Inside the Epic ‘Fraud’ That Got a Bishop Indicted

The congregants of University AME Zion Church have owned their building in Palo Alto, California, for nearly 50 years. As far as the congregation was aware, the church—a low, white building where more than 100 people from around the city gather each Sunday—had not had a mortgage, taken out a loan, or so much as missed a utility bill since the early 1970s.

So when Pastor Kaloma Smith received a default notice in June 2020 alerting him that his church was $235,730 past due on mortgage payments and facing imminent foreclosure, he was stunned.

According to a recent filing by the church in California Eastern Bankruptcy Court, Smith quickly sought counsel from Bishop Staccato Powell—then one of the highest-ranking members of the national AME Zion Church, and the leader of the Episcopal district in which University AME Zion resides.

“We received notice of foreclosure in the mail today,” Smith texted Powell, attaching a photo of the notice. “Is this real.”

“It is being resolved,” the bishop responded cryptically. “On a call.”

“What do I do,” Smith asked, still shellshocked.

“Put the letter in the [drawer],” the bishop responded, “and remember what I told you.”

AME Zion is one of the oldest and largest Black religious institutions in the country. Founded in the early 19th century by African Americans fleeing discrimination in white Methodist churches, it has since grown to more than 1.4 million members around the world. Its ranks have included Harriet Tubman, Sojourner Truth, and Bishop Alexander Walters, the co-founder of the NAACP.

As bishop of the Western Episcopal District—which stretches from Washington to California, and includes Arizona, Alaska, and Colorado—Powell was one of the most powerful AME Zion figures; as a pastor of more than 30 years, he was one of its most trusted. But an indictment filed in the U.S. District Court for Northern California last month claims Powell betrayed that trust in order to enrich himself and his business partners—orchestrating an audacious scheme that has left multiple churches facing the threat of foreclosure and the bishop in debt for more than $12 million.

Powell is now facing up to 20 years in prison if convicted, and the churches under him have filed adversary proceedings against him in his bankruptcy case. He has pleaded not guilty to the charges and maintains that his actions were for the benefit of the district. And while the reverend was disrobed as a bishop last year, a number of AME Zion leaders are still supporting him, leaving members to question whether their charismatic leader was a visionary or a scammer.

The first sign of trouble, according to University AME Zion’s bankruptcy court filing, was at the conference of Western Episcopal District pastors that Powell called in April 2017, less than a year after he took over as bishop. According to the filing, Powell laid out his grand vision for the district—some of which can still be seen online, in a brightly colored pamphlet called “Powell’s Priorities”—and insisted that in order to carry it out, the churches would have to pool their resources and increase their donations to the episcopal district.

According to a recently filed indictment, however, Powell’s alleged pressure campaign started even earlier than that. In February of that year, the indictment alleges, he suggested to the pastor at Kyles Temple in Vallejo, California, that he sign over the deed to the church so that Powell could use it as collateral on a loan for his new residence. According to the indictment, the pastor asked Powell to provide a written proposal for the congregation to review. (Under AME Zion doctrine, any church property transfer must be approved by a majority of the congregation, its board of trustees, and its quarterly conference.)

Instead, the indictment claims, Powell’s assistant pretended to be the secretary of Kyles Temple and created a fake resolution allowing Powell’s business partner, Sheila Quintana, to negotiate with a lender on the church’s behalf. On March 23, the complaint alleges, Quintana did just that, using the church as collateral to obtain a $500,000 loan on the property—without the knowledge of the pastor and his congregation.

Six months later, Powell approached Smith, the pastor of the Palo Alto church, about signing over the deed to his property, too. This time, according to the church’s bankruptcy court filing, Powell claimed that the property would be used as collateral on a loan of about $200,000 to pay off the debts of a struggling church in Sacramento. Believing that the building would be held in trust by the district, and that it would be used to help another congregation, the church’s board approved the transfer.

According to the Palo Alto church’s bankruptcy court filing, however, the deed was transferred not to a trust, but to Powell’s for-profit business, and used to take out $2 million in loans that same day. Over the course of more than a year, the filing states, Powell’s associates would refinance the property multiple times, ultimately securing nearly $4 million in high-interest loans.

According to the indictment and multiple bankruptcy court filings, Powell ran this scheme for years, using manipulation, coercion and deception to secure the deeds to at least five different church properties and take out at least 22 high-interest loans. In some cases, such as in Palo Alto, he allegedly told congregations that giving over their property would benefit the district as a whole. In others, he claimed that the AME Zion Book of Discipline—the official record of church law, which Powell was partially in control of editing and updating—mandated that the churches hold their resources collectively. In still others, such as Vallejo, he allegedly did it in secret.

For a while, it worked. According to the indictment, Powell used the proceeds of the Los Angeles church loan to add land to his family farm in Hallsboro, North Carolina, and used other loans to pay down debt on his personal residence in Wake Forest. The episcopal residence he ultimately purchased, in Granite Bay, California was worth more than $1.8 million, and contained four bedrooms, six bathrooms, a sauna, and an outdoor pool. According to the indictment, Powell’s business partner, Quintana, also benefited from the scheme, writing checks from the WED Inc bank account to her husband, who did no documented work for the company.

And then it all came tumbling down.

Staccato Powell grew up in a working-class, “God fearing” family in Hallsboro, North Carolina, the fifth son of a housekeeper and a civil service worker, according to a profile in the religious publication Faith and Leadership. He has repeated, in multiple interviews, how he was called to service from a young age, giving his first sermon at 16 and accepting his first pastorate at 18.

In 2003, Powell was called to serve as pastor for Grace Zion Church in Raleigh—a role he told Faith and Leadership he took “kicking and screaming.” According to the profile, Powell rapidly expanded membership at the poorly attended church from 50 to 1,300, and increased its presence in the surrounding community. Attendees there professed that he had “elevated all of our lives.”

Evonne Bolding, who worked with Powell at Grace Zion Church between 2005 and 2007, told The Daily Beast that Powell was a compassionate boss and a committed family man. She recalled him moving church services in the summer to earlier in the morning, so parents could go home and spend more time with their kids.

“[He was] very personable and really in tune and sensitive to whatever your needs were,” Bolding said. “Whatever he could offer to get you, he would give that to you.”

But even in Raleigh, Powell’s bold vision led to conflicts with church authorities. Powell claimed to be ushering in a “new church,” which would focus less on denominations and more on unity as Christians. George Washington Carver Walker, the senior bishop of the AME Zion Church at the time, told Faith and Leadership he didn’t think much of that message, quipping: “As a bishop, I cannot go with the post-denominational church. That would be against my philosophy.”

Despite the pushback, Powell took on a larger and larger national role over the coming years. He served as deputy general secretary of the National Council of Churches, a coalition of 38 different Christian faiths, and as a board member on several other cross-denominational coalitions. In 2010, he hosted a joint gathering of leaders from all three major African-American churches called “The Great Gathering,” which drew attendees from Cornell West to Marian Wright Edelman and ended with a taped message from President Barack Obama.

When he arrived in the Western Episcopal District in 2016, much like he did at Grace Church more than a decade earlier, Powell had an ambitious plan for reform. The “Powell Priorities” pamphlet he created for the district is brimming with hopeful—if slightly improbable—optimism, pledging his members to everything from eliminating plastic pollution to acquiring their own nationally chartered bank. In an interview with the Religion News Service, he did not deny having asked his churches to give more of their incomes to the district, but claimed it was in service of “usher[ing] in a new paradigm of growth and expansion.”

Whether this talk of expansion and ingenuity was genuine, or cover for a massive, self-enriching scheme, is up for debate. (There is, in fact, an entire Religion News Service article dedicated to this question, entitled, “Staccato Powell: pioneer or swindler?” in which several pastors pledged their support for him.) Some former colleagues who spoke to The Daily Beast said they still held out hope that the charges against Powell were false, and that he would fully explain himself in court. But they also left open the possibility that the self-proclaimed reformer had gotten too swept up in his own revolution.

“He’s a spiritual person, he’s a good guy,” said Bishop John R. Bryant, who worked with Powell on the Great Gathering. “[But] all of us can fall. And I would just hope that that’s not the case.”

Pastor Smith first sensed something was off in January 2019, when the Palo Alto church received a notice of overdue property tax—which, as a nonprofit organization, it had never had to pay before. Smith, unaware that Powell had transferred ownership of the property to his for-profit corporation, forwarded the notice to the bishop and his staff. According to the church’s court filing, an employee of Powell’s responded by claiming that the agency was simply confused.

But in April 2020, according to the filing, the pastor received a call from a “concerned third party,” informing him that there was a $3.6 million mortgage on the church property and approximately $11 million in mortgages on multiple church properties in the area. A month later, as rumors about the situation swirled, the church claims Powell called the pastors in his district to assure them that their mortgages would all be taken care of, and that each of them would have “money in the bank after this was all done.” What he did not tell them is that his company had doubled down on his scheme just one month before, increasing the loan balance on a Los Angeles church from $1.2 million to $1.5 million, according to that church’s court filing.

Finally, in July 2020, the AME Zion Board of Bishops—the church’s governing body—sent a letter to all of the Western District congregations announcing what many of them already knew: A number of church properties had transferred ownership without following proper church procedure, and several had received foreclosure notices due to delinquent payments. The board said its members had met with Powell that month, and that he had promised to “bring this situation to an appropriate resolution.”

Three days later, Powell’s company filed for bankruptcy.

The scale of the bankruptcy filing is striking. Powell’s company claims to own 11 churches, a parsonage, and the bishop’s official residence, for a total of more than $26 million. It also claims to have taken out $14 million in loans on the properties, and to be nearly $12.5 million in debt. The filing was the first time many churches in the Western District learned exactly how much they owed on their properties. But even more surprising was the plan to pay it off: Sell the church properties and use the proceeds to pay his debt—despite being instructed by the Board of Bishops to return the properties to their rightful owners.

At least three churches have filed adversary proceedings in the bankruptcy proceeding, hoping to block Powell’s company from selling off their properties. A filing by a Los Angeles church is unsparing in its depiction of its former leader, claiming that his company had “no revenue generating operations of its own,” and was now attempting to sell off “coopted local church properties” in order to satisfy a “massive debt incurred by the Debtor alone.” The Palo Alto filing lays out the consequence of this scheme in stark relief: “If the Debtor’s unlawful attempts to sell [the church property] are not stopped by this court,” it reads, “Palo Alto’s oldest Black church will lose its sanctuary.”

In July 2021, almost a year to the day after Powell’s company filed for bankruptcy, the General Conference of the AME Zion Church took the step last year of removing him as a bishop—the first time this had been done since 1948. The move followed a months-long internal investigation into the bishop, and a full trial at the General Conference. “A core principle of Methodism is accountability,” the Board of Bishops said at the time. “No position, regardless of prominence, is beyond this proposition.”

Powell, meanwhile, continued to deny the charges against him, telling the Religious News Service he expected to be “totally exonerated.” Five months later, he was arrested on four counts of mail fraud and wire fraud.

There is a section of the Western Episcopal District’s website, next to the tab on “Powell Priorities,” titled “Dare2Believe,” which quotes from section Mark 9, in which Jesus appears before a sick child and his father and tells them that all things are possible if they believe. The father declares his belief, and the boy is magically healed. According to the site, the moral of this story is that, regardless of one’s plight, “BELIEF in God can and will turn things around.”

“If you BELIEVE,” it reads, “God will fix the situation for you.”

Throughout this process, Powell has not only maintained his innocence, but also his belief that it was all a part of God’s plan. In an interview with Religion News Service in 2021, after his removal as bishop, Powell declared the decision a “providential move of God,” that would allow him to practice ministry outside the confines of the AME Zion Church.

“I have no animus—nothing,” he told the news service. “I feel that God has moved in a mighty way and what some may have intended to be adversarial and evil, God will use ultimately not just for my good, but for the good of his people.”

Powell did not return multiple calls and emails from The Daily Beast; his attorney declined to comment. (Quintana has not secured a lawyer and could not be reached for comment.) The former bishop pleaded not guilty to all four charges in a brief, virtual court hearing in California earlier this month. Both he and Quintana were released on bond.

At the court hearing, Assistant U.S. Attorney Jonathan Lee described how Powell and his associates pressured pastors into giving up their property and forced them into unimaginable debt. “The loss afflicted on the affected congregations is incalculable,” he said. The three churches that filed adversary proceedings in Powell’s bankruptcy proceedings are continuing to move forward; the Palo Alto church, represented pro bono by the law firm Mayer Brown, is moving into discovery.

But in a statement issued the same day the charges were announced, the AME Zion Board of Bishops sounded almost woeful that Powell had been charged.

“It has never been the desire of the Board of Bishops to pursue prosecution of Dr. Powell,” the board said. “Upon hearing the news today, we will continue to keep Dr. Powell, Dr. Quintana, their families, the congregations that were involved as well as the A. M. E. Zion Church in our prayers.”

“We will continue to look to our God for comfort, inspiration and directions as all of us journey through this strange place,” they added.

Read more at The Daily Beast.

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