Greg McAtee first joined the Knights of Columbus 16 years ago, when he was 55.
He was joining a formidable club, the largest Catholic fraternal organization in the world with alumni like Babe Ruth and John F. Kennedy, and it continues to have powerful political allies in 2019. He was also, though he didn’t realize it at the time, becoming a pawn in an alleged scheme to inflate membership numbers for a multibillion-dollar life insurance company.
But to him, the Knights were mostly just a group of nice men from his parish in Mobile, Alabama, who wore matching shirts with shield insignias. They raised money for charity, had Christmas parties for good causes, and fried fish for its friends and family in the local community center.
Today, however, McAtee is a witness for the plaintiffs in a massive new lawsuit that could shake one of America’s most powerful socially conservative groups to its core. The case is accusing the Knights of Columbus of “racketeering, fraud, deception, theft, and broken promises,” a complaint in the US District Court for Colorado, which will begin hearing the case Monday, reads.
According to multiple sources and the lawsuit, the alleged scheme went like this:
In order for life insurance companies to continue having people buy its plans, they need to have a top rating from an insurance rating company.
The key thing insurance rating companies are looking for is the ability to pay back the claims of policyholders. One of the main indicators of that is whether a company’s customer pool is growing, and whether young people who will pay their life insurance claims for a long time are buying policies.
Knights of Columbus currently has an A+ rating from AM Best.
The Knights of Columbus can only sell life insurance to its members (or someone who becomes a member within 90 days of applying for insurance), and its members can only be men who are “practical Catholics” (meaning they accept all the teachings of the Catholic Church) and live in the US, Puerto Rico, or Guam.
The lawsuit claims that the Knights’ membership is not in fact growing, but shrinking and getting older.
To hide this, the lawsuit claims, it has made it extremely difficult to remove members from its rosters, even if they haven’t paid dues in years. So, as some more members join, and none of the members who leave are recorded, it appears to insurance rating companies that its pool of potential customers is growing.
Unfortunately for the Knights on the ground in local chapters, who are largely uncompensated volunteers, this means they have to cover the cost of the nonexistent members they couldn’t take off the books, the lawsuit alleges. When they couldn’t get them removed, they ended up paying out of pocket, or sometimes dipping into the funds they had raised for charity, five of the men told BuzzFeed News.
The lawsuit was filed in 2017 by UKnight, a Colorado-based IT firm hired by the Knights of Columbus to update communication software for its more than 10,000 local US chapters, referred to as councils. In the lawsuit, UKnight alleges that the Knights’ senior leadership (namely senior executives Thomas Smith and Matthew St. John) were “engaged in an elaborate conspiracy to artificially inflate the Knights of Columbus’ insurable membership numbers and artificially improve” its ratings by insurance rating companies, thereby making people more likely to buy its life insurance. UKnight and one of its managers, Leonard Labriola, an individual plaintiff in the case, claim the Knights unlawfully terminated its contract after UKnight discovered the alleged conspiracy.
In court documents, the Knights dismissed the suit as “a disappointed prospective vendor that offered the [Knights] inferior and outdated website services that the [Knights] refused to endorse.”
In a comment sent to BuzzFeed News Friday, a spokesperson for the Knights of Columbus said the group, which she referred to as the Order, “believes strongly in the judicial process and looks forward to responding before a jury to the claims made by the plaintiff in this contract dispute.”
“The Knights of Columbus has a long-standing, thoughtful, and well-conceived membership retention process in place that reflects sound practices and the values of the Order,” the statement continued. “One of those values is to ensure that members of the Knights provide mutual aid and assistance to fellow members of our organization.”
After around two years of failed negotiations, Monday, Aug. 26, will be the first day the case will finally go to trial.
BuzzFeed News spoke to seven current and former Knights of Columbus, two of whom are involved in the case, and reviewed emails, court documents, and internal membership spreadsheets and contact lists. All of the men were in leadership positions in their local chapters that enabled them to have access to membership information. The men were from four different states and seven different towns, but their stories were nearly identical. All of them said that they noticed large numbers of inactive members on their local council’s rolls, that senior members of the Knights of Columbus ignored their questions about it, and that they had to use donations meant for charity or pay out of pocket to cover dues owed by what they began calling “phantom” members.
Each of the men said they joined the Knights of Columbus years ago because they wanted to do good work; the group was influential and respected in their local parishes. And the Knights did do good work, giving back to their parishes and creating a sense of community. It was worth the $30 to $100 annual membership fee. Once they entered leadership positions, however, they each noticed something odd — there were dozens of inactive members on each of their books who hadn’t paid their dues or participated in the Knights in years, sometimes over a decade.
The men tried to contact the members to see why they weren’t paying their dues, but many of them had moved away, changed parishes, left the Catholic Church, or, in some cases, were listed as over 100 years old and were almost certainly no longer alive. In one case, an internal membership spreadsheet provided to BuzzFeed News showed that of one council’s 399 members, 97 were inactive. After making several efforts to get in touch, the leaders of the council managed to track down most of them, but two were dead, about 40 said they planned to withdraw from the Knights, and they never managed to find another 30 of the members.
When they tried to alert the state and national council of Knights, known as “the Supreme Council,” about the issue, they were instructed to jump through nearly impossible hoops to get the inactive members off their rolls, they said. Several of the men pointed out that this goes against a section of the Knights of Columbus constitution that states that after three months of a member not paying his dues, he “ipso facto forfeit[s] his membership.” But this didn’t seem to matter to their higher-ups.
“And I just I found myself at work one day and I was like, ‘You know what? There’s got to be something going on with the Knights, this is too strange,” Danny Gonzalez, 50, a librarian and former Knights trustee from El Paso, Texas, told BuzzFeed News. “So I started doing my research … and asking questions.”
Five of the men told BuzzFeed News that when they started pointing out the issue and reporting it to their higher-ups, they were met with silence, discouragement, and warnings. (The Knights of Columbus declined to respond to the individual claims of the local leadership).
“There was a threat when I and the financial secretary said, listen we’re not gonna pay dues for these non-paying people,” McAtee told BuzzFeed News. “And they came back and said, under the Knights’ constitution, if the council doesn’t pay the dues, they have the right to suspend the council.”
A series of letters and emails between McAtee and the Alabama State Membership Retention Chairman Grand Knight Richard Klusman provided to BuzzFeed News support McAtee’s story. In the letters, Klusman tells McAtee that the Knights had changed its policy on quickly suspending nonpaying members out of consideration for people who couldn’t pay dues for temporary reasons like military deployment or illness. Klusman said the Knights encouraged councils to contact every member before requesting their suspension.
An affidavit filed in the case by the Knights of Columbus used nearly identical language to that in the emails. The man giving the affidavit was Gary Nolan, the Vice President of the Knights’ “Fraternal Education, Training and Ceremonials.” Nolan walks through the membership removal philosophy saying that “three or four years ago” the Knights switched from an “Intent to Suspend” to an “Intent to Retain” philosophy with its members. This means they ask local councils to make every effort to contact the lapsed members and to get them to re-engage with the Knights before they file official paperwork, showing they have done this, for their removal. The only mention in the affidavit of not being able to contact the lapsed members at all — a common problem among all of the men who spoke to BuzzFeed News — is to blame council for not keeping track of the members throughout all their years of membership.
“In many situations, the council had failed to reach out to the member for many years, a man who was supposed to be their Brother Knight! These situations were usually a lost cause,” the affidavit reads. “Sad cases occurred when a member did not attend a council meeting, and the council would forget about him, his family, his life circumstances.”
The affidavit says that if a member has lapsed on his dues for medical or financial reasons, they can apply for a waiver, or another Knight can “volunteer” to subsidize his dues. It did not mention what happens to the dues of someone they cannot contact but haven’t been able to remove from the rolls.
But when McAtee sent official forms to the state representatives requesting that they remove members his council had contacted who no longer wanted to be Knights, the requests were apparently rejected, according to an email from March reviewed by BuzzFeed News. In the same email, an Alabama state representative for the Knights warned McAtee’s council that if they didn’t cover the non-paying member’s dues, they would all lose their membership benefits and the council would be suspended.
Another former Knight in his 70s, who asked to remain anonymous because he was considering filing his own lawsuit, said that when he discovered some of the members on his list didn’t exist, he went to the Supreme. They responded with what he called “a threat with a smile.”
“It was very obvious to me, when you’re looking at a man face to face and you bring this up, and the conversation is ‘You don’t want to go there,’ and then just a glaring stare with no further response,” the man said. “I knew that if I opened my mouth, I wouldn’t be there anymore.”
Jerry Mishork, 58, who worked as a webmaster for the Knights, helping councils around the country set up their websites, said the people he worked with would repeatedly bring up the membership issue without him mentioning anything about it.
“I am a staunch believer in the Knights at the local level,” Mishork, who was deposed in the lawsuit, said over the phone from Texas. “I think there’s a few guys at the top where there’s too much money involved and they lost their vision. Those aren’t the real Knights to me. But what they’re doing is affecting everyone.”
In its court filings, UKnight says they have spoken to “numerous” local councils that tell the same story as the members who spoke to BuzzFeed News, being forced to keep “phantoms” on their rolls and and pay their fees to the state and national organizations. The lawsuit cites examples: a New Jersey council that listed having 316 members, but in reality had only 54; a Texas council that attempted to purge 80 members who hadn’t paid dues in years, but were told by Knights above them that they were only allowed to remove eight. Another council tried to remove half its listed membership due to inactivity — about 200 members — but were denied by leaders on the state and national level.
Councils set their own membership fees, which can vary from around $30 to $100. If a council had 200 phantom members, the paying members could be forced to cover anywhere from $6,000 to $20,000 in extra dues. Often the local chapters just gave up and paid the extra dues themselves, the men told BuzzFeed News. Sometimes the Knights paid out of their own pockets for the phantom members, other times they were forced to dip into the money they raised for charity. (The Knights of Columbus councils hold frequent fundraisers to keep the organization and its charitable works afloat.)
“Why should our fundraising money go to pay dues?” McAtee said. “It should go to do our charitable works, the main reason the Knights exist.”
Eventually McAtee was so disturbed and disillusioned by this, he said, that he resigned from his post. Now, years later, he is considering filing a lawsuit over the issue, and talking with his fellow Knights about disbanding his local Knights chapter all together.
“If you follow the money you will find the truth, and that’s what I did,” McAtee told BuzzFeed News from his home in Mobile, Alabama. “It’s time for it to come to a screeching halt. I mean, this is just simply not right.”
The Knights of Columbus, a 501c3 non-profit founded in New Haven, Connecticut, in 1882 to provide benefits and community for newly arrived Irish immigrants. Sometimes referred to as a “fish-fry organization,” a modest local charity group with little political influence, they are also the largest fraternal Catholic organization in the world — with chapters in 17 countries — and are one of the most powerful Catholic groups in the US, with deep roots in Washington. They donate millions of dollars a year to conservative political organizations and media outlets, and regularly lobby Congress and the White House on conservative and religious issues.
Tax documents from 2014 show the Knights gave $1 million to the anti-abortion political action group Susan B. Anthony List that year, and about half that to the anti-abortion group March For Life. They also gave $1.2 million to sponsor a news show five nights a week on the popular Catholic outlet Eternal World Television Network (EWTN).
Attorney General William Barr is a member of the Knights of Columbus, as is Democratic Sen. Joe Manchin, and the controversial former head of the Office of Refugee Resettlement Scott Lloyd was an attorney for the Knights. The Knights of Columbus have met publicly and privately with members of the administration including Vice President Mike Pence, and President Donald Trump himself (along with Pope Francis). In December, the head of the Knights of Columbus, Supreme Knight Carl Anderson, stood in the Oval Office alongside Trump as he signed a law the Knights had been lobbying Congress and the White House on for years, which provided “financial and technical” assistance to Christians in Iraq and Syria. They regularly lobby Congress and the White House on issues of judicial nominations, religious freedom, tax issues, and advocate against same-sex marriage and abortion.
The nonprofit is also a major life insurance company. In 2017, the Knights sold $8.78 billion in life insurance to its members, and the Knights’ website says they have a total value of more than $100 billion of life insurance coverage. In 2017, Anderson made an annual income of $1.4 million, down from $2.2 million in 2014.
“As a result of these revenues, [Knights of Columbus] Supreme and its executives, in contrast to the local councils, sit among the world’s elite power,” the lawsuit argues.
The Knights say they have 1.9 million members in the world but the lawsuit alleges they are inflating this number by about 30% in order to keep its insurance rating high and keep selling more policies. In its website’s Frequently Asked Questions under “Is the Knights of Columbus financially strong?” its response is that the Knights have “42 years of superior ratings for financial strength” and currently is rated A+ by the insurance rating agency AM Best.
Even as the Knights’ membership has grown internationally, its numbers have likely stagnated in the US, where the number of Americans who identify as Catholics is dropping dramatically. In a 2014 study, Pew found that the number of Catholics in the US had declined significantly between 2007 and 2014 and that the median age of American Catholics was growing. Christian affiliation in the US is declining in general, but Catholics are being hit harder, the study found. In 2014, 13% of adults in the US identified as former Catholics.
As well as Catholics in general, men with Knights life insurance seem to be growing older without new young customers to replace them, three insurance agents for the Knights of Columbus told BuzzFeed News. Membership sheets of nearly 100 members provided to BuzzFeed News from different chapters of the Knights showed that the majority of those insured with the Knights were more than 50 years old, and many were in their sixties and seventies. If younger people aren’t buying policies and paying into the life insurance pool as those insured with the Knights grow older and die — or from the point of view of life insurance, stop paying into their funds and collect life insurance claims — the Knights will find themselves giving out more money than they are taking in.
The allegations — membership inflation, keeping phantom members on the books in order to appear more profitable — are very common in fraud cases, Chelsea Binns, the president of the New York chapter of certified fraud examiners, told BuzzFeed News, though she said she couldn’t give a judgement on this specific case.
“From my experience in the fraud world, what you see here is not uncommon when you have misaligned incentives. It’s really all about incentives,” Binns said.
The lack of regulation of nonprofits often makes it easier for this kind of fraud to occur, she added.
“There are not a lot of rules governing non-profit organizations in general, so it doesn’t really surprise me,” Binns said. “If no one tells someone not to do something, they often keep doing it, that’s what I’ve found in the fraud world. If it’s advantageous to them, they do it.”
In recent months, UKnight’s lawyers have repeatedly requested membership data from the Knights so that they could analyze whether their theory gathered from anecdotes — that the Knights are inflating their numbers — is correct. The judge on the case, Judge Brooke Jackson, granted this request. As of a hearing in May, however, only 96 of the more than 10,000 councils had taken the court-mandated survey facilitated by the Knights of Columbus regarding their membership numbers.
Of those 96, UKnight said that they determined there were about 20% to 40% fewer members than the Knights were alleging, but said they did not have enough data to determine if the problem extended throughout the organization.
“It’s been like pulling teeth getting information out of the Knights of Columbus from day one,” Judge Jackson said, according to a transcript of the May 13 hearing. “All that has done to me is make me wonder if there’s something there …. it makes me wonder what’s going on.”
When the lawyers for the Knights attempted to defend their noncompliance, by saying they had facilitated and encouraged the councils to fill out the survey about their membership, Jackson responded, “So you’ve either got the laziest or the dumbest financial secretaries, or they’ve gotten the impression one way or the other that it would be better not to respond.”
Eventually the judge ordered the knights to provide more complete membership information, and threatened to enter a default judgement in the case if they did not.
The seven men who spoke to BuzzFeed News all expressed deep sadness while discussing what they say they had discovered, two even teared up while talking about the Knights.
“I was passionate about being a Knight,” Danny Gonzalez, a 50-year-old former Knights trustee in El Paso, Texas, told BuzzFeed News. When he started with the Knights he was, “energized and excited and passionate about what we did, you know, they still do good work.”
All of the men who spoke to BuzzFeed News said they still greatly valued the work done by the local chapters, and recognized how important the Knights were to their communities.
“What they’re doing is so un-Catholic,” a man from Texas who asked not to be named out of fear of retribution from the Knights said. “When I found out what they were doing I almost resigned.”
Two of the men did resign from their posts, and three others said they felt they were pushed out. One man and his wife even left the Catholic church all together.
“Between the [church’s sexual abuse scandal] and this, we just thought, where’s the right in this anymore? It just doesn’t make sense anymore,” the man, who asked not to be named as he is considering filing his own lawsuit, told BuzzFeed News. “It’s all about money now, and not what we do, but how do we hide what we’ve done?”
All of the seven agreed that the Knights were not a lost cause, but said the organization’s leaders need to be held responsible for what is happening. The local Knights have to fight for what’s right they said, go against the Supreme if that’s what’s necessary.
“It’s like David vs. Goliath,” Mishork said. “But the truth has to come out.” ●