Boston Black Church Built in 1807 Faces Foreclosure – Black Historical Icon or Black Bank Solvency ?
Judge extends church’s date to file reorganization
By Beth Healy
| GLOBE STAFF JANUARY 04, 2013
BARRY CHIN/GLOBE STAFF/FILE
OneUnited Bank was opposed to allowing Charles Street AME Church time to amend its reorganization plan.
The judge in the Charles Street African Methodist Episcopal Church bankruptcy case Friday gave the congregation until Jan. 18 to file an amended reorganization plan, over the protests of bank lawyers who called the church’s proposals unrealistic and based on erroneous figures.
It was the latest skirmish in what has turned into a long court battle between the church and OneUnited Bank. Charles Street AME filed for federal bankruptcy protection last March, after it fell behind on payments for nearly $5 million in OneUnited loans and the bank threatened to auction off the the historic Roxbury church.
“There is no plan here that’s possibly feasible,’’ said Gayle Ehrlich, a lawyer for OneUnited, in a withering indictment of the church’s financial records in US Bankruptcy Court in Boston. “This case is way off track and can never get on track.”
Ehrlich criticized the church’s proposal to repay its debts to OneUnited over 30 years as unheard of with a business loan — only home mortgages and farm equipment purchases are afforded such long pay-back periods, she said.
While complaining that the church hasn’t produced some of the documents the bank is seeking, OneUnited’s lawyers also alleged they had found errors in the financial reports the church had already submitted. Ehrlich said the bank calculated the church operated at a $226,000 loss in 2011, even though Charles Street AME reported a surplus. The church was able to pay its bills, Ehrlich claimed, by dipping into restricted cash funds.
But Ross Martin, the lawyer representing Charles Street AME, said the math was not that simple, and the bank was potentially miscalculating some expenses and revenues.
The disagreements will have to be settled at a later hearing, Judge Frank J. Bailey said. If a reorganization plan is not agreed upon by the end of February, the judge said, the bank would be free to submit its own plan.
Relations between Charles Street, a historic black church, and OneUnited Bank, one of the nation’s largest African-American-owned banks, broke down in 2009.
The church had been building the Roxbury Renaissance Center, with funding from the bank, envisioning it as venue for meetings and weddings, small business start-ups, and a music program. But the recession hit before construction was complete, and after several extensions, OneUnited, facing financial troubles of its own, called the loan.
“We certainly have been held captive in this case,’’ Ehrlich said in reference to the bankruptcy proceedings, which are now in their second calendar year.
Bailey, too, indicated impatience with the pace of the case, saying, “It’s diverting the debtor from its mission, diverting the bank from its mission.” But he said the case, while relatively small, has had its complexities.
What started as a pledge between the two parties to work together for the community has devolved into a hostile legal battle.
On Friday, Ehrlich accused the church of not only making mistakes but ”bad faith” in its financial representations, and alleged fraud on the part of the greater district church.
She also implied that Martin has served pro bono only because his firm, Ropes & Gray, does a lot of business with the Boston investment firm Bain Capital, some of whose partners have intervened to try to help Charles Street AME.
Bailey chastised Ehrlich, saying, “Your comments do violence to the notion of pro bono, and I would ask you not to repeat those words.”
Beth Healy can be reached at bhealy@globe.com.
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Money, politics fought over in church’s bankruptcy case
By Beth Healy
| GLOBE STAFF SEPTEMBER 05, 2012
DAVID L. RYAN/GLOBE STAFF
The Rev. Gregory Groover denies starting any protests.
It was a remarkable moment in the midst of a nasty fight. On the first day of Charles Street African Methodist Episcopal Church’s bankruptcy proceeding in August, a church leader, Dennis Lloyd, greeted Teri Williams, the president of OneUnited Bank, with a polite kiss on the cheek.
Such good will has not been on display since, over many hours of testimony and cross-examination in US Bankruptcy Court in Boston. Charles Street is trying to reorganize nearly $5 million in loans it owes the bank, after OneUnited threatened to auction off the historic church in February and sparked a public battle between the two prominent black institutions.
Testimony will resume Sept. 19, after the judge scheduled extra time to handle the contentious matter.
Last month, on the third day of hearings, a lawyer for the bank hammered the Rev. Gregory Groover with questions implying he had lied when he said the church “never missed a payment” on its loans and accused Groover of organizing community protests to “bring pressure to bear” on OneUnited so it would not foreclose on the historic black church.
Groover also repeatedly insisted that he did not organize the protests against the bank, nor personally call for the help that came from local and national politicians.
“We welcomed anyone, including elected officials, supporting our efforts to block our church from being auctioned,’’ Groover said during a long cross-examination by the bank’s lawyer, Lawrence Edelman, according to a recording of the proceeding.
At one point, Edelman sought to prove that Groover had organized the neighborhood rallies by showing a newspaper photograph in which he appeared alongside the Rev. Eugene Rivers, an activist minister in Boston who was, in fact, one of the organizers of the events.
For all the back-and-forth, the case may boil down, in part, to whether First District AME Church — the Philadelphia-based umbrella organization to which Charles Street AME belongs — can escape the guarantee it offered when OneUnited extended Charles Street a loan to build a community center. The bank’s president has testified that OneUnited would not have made the loan without the guarantee.
OneUnited gave the church several extensions on the construction loan for the Roxbury Renaissance Center but ultimately called in the loan. Another $1.1 million loan came due in November; the church missed its October payment but sent a check in December, which the bank cashed and then returned.
Earlier in the proceedings, a lawyer for First District AME Church grilled Williams on her understanding of the district church’s financial statements. He alleged that she had misread them, despite her MBA from Harvard Business School, and overstated the amount of cash available in the event a guarantee was needed.
Williams and the bank’s lawyers maintained that her reading of the documents was accurate, reflecting $19 million in cash on the books of the organization.
Charles Dale, the lawyer for the district church, said those funds were held across the districts’s 330 member churches and in other entities. The actual cash held by the district itself was $237,000, he said, citing documents filed with the court.
Williams responded that if inaccurate information was provided to the bank, that could take the fight beyond a loan dispute to “potential fraud.”
Representatives for the bank have indicated they felt they prevailed on the day of Groover’s cross-examination. It was a view upheld in a recent report in The Baystate Banner, a weekly newspaper for the African-American community owned by one of OneUnited Bank’s directors, Melvin Miller. Meanwhile, representatives of the church, begun on Beacon Hill and now in Roxbury, say Charles Street AME came out on top in that session.
Edelman, the bank’s lawyer, suggested in court that Charles Street can’t afford to finish its community center and repay its loans. Its fund-raising forecasts are too sunny, he said. By his analysis, the center would run an annual deficit of about $100,000. The church’s lawyer, Ross Martin, countered that those figures do not include additional fund-raising by Charles Street.
Beth Healy can be reached at bhealy@globe.com.
Originally published August 22, 2012
Money Squabble in Boston Snares Black Church, Bank
by Zenitha Prince
An ongoing legal dispute between OneUnited Bank and the venerable Charles Street African Methodist Episcopal Church in Boston is taking a heavy toll on the city’s Black community, leaders and residents say.
Last week, lawyers for the two Black institutions gave oral arguments in a Massachusetts bankruptcy court as the bank tried to stop the church’s Chapter 11 filing. The case was the latest in a prolonged battle over more than $4 million in loans.
“It’s disappointing that the two institutions have not been able to come to a resolution,” said Boston City Councilor Tito Jackson, in whose district, District 7, both the bank and the church are located.
“Both institutions are very valuable to our community—Charles Street AME is one of the oldest and most beloved faith institutions in the city, and OneUnited is one of the only Black-owned banks.”
As one of many Black leaders who tried to help broker an agreement between the parties, Jackson said he was discouraged by the way the matter was being played out in the public eye. “My attempts and work was to try to bring both parties together to find some resolution because this public rhetoric and story is damaging to both institutions and to the fabric of our community.”
The beginning of this story seemed to be a happy one. In October 2006, according to information provided by the bank, Charles Street AME was granted two loans: a $1.5 million church loan that was to be repaid in full in five years; and a $3.6 million construction loan that matured in 18 months and for which the AME Church’s First Episcopal District was a co-signer. The construction loan was earmarked for the building of the church’s Roxbury Renaissance Center, a facility many said would be a vital resource in the community.
A senior bank official told the AFRO that at first the relationship was amicable: while the church was late on a majority of its payments (the church’s attorney said that while late, payments were always made with the requisite late fees), the bank tried to be flexible, offering the church five three-month extensions and even introducing church officials to potential donors.
But that relationship soured, the bank official and court documents allege, when the church took on Bain Capital to help with its debt restructuring. On Aug. 6, 2010, during a conference call, Bain Vice President Ryan Cotton supposedly said his firm was prepared to purchase the church’s outstanding loan for $1 million, and the bank could accept the offer or “endure a raft of bad publicity.” The bank refused the offer, construction halted on the Center, and the matter went to court.
Earlier this year, after the bank announced its intent to foreclose on the church’s property and the church filed for bankruptcy to stave off that foreclosure, Bain Capital popped up again. Bank attorneys allege that the Rev. Gregory Groover Sr., pastor of Charles Street AME, and his attorneys “contrived a scheme” in which Bain’s Cotton and Steve Pagliuca, the firm’s managing director, would route $1.5 million in donations to the First District’s bank account. The First District would then donate that money to complete construction on the center with the condition that it be released from its obligations under the terms of the original loan.
According to a Bain Capital spokesman, Cotton and Pagliuca were above board in their dealings.
“Individuals that work at Bain Capital have provided advice and counsel on a volunteer basis to the Charles Street AME,” the spokesman said in an e-mail. “They became involved because they believe strongly that the church is a vital community resource and want to see the church continue its important work. All interactions in this matter were completely professional.”
According to Charles Street’s attorney, D. Ross Martin, of Ropes & Gray LLP, it is OneUnited that failed to exert due diligence before extending the loan and later, derailed the possibility of a peaceful solution.
“It is indisputable that the bank sued first,” Martin told the AFRO. “And it is indisputable that after they filed the foreclosure sale and before the church filed for bankruptcy the bank refused to meet with the church. That speaks volumes.”
He added, “I can’t quite figure out why they’re doing it this way. I do this for a living and usually people negotiate things, but they’re not negotiating…. It’s a very odd situation.”
Community reactions to the feud have been mixed. During a rally at Charles Street AME, attended by about 500 persons, many were angry and frustrated at OneUnited’s attempted foreclosure and lawsuit, said Jackson, the lawmaker.
“OneUnited Bank is a business. [And] the perception [about the nature of businesses] became a precursor to reality. So this didn’t look good, feel good…,” he said.
William Murrell, an information services consultant who has been following the twists and turns of the public quarrel, agreed, but said some are also seeing the bank’s point of view, especially since more details of the case were revealed in court.
“At first it seemed that the bank was being heavy-handed and the prevailing thought was that OneUnited should cut the church a break. But, as the story has played out, it appears that that was untrue,” Murrell, creator of AboutBlackBoston.com, said.
Observers will have more information to weigh in the comings weeks: In addition to last week’s hearings, Judge Frank Bailey will hear testimony on Sept. 19, 20 and 28.
In its debt restructuring plan, offered as part of the bankruptcy filing, Charles Street has offered to pay back the back the OneUnited loan in full, with interest, over a period of 30 years.
OneUnited has balked at the timeline and has challenged the bankruptcy filing. Citing the AME Church’s canon of doctrine, OneUnited said Charles Street is ineligible for Chapter 11 relief, since its assets are held “in trust” for the First Episcopal District, and the First District is thus responsible for discharging the church’s liabilities—including the balance on the OneUnited loan.
The argument is ludicrous and faulty, Martin, Charles Street’s attorney said.
“Charles Street AME has been an independent entity in Boston since 1839,” Martin said. “The real estate deeds are absolutely clear that Charles Street AME holds this property. Everyone in the (broader) AME (denomination) agrees Charles Street is independent. But somehow a bank is saying that it knows AME doctrine better than the AME?”
The escalating tiff has cast a pall over Boston’s Black community as residents remain torn over their interests in preserving an historic 194-year-old church and supporting the solvency of a Black-owned bank.
“This is a financial matter and this happens in the business world all the time,” Councilor Jackson said. “We’re speaking about a substantial sum of money, and we’re at the point now where this is in litigation and lawyers are involved so this process will have to play itself out.
“But when it’s two institutions that are in our community, and [the situation] gets played out in the way it’s being played out, it’s much more frustrating.”
AFRO.com
