A “Slush Fund” Mindset & Erton Köhler’s Legacy in South America
The financial irregularities in Brazil—estimated around $6 million—currently under investigation by Adventist Risk Management occurred within a South American Division centralized insurance structure created by its previous president, Erton Carlos Köhler. Since 2021 he has been the Secretary of the General Conference.
Köhler’s consolidation of resources at the shared ARM-SA and SAD headquarters in Brasilia contributed to undermining union autonomy. The tradeoff was explained as a way to professionalize financial management. Sources in Brazil and the United States have requested anonymity to provide details into what one person called a “trust fund experience of entities” in Spectrum’s previous report. A case study of one union in Brazil shows how this process worked.
Until the election of Köhler in 2006 as division president, almost every union in South America had its own trust fund to insure the vehicles of credentialed church employees. The practice was started by the Central Brazil Union Conference (UCB) over 40 years ago. It was a way to save funds paid to external insurance companies since the average church worker was less likely to drive recklessly or get into an accident. The practice was risky at the beginning, but the driving record and steady contributions of employees over many years gave the funds a considerable amount of money. These savings allowed the unions to charge less for their church workers’ car insurance or freeze rates over many years despite inflation. This popular program even awarded workers for their safety records with benefits like extra money to maintain their cars.
In addition to the mutual benefit, these union managed funds also supported the financial security and autonomy of the field’s institutions. At times they become a contributor to a “slush fund” mindset in the unions. Apart from a “technical reserve” required to be saved—approximately six times the earnings of the fund in the previous year—according to two sources who requested anonymity, a union executive committee could vote to invest or lend the money to church institutions, in order to develop new programs or provide assistance in case of financial struggles.
This source of union financial autonomy was seen as a major problem by the Köhler administration which preached modernization via a top-down authority structure. The division campaigned to merge all the union trust funds in Brasilia. Some reasons given for this was to increase oversight against local misuse of funds as well as a General Conference mandate to centralize under the management of Adventist Risk Management, Inc. at the denominational headquarters in Silver Spring, Maryland. ARM, Inc., the South American Division, and the department of communication at the General Conference didn’t respond to an invitation to comment by the time of publishing.
Under Köhler, the newly created Adventist Risk Management-South America office soon acquired the UCB’s insurance broker Unibrás (founded in 1978) which was then run by ARM, Inc. But, while most of the unions transferred their trust funds to ARM-SA during the 2010s, UCB, whose trust fund had the most significant amount of money, resisted the merger. According to a source who requested anonymity to share details, the union became the main target of the SAD campaign. Meetings with the division were often tense with an “us versus them” mentality. The source added that the division employed rhetoric which implied that the UCB was acting against the best interests of the world church.
This created some confusion in the union. For instance, approximately 500 retired church workers in São Paulo transferred their car insurance to ARM-SA because they mistakenly thought their retirement plan, administered by SAD, required their cars to be insured by ARM-SA. Many of the retirees then transferred their insurance back to the union once they found the old rates cheaper.
It wasn’t until the end of 2018 that the SAD campaign yielded fruits. It happened through the southern Brazil network of connections that produced the last three division presidents and other church finance leaders. Formerly the South Brazil Union treasurer, Edson Erthal de Medeiros was elected in the constituency meeting as the treasurer for UCB with the stated purpose of solving matters between UCB and SAD.
In November 2019, one year after being re-elected in that constituency meeting, the UCB President, Domingos Sousa, retired. The union executive committee, chaired by the division president, Köhler, then named Southeast Brazil Union Conference President Mauricio Pinto Lima, referred to by some as Köhler’s “sniper”, as the new union president. In 2020, the millions of dollars in the UCB trust fund and all its insurance contracts involving several thousand cars were acquired by SAD/ARM-SA.
In 2021, after barely two years at UCB, the SAD nominating committee then moved Edson Erthal de Medeiros to lead the Brazilian Publishing House.
The transfer of trust funds to division headquarters in Brasilia also consolidated a mechanism for unofficial financial assistance by Köhler. Although not acknowledged officially as an ARM-SA practice, multiple accounts suggest that church institutions could borrow money from the Brasilia office for investment or support in emergencies, as long as enough insurance was also purchased from ARM-SA in order to compensate for the borrowed money on the company’s books. An example of this discretionary or post hoc slush fund use benefited the south Brazil-based Cruzeiro do Sul Adventist Academy (CSB). The school’s church suffered severe storm damage and wasn’t insured for natural disasters, but it had much of the repair expenses covered.
As previously reported, the six ARM-SA employees, including the organization’s top three leaders were terminated after two GCAS multiple week-long investigations in late 2023. The six million dollars that they were allegedly responsible for misusing currently has an unknown destination. According to a source, all of those terminated employees have links to the network of division relationships centralized by Köhler.
While what happened with the multiple trust funds is still unclear pending the conclusion and disclosure of ARM, Inc.’s investigation, that informal network of centralized division control and a general “slush fund” mindset could be the source of the irregularities detected by GCAS.
ARM, Inc. has two corporations in South America: UNIBRAS and a consulting arm. Those two entities are regularly audited and are not the target of the current investigation. The ARM-SA office includes workers responsible for the credentialed employee benefit funds. This is where the alleged “administrative irregularities” lie. According to a source who requested anonymity to reveal sensitive information, those funds “are administered by the division.”
