A securities industry arbitration panel last month rejected the diocese's allegations against three individuals and two brokerage firms that handled its investment accounts, the diocese confirmed last week.

However, Robert Dyer, an Orlando securities lawyer who represented the diocese, said the case was not over. He would not say what further steps, if any, he could take to recover the lost money. "It's not over till it's over," Dyer said.

In its appeal to the three arbitrators of the National Association of Securities Dealers, the diocese alleged breach of fiduciary duty, gross negligence and breach of contract.

The diocese's affected investments include its Slemaker fund, endowment fund, Mowery fund, and trust-and-agency fund, according to a case summary by the arbitration panel.

Diocesan spokesman Joe Thoma would not disclose the extent of the diocese's investments or characterize the effect of the setback on the diocese's overall finances. "It's always tough to lose money," he said.

The diocesan newspaper has not reported the securities losses, and no announcements have been made in any churches disclosing them, Thoma said, though in 2002 they were brought up during a diocesan convention.

The losses had not resulted in layoffs or other apparent ill effects on church operations, Thoma said. The diocese's annual operating budget is about $2 million, he said.

The actual losses to the diocese were about $710,000 between Oct. 2, 2000, and October or November 2001, Dyer said. However, with interest included, the amount of losses would have amounted to about $1.1 million, he said.

The arbitration panel's summary of its decision said the diocese had sought more than $1.8 million in "compensatory damages, plus interest." However, Dyer said the diocese had never actually claimed that much. "We originally calculated that amount and withdrew a claim for that," he said.

Among the other financial issues the diocese is dealing with is a major capital fund-raising campaign. Under way for about a year and a half, the campaign has brought in "about $2 million," Thoma said. That money is being raised to fund future growth, he said.

Also, the diocese is battling one of its churches, Episcopal Church of the New Covenant, in Winter Springs, whose governing board voted in January to leave the denomination and take its church building and other real estate with it. The parish board is splitting with the Episcopal Church over the confirmation of a gay man as the church's bishop of New Hampshire.

Included in the local diocese's portfolio in 2000-01 were shares in JDS Uniphase, once the world's biggest supplier of fiber-optic components.

The company lost $51 billion in 2001 as the technology boom was deflating -- a record corporate loss at the time. The diocese also held shares in two high-technology mutual funds: the Van Kampen Aggressive Growth Internet Fund and the Van Kampen Telecom Trust Series 9.

One of the two brokerages named in the diocese's claim was Continental Broker-Dealer Corp., a New York-based company.

In an apparently unrelated action, the NASD expelled Continental from the securities industry on June 7 for a wide range of securities violations, including abusive sales practices and falsifying its books.

The other brokerage named in the diocese's complaint was Prudential Securities Inc.

Both companies and the three individuals named in the complaint were found not culpable by the NASD arbitration panel.

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