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In December of 2007, a selection process selected three investment companies to manage the money for the endowment. The three managers selected were Regions/Morgan Keegan Investment Services, First Tennessee Bank, and Smith Barney.
Rhodes could not say which managers had lost money, or in which investments it was lost, even though, being chairman of the investment committee, he was responsible for tracking investment performance. It has been reported but was unconfirmed by Rhodes that losses amount to at least 10% of the original BMH United Way proceeds, although this figure could be higher.
Rhodes is the President and Chief Executive Officer of the Church of God Benefits Board, Inc. in Cleveland, TN. The Benefits Board oversees $250 million in pension plans for ministers and church-related employees, operates a loan program for first mortgage church loans, and also oversees the investments of the Board.
The United Way's portion of the hospital proceeds has not performed as well as Bradley County's investments.
County Mayor D. Gary Davis told The People News, "The county received $15 million from the sale of the hospital. Last year the hospital money was invested and it made approximately 4% interest, which was a good return last year." When asked about the United Way losing money on their investments, Davis explained, "Ours is invested in things that the law says we can invest in, investments that are safe, and we got a good return.
On the other hand, United Way had parts of theirs invested where a yield could be much higher or it can be much lower. Last year it actually went down. Some is invested in higher risk investments. In good times, they'll have a whole lot more interest, in bad times, less. On paper, United Way's $19 million dollars is now only worth $16 million, a $3 million loss. The reason that occurs is that last year it was a year it was down, whereas our portion was making 4% in safer investments that the State says we can invest in. 4% was good, But over time, United Way may make more than we are because they are allowed to do those riskier investments."
The United Way investments did not just fail to achieve a higher interest rate, they actually lost money from the principal, and if Davis is correct it could be as high as 16%, bringing the total left to approximately $16 million.
Rhodes said, "The Investment Committee meets at the United Way with the managers and those records are held at the United Way. A massive amount of record keeping is done and the committee goes in and looks at the records. We get monthly reports, but those are summary reports. When we meet with the managers once a quarter, we go over a very detailed performance evaluation of every manager and how well they did, and how well they performed, but the records are permanently held at the United Way. Rhodes then explained that the United Way would have all of those records, and clarified that his role in this was not making all of those decisions. He said, "I am on the Executive Committee of the United Way and I was appointed as the chair of the Investment Committee for those funds once the money got to United Way."
As of press time, the specific amounts that were requested in this fund are still unknown. But the best estimate seems to be a loss of about $3 million.
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