terms with the RTC.

A group of 2,200 unhappy investors, who purchased $18.8-million of now-defaulted church bonds in 1991, are trying to foreclose on the 160-acre Liberty University campus. They have set a Dec. 1 deadline for satisfaction on their failed investments.

The school already has lost a 50-acre chunk of the campus after it fell behind on payments to an Arkansas financial institution which claimed the undeveloped land at auction last year.

In August, Falwell gave the faculty and staff a forced two-week vacation without pay in order to save a much-needed $1-million. In mid-September, paychecks bounced for about 20 Liberty University employees _ a development the school attributed to an accounting error, not a problem with cash flow. Nevertheless, it sent a shiver through the community.

Falwell's own followers contributed to his financial problems. People signed up by the thousands for the Liberty Home Studies Institute, a $1,000 Bible study correspondence course underwritten by the Household Finance Corp. HFC advanced Liberty $1,000 for each student who made the $25 down payment, but most people failed to keep up their payments. Defaults were huge and the venture wound up more than $10-million in debt.

An Arkansas bank is dipping into Falwell's bi-weekly paycheck for repayment of loans he personally secured. Last month, U.S. Department of Education officials visited the school to determine if Liberty University is solvent enough to keep its students eligible for federal tuition aid.

An ardent supporter of President Bush and a visible figure last August at the Republican National Convention, Falwell is using a familiar Bush campaign theme to launch a campaign of his own _ to save the American family.

He's written a book on the subject and intends to use family values as a theme this fall, purchasing airtime for The Old Time Gospel Hour on 100 television stations nationwide.

When Falwell disbanded the Moral Majority in 1989, he virtually disappeared from national politics. As his debts mounted, he became a less visible television presence, cutting the number of stations that carried his weekly program from 200 to 60 and channeling the $15-million annually he spent on airtime to meet his mounting debts.

In his heyday, Falwell pulled in $135-million in contributions each year. Last year, he took in less than $100-million _ a considerable sum, but apparently not enough to part the sea of red ink that threatens to engulf him.

Falwell expressed confidence that the tough economic times many Americans are experiencing would affect his ability to raise money.

"People give more when they're hurting," he said. "Churches fill up when people are in need. During hard times, people feel the need to be more charitable."

Disgruntled investor Claude Ferebee isn't so sure.

"Public confidence in Falwell _ at least among the people I talk to _ is now pretty low," Ferebee said.

A retired Fort Worth, Texas, lawyer, Ferebee is representing the 2,200 bondholders trying to negotiate a payback for their investment.

Much of the first reporting on Falwell's finances was done by religion writer Jan Vertefeuille of the Lynchburg News and Advance, whose chronicling of every turn of Falwell's downward spiral has resonated through the community.

"There are many who think the world of Dr. Falwell. Some don't like him and most are neutral," said Jeff Downin, head of the Lynchburg Chamber of Commerce. "But for Liberty to close down would be a major blow to this community, financially and in terms of the contribution Liberty people make to the quality of life here."

As Lynchburg's fourth-largest employer, Falwell tried in 1986 to get the city to issue tax-free municipal bonds to ease his way out of debt _ a move that was blocked in court by the non-partisan watchdog group Americans United for the Separation of Church and State.

He then turned to other sources of financing, among them Willard May, a former minister and Texas millionaire, whose AMI Securities was a Keating subsidiary. May was a specialist in church bonds, a risky form of investment virtually unregulated by the Securities and Exchange Commission, because they are issued by non-profit organizations.

May loaned Falwell at least $32-million before Texas authorities shut him down. He is now under indictment on six counts of securities fraud.

May's companies were the last source of money for Falwell's embattled ministry. And while Falwell himself has not been implicated in any wrongdoing, the money he owes may be too much for the ministry to pay.

One enduring embarrassment for the school was May's pledge to contribute $1.5-million to the construction of its football stadium. When the stadium was completed in 1989, it bore his name. University officials quietly removed it after the indictments were handed down. He never did give Liberty University any money.

All this has taken its toll on student and faculty morale at Liberty. Enrollments are down about 1,000 and some teachers have left in search of more secure pastures.

But Charles Onyeanusi, who hopes to graduate this June with a degree in telecommunications, is as serene about the future as the founder of his school.

"God has been providing for this school for a long time," said Onyeanusi, who, encouraged by missionaries in his native Nigeria, came here on scholarship. "We have to believe that things will work out one way or the other."

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