Jerry Falwell Jr.'s deals made Liberty University a juggernaut, but now they get a second look

Liberty University hired a forensic firm to probe financial dealings during Falwell's tenure

Soon after the Rev. Jerry Falwell's son took the reins of Liberty University from his father, the religious school in the bucolic shadow of Virginia's Blue Ridge Mountains quickly became a higher education powerhouse, with a surging enrollment and an endowment that grew like a hedge fund.

But with Jerry Falwell Jr. and his wife, Becki, embroiled in a series of lurid sex and booze scandals that have already cost him his job, the Midas touch that turned a sleepy Bible college in Lynchburg into a cash cow is getting a second look. And a host of deals that lined the pockets of the Falwells and their friends may not stand up to scrutiny.

"Did Liberty do well while Jerry was in charge? Yes. Was it on the up-and-up? Hell no," a Lynchburg resident who has known the Falwells told Fox News on condition of anonymity since she still works in the area.

Jerry Jr., who graduated in 1984 from the school his father built and then went off to law school at the University of Virginia, never shared his father's calling to the pulpit. But when he returned to work as a lawyer for the school, he demonstrated a knack for making deals that seemed to serve the family's mission well. When the elder Falwell died in 2007, his son took full control, and Liberty took off.

Just last year, Falwell's money moves helped grow Liberty's endowment by $317.5 million to a whopping $3.1 billion. Total enrollment, including graduate students, rose to nearly 80,000. Even the NCAA Division I football team, the Flames, played in a bowl game. Through it all, Falwell was the ubiquitous face of the school, appearing on national TV, meeting with the president and always promoting Liberty.

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But since his resignation last month, there has been growing concern that the lines between Falwell's personal profits and that of the school's were blurred. Following his departure, Liberty University's board of trustees announced it had retained an independent forensic firm to conduct an investigation into the school's operations during Falwell's nearly 13-year tenure. The audit would look into "all facets of Liberty University operations" including "financial, real estate and legal matters."

Forensic audits are often performed to root out corruption, fraud and conflicts of interest. Depending on the results, Falwell's financial deals could put the conservative college on a path to financial ruin.

Perhaps one of the most egregious examples of Falwell bending the rules is a sweetheart business deal he brokered between Liberty and Benjamin Crosswhite, Falwell's personal trainer. Falwell and his wife Becki began their private training sessions in 2011 with Crosswhite, then a 23-year-old recent Liberty graduate. Two years later on July 23, 2013, Liberty University began renting space to Crosswhite to use as a fitness training center.

This Wednesday Nov. 28, 2018 file photo shows Rev. Jerry Falwell Jr., right, and his wife, Becki during after a town hall at a convocation at Liberty University in Lynchburg, Va. (AP Photo/Steve Helber)

This Wednesday Nov. 28, 2018 file photo shows Rev. Jerry Falwell Jr., right, and his wife, Becki during after a town hall at a convocation at Liberty University in Lynchburg, Va. (AP Photo/Steve Helber)

A longtime university official familiar with the arrangement told Politico that "the facility was specifically built into the old Racket Club for Jerry and Becki to train privately."

Over the next several months, Liberty University started cutting checks for expensive upgrades to the facility and in 2015, Falwell had the school draft a proposal to sell the property to Crosswhite at a deep discount and pay him upfront for Liberty's use of the facility for seven years.

"We raised his rent some to cover the investment. LU then sold it to Ben," one senior university official told the publication. "Nobody else was allowed to bid on it."

One of the biggest red flags with the deal was that Falwell used the assets of the tax-exempt university, which depends on millions of dollars its students receive in federally backed student loans and grants. At the time, Liberty brushed off concerns and claimed the deal benefited the school. Liberty said the land was gifted by a trustee who had died but that it became a "drain on university resources," and said that because Crosswhite had been leasing the space since 2013, he was "the most viable purchaser."

The school justified its price cut and its decision to finance Crosswhite's purchase by saying Liberty's tennis team would use the courts to practice.

When asked by Fox News to comment further, Liberty University spokesman Scott Lamb dismissed questions about the deal as old news.

In this Nov. 16, 2016, file photo, Liberty University president Jerry Falwell Jr., poses during an interview in his offices at the school in Lynchburg, Va. (AP Photo/Steve Helber, File)

In this Nov. 16, 2016, file photo, Liberty University president Jerry Falwell Jr., poses during an interview in his offices at the school in Lynchburg, Va. (AP Photo/Steve Helber, File)

Falwell again raised eyebrows when he enlisted his friend's construction company, Construction Management Associates, to manage a massive campus expansion project worth hundreds of millions of dollars. Falwell helped his friend Robert Moon form the company in 2013 with a $750,000 start-up loan from Liberty, Reuters reported. Fast forward four years and public tax records show CMA banking more than $64 million in revenue from Liberty. Moon has denied any special favors and said his company repaid its loan with interest.

Liberty has said that CMA's construction contracts are "within the scope of the forensic investigation" into Falwell.

In a 2012 project green-lighted by Falwell, the university spent more than $2 million to build a tunnel that links Liberty to an off-campus shopping plaza that Falwell partially owns.

Another potential conflict of interest involved JF Management - a private firm formed by Falwell's son Jerry "Trey" Falwell III, that was hired to manage university properties.

According to the school's most recent tax filing, JF Management received more than $58,000 in 2017. Trey Falwell is also one of Liberty's vice presidents and gets a total compensation of around $189,000 a year.

During Falwell's time at the top, he also put his other son and their wives on the university payroll. Both sons still hold positions at Liberty.

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A deep dive into Falwell's finances by Reuters also revealed that before becoming school president, Falwell set up two companies that allowed him to make property deals with nonprofits affiliated with the university. In each of those deals, Falwell played multiple roles that could be viewed as conflicts of interest. He was a ranking official at the university, a board member for the nonprofit selling the land and a private developer who would likely pocket a profit. Those transactions, however, will not be part of the school's investigation into Falwell because they took place prior to him becoming president.