Rex in the Red

Like many other corporate commanders, Rex Humbard dresses in expensive suits, commutes to his office in a Cadillac and jets to out-of-town appointments in the company plane. His Ohio-based conglomerate issues securities, reports annual revenues of $8,000,000 and has assets worth some $30 million. Yet Humbard, 53, is no ordinary businessman. He is a guitar-picking, down-home evangelist (TIME, May 17, 1971) with a following of 25 million weekly television viewers on 400 stations in the U.S. and foreign countries.

Conglomerating for Christ has obviously paid off handsomely for Humbard. His headquarters is the $3,400,000 rigged-for-TV Cathedral of Tomorrow in suburban Akron. He lives in a $225,000 house in Akron's West Hill, where the rubber barons reside.

Lately, however, Humbard's evangelical empire has been having some mammon troubles. Officials in six states have banned further sale of the securities sold by the cathedral because they were not properly registered. Last month Ohio commerce regulators won a temporary restraining order prohibiting him from selling securities, from encouraging investors not to redeem their holdings or from disposing of cathedral assets. They accused the cathedral of "unconscionable sales methods" in marketing securities, claiming that its salesmen failed to tell prospective investors that the church is in financial trouble. In addition, the U.S. Securities and Exchange Commission has asked a federal court to appoint a receiver to take over all of the cathedral's assets. According to SEC lawyers, the church has spent $7.3 million more than it has taken in over the 18 months ending Dec. 31, and currently has $4.2 million more in liabilities than assets.

Humbard got into high finance in 1959, a year after building his 5,000-seat cathedral. Finding that TV time to spread the Word was expensive, he followed the example of other religious and educational institutions and began issuing bonds and promissory notes. But he did not sell the securities through licensed brokers. He formed his own traveling squad of 20 salesmen, many of them ministers in the cathedral, who have since raised $ 12 million from small investors in 47 states.

Humbard turned his corporation into a conglomerate in 1965, when he bought the Real Form Girdle Co. of Brooklyn, N.Y. Since then he has acquired and resold an advertising agency and a printing company in Akron, spent some $3 million to buy and modernize Mackinac College in northern Michigan and $10 million for a 24-story office tower in downtown Akron. Adjacent to the cathedral he has built a 202-unit apartment building for senior citizens and a restaurant (all the dinner you can eat for $3, no smoking or drinking, please). The acquisitions are owned and operated by Cathedral Enterprises Inc., a tax-paying subsidiary of the church. Says Humbard: "Profit is not a dirty word in religion."

Trouble is, Humbard seldom turns a profit. Earnings from the girdle company have gone flabby ("Panty hose killed us," explains Humbard), and Mackinac College has attracted only 150 students for its 700 places. Nearly all of Humbard's available revenues go into buying more television time.

Ohio Commerce Director Dennis Shaul wants Humbard to stop issuing securities and to establish a cash reserve of up to $3,000,000 to ensure that cathedral investors can get their money back if they want. The SEC wants a receiver to put the cathedral back in the black, even if it means selling off some of its assets. Humbard's lawyers will try to work out a compromise at court hearings this week and next.

The pastor complains that business is not all that bad. The problem, he says, is that the Government will not let him count as assets $14 million that the cathedral will inherit from people who have written the church into their wills. He insists that cathedral investors are not worried about their investments; they are pious folk who regard the church's securities as a contribution to gospel spreading. As Humbard told TIME Correspondent Richard Ostling last week: "We have never missed an interest payment. We're not in default with our people. If Government regulators try to force us into a corner, it's the noteholders they say they're trying to protect who will suffer."

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