Church law­suit is lat­est spat over Lilly be­quests

Post-Tribune - - State - BY GREG AN­DREWS

IN­DI­ANAPO­LIS — Back in the early 1950s, as subur­ban mi­gra­tion was putting many down­town In­di­anapo­lis churches in peril, Eli Lilly Jr., grand­son of the phar­ma­ceu­ti­cal firm’s founder, made a $1 mil­lion gift aimed at se­cur­ing Christ Church Cathe­dral’s future on Mon­u­ment Cir­cle.

As his­to­rian James Madi­son noted in “Eli Lilly: A Life, 1885-1977,” Lilly’s gift doc­u­ments called Christ Church “a pre­cious pos­ses­sion of the City of In­di­anapo­lis and of the State of In­di­ana, stand­ing in the very heart of the City and State as a vis­i­ble wit­ness for Je­sus Christ and as a sym­bol that the spir­i­tual val­ues of His rev­e­la­tion en­dure while all ma­te­rial val­ues per­ish.”

It was one of many gifts that Lilly gave to sup­port his beloved Christ Church Cathe­dral — where he was bap­tized and where he at­tended his en­tire life, save a spell in the tu­mul­tuous 1960s when he had a fallingout with a left-lean­ing rec­tor.

The big­gest gift came at his death, when he left 10 per­cent of his re­main­ing es­tate — a stash of Lilly stock worth $13 mil­lion at the time. He also be­stowed smaller, mul­ti­mil­lion-dol­lar gifts on two other Epis­co­pal churches along Merid­ian Street, Trin­ity at 33rd Street and St. Paul’s at 61st.

It was his fi­nal act of gen­eros­ity that nearly 40 years later has spawned Christ Church’s no-holds­barred fed­eral law­suit against the na­tion’s largest bank, JPMor­gan Chase & Co.

The church ac­cuses JPMor­gan, which was trus­tee over most of the Lilly gift un­til re­sign­ing in De­cem­ber, of “in­ten­tional mis­man­age­ment” and “self-deal­ing,” lead­ing to $13 mil­lion in losses, the In­di­anapo­lis Busi­ness Jour­nal re­ported.

JPMor­gan has de­clined to com­ment. The bank is the suc­ces­sor via merger to Amer­i­can Fletcher Na­tional Bank and In­di­ana Na­tional Bank, which each re­ceived re­spon­si­bil­ity for man­ag­ing one-third of Lilly’s gift. The other third orig­i­nally went to Mer­chants Na­tional Bank, later known as Na­tional City Bank and now PNC Bank, which also gave up man­age­ment around year-end. All the funds now are man­aged by the Christ Church Cathe­dral Foun­da­tion.

This is far from the first time that heirs and ben­e­fi­cia­ries of the Lilly fam­ily for­tune have tan­gled over how it was man­aged. In the early 2000s, nieces and neph­ews of Ruth Lilly, great-grand­daugh­ter of the phar­ma­ceu­ti­cal firm’s founder, com­plained re­peat­edly that Na­tional City was mis­han­dling her $1 bil­lion es­tate.

In 2002, af­ter dis­clo­sure of manufacturing prob­lems caused Eli Lilly and Co. shares to fall 5 per­cent in a sin­gle day, nephew Ge­orge Lilly blasted bank of­fi­cials in an email, as­sert­ing they were too con­cen­trated in the phar­ma­ceu­ti­cal stock.

“I con­tinue to in­sist that ra­tio­nal and pru­dent strate­gies be put in place so that we do not once again find our­selves ex­posed like a jack­ass in a hail­storm,” the email read.

In later years, the fam­ily praised Na­tional City for im­prove­ments. Af­ter giv­ing most of her for­tune to char­i­ties, Ruth Lilly died in 2009 at age 94.

Christ Church’s suit against JPMor­gan takes par­tic­u­lar is­sue with the bank’s re­peated in­vest­ments in its own pro­pri­etary prod­ucts, in­clud­ing hedge funds, “struc­tured notes” and other high-fee, opaque in­vest­ments. By 2009, the suit says, three-quar­ters of church as­sets were in­vested in JPMor­gan pro­pri­etary prod­ucts.

“On many of the fi­nan­cial prod­ucts pur­chased by JPMor­gan from it­self on be­half of the church us­ing church funds, JPMor­gan made sub­stan­tially more money than the church, even though the church trusts bore all the risks of the spec­u­la­tive in­vest­ments,” the suit says.

From 2005 through 2007, the value of church trusts man­aged by the bank rose from $35.4 mil­lion to $39.2 mil­lion. By De­cem­ber 2013, af­ter the stock mar­ket tum­bled and then shot up, the value had slipped to $31.6 mil­lion, the law­suit says.

The suit points out that, as trus­tee, JPMor­gan had a duty to in­vest and man­age the funds solely in the church’s best in­ter­ests.

The JPMor­gan suit says that by 2009, Christ Church’s In­vest­ment Com­mit­tee had be­come con­cerned and sent a let­ter re­quest­ing “co­op­er­a­tion and some con­trol.”

JPMor­gan pushed back, say­ing it had full le­gal au­thor­ity over the ac­counts—and sug­gest­ing the com­mit­tee would be well-served by let­ting it do its job.

“Christ Church ben­e­fits from work­ing with JPMor­gan as a lead­ing as­set man­ager with over one tril­lion dol­lars in as­sets un­der man­age­ment,” the let­ter said.


The Christ Church Cathe­dral is on Mon­u­ment Cir­cle in down­town In­di­anapo­lis.

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