Oops! New church filings reveal $600K in financial errors

In yet another embarrassing disclosure in federal bankruptcy court, Rev. Gregory S. Groover Sr., pastor of the historic Charles Street AME Church, submitted revised 2011 financial statements that show previous submissions for the same fiscal year were wrong by more than $600,000.

U.S. Bankrutpcy Judge Frank Bailey rescheduled the hearings to November shortly after Groover’s attorney submitted the new financial statements last Friday. The new submission throws into serious question whether the church will be able to repay nearly $5 million in loans to OneUnited bank and debt owed to other creditors.

The new court filings show that Charles Street actually lost about $220,000 in FY 2011 instead of earning $385,000 as previously stated. The biggest change occurred in their accounting for yearly tithes and offerings. The new submission claims the church collected just $770,000; the church’s previous statement shows more than $1.2 million in collections, a difference of $446,000.

That difference was reflected in the new submission’s annual earnings of $900,000 instead of the previously reported $1.35 million.

It’s unclear how the new financial statements will impact the bankruptcy proceedings. But they do appear to confirm what OneUnited lawyers have described as “gross, severe financial mismanagement” at Charles Street Church.

The relationship between OneUnited and Charles Street started  on Oct. 3, 2006 when Groover, who is also the Boston School Committee chairman, agreed to borrow $3.6 million to build a 22,000-square-foot community center on church-owned land near Grove Hall.

Called the Roxbury Renaissance Center, the building would feature a grand ballroom, multi-purpose meeting space, conference rooms, prayer and meditation space and soundproof musical practice rooms. To pay for the construction Groover said that he would raise money by renting space for wedding receptions and community meetings.

The OneUnited construction loan became due on June 1, 2008, and despite a total of five extensions, the church was unable to satisfy its debt by Sept. 1, 2009. A year later, on Aug. 17, 2010, OneUnited then sued in Suffolk Superior Court for breach of contract.

Also named in the suit was Charles Street AME’s co-signer, the First Episcopal District of the African Methodist Episcopal Church based in Philadelphia. At the time, First District, claimed it had $65 million in cash and  nearly $500 million in assets.

Charles Street had also borrowed another $1.1 million, separate from the $3.6 million construction loan. That loan is also in default.

To forestall the pending foreclosure of its property by OneUnited bank, Charles Street filed for bankruptcy in March in a move to keep the church operating as it has for almost two centuries.

Although Groover publicly denied any delinquency, the church was late on 43 of its 56 payments and missed its final two payments, according to court records. That “pattern of delinquency,” OneUnited stated at the time, triggered 17 notices of intent to foreclose and forced Charles Street to pay about $17,000 in late fees.

In addition to OneUnited, Charles Street owes about $630,000 to Thomas Construction Company, the Dorchester firm hired to build its proposed Roxbury Renaissance Center; another $450,000 is owed to Tremont Credit Union for a loan to repair the church’s roof.

OneUnited bank has already rejected one plan offered by Charles Street to repay its outstanding loans. That filing asked bankruptcy Judge Frank Bailey to disapprove what OneUnited attorneys have characterized as “sheer chutzpah” — a payment plan of $27,000 a month over the next 30 years.

Based on previous financial statements submitted by Charles Street, OneUnited attorneys remained unconvinced that the church would make such payments. Charles Street attorneys even asserted as much.  

“Our operations,” Charles Street financial documents state, “are dependent on individual donations for substantially all of our revenues, and there is no guarantee that donations made from such sources will remain at levels comparable to present levels or that they will be sufficient to cover all operating and fixed costs.”

 In fact, the church argued, “increased unemployment or other adverse economic conditions in our community might decrease our congregation’s ability to contribute to the church.” According to the proposed Charles Street plan, none of the smaller creditors — the 28 companies owed amounts ranging from $370.18 to $17,790.88 for a total of about $115,000 — would receive any money.

Given the enormous debt the Church was accumulating, it was astounding to learn during recent bankruptcy hearings that Groover testified he had urged his congregation to stop making offerings and weekly donations to avoid having those funds seized by OneUnited in their attempt to collect the outstanding debt.

When asked to explain the reason that his yearly revenue had dropped by nearly 20 percent between 2009 and 2010 from $1.1 million to about $900,000, Groover testified that he had told his members he was concerned that the litigation with OneUnited would allow the bank  “to go after” the church’s assets, including their weekly tithes.