After a year of startling disclosures by Charles Street AME church officials, including an estimated $400,000 in misappropriated funds designated for a church pastoral program, U.S. bankruptcy Judge Frank Bailey set a final hearing date in the increasingly bitter trial pitting the historic church against OneUnited bank.
The April 12 confirmation hearing will determine whether the court will accept the church’s plan to repay nearly $5.2 million in loans to the nation’s largest black-owned bank as well as additional funds to outstanding creditors.
Charles Street attorneys have argued that once the bankruptcy hearings are completed, the church can then finish building its Roxbury Renaissance Center and start generating money by holding weddings receptions and community meetings to repay its debts over a 30-year period.
OneUnited attorneys have opposed such repayment plans in large part because of what they have discovered are significant problems with the church’s financial statements that are being used to determine the repayment plan.
Those financial statements, coupled with the testimonies of Charles Street Pastor Rev. Gregory Groover Sr. and Rev. Opal Adams, the woman who kept the financial books and authored Groover’s annual reports, demonstrate what bank attorneys characterized as “a false portrayal of its financial circumstances and purposefully [overlooking] its obligations.”
In fact, OneUnited attorneys have filed a motion to dismiss the entire bankruptcy proceeding.
The relationship between OneUnited and Charles Street started on Oct. 3, 2006, when Groover agreed to borrow $3.6 million to build a 22,000-square-foot community center on church-owned land near Grove Hall.
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, the First District, based in Philadelphia, claimed it had $65 million in cash and nearly $500 million in assets, and had plesdged its assets as collateral for the loan.
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 nearly the last two centuries.
In addition to its debts to OneUnited, Charles Street owes about $630,000 to Thomas Construction Company, the Dorchester firm hired to build its proposed community center; another $450,000 is owed to Tremont Credit Union for a loan to repair the church’s roof.
As part of its initial defense, Charles Street attorneys argued in legal documents that the bank made “a reckless” loan and that they knew — or should have known — that the church would be unable to repay as originally agreed.
In addition to unpaid debt, the church is facing repercussions from Groover’s admission that he used cash from an $875,000 grant from the Lilly Foundation, which was designated for use only to support the church’s pastoral program. Of the $875,00 grant money, only $90,000 remains, according to the church’s latest financial disclosures, and with two years remaining on the program, Adams estimated that the church would need to raise an additional $340,000 to fulfill its program obligations. Based on her own records, Adams testified that the church owed at least $100,000 to the Lilly fund.
Groover, who recently resigned his position as chairman of the Boston School Committee, has admitted that “mistakes were made.”
