Church lawsuit is latest spat over Lilly bequests
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.