August 23, 2012 — vol. 48, no 3
Groover: ‘Mistakes were made’ in church finances
Charles Street AME pastor Gregory G. Groover Sr. admitted last week that he deliberately misled his congregation, politicians and the media about his handling of church finances. (Sandy Middlebrooke photo)
In often embarrassing testimony, Rev. Gregory Groover Sr. admitted before a bankruptcy judge last week that he had a “problem” managing the church’s finances and he deliberately misled his congregation, politicians and the media by publicly stating that he had never missed a payment to his main creditor, OneUnited Bank.
Groover admitted that he made “erroneous” statements about OneUnited, the nation’s largest black-owned bank and the only institution that agreed to lend him nearly $5 million to not only build a community center in Grove Hall but also to consolidate the church’s then existing debt.
The testimony of Groover, who is also Chairman of the Boston School Committee, now confirms what OneUnited bank attorneys initially described as Groover’s “gross, severe financial mismanagement” in the handling of a $3.6 million construction loan and a $1.1 million debt consolidation loan to Charles Street AME church.
The construction loan was to help pay for a 22,000-square-foot community center on church-owned land near Grove Hall featuring a grand ballroom, multi-purpose meeting space, conference rooms, prayer and meditation space and sound proof musical practice rooms.
Groover said that he would raise money by renting space for wedding receptions and community meetings. The Roxbury Renaissance Center is still not completed.
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.
The 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.
But even then, OneUnited bank officials were trying to keep the church on track. OneUnited President Teri Williams testified last week that she arranged meetings with Groover and potential donors, including officials from Fidelity Investments and the Boston Symphony Orchestra, to no avail.
Williams also testified that the bank would have never approved the loans based solely on the church’s finances, but instead relied on the co-signer of the construction loan, the First District AME church, which claimed at the time to have at least $19 million in cash.
“We would not have done the loan without the guarantee,” Williams testified.
Just how much authority Charles Street has over its own affairs remains unclear given the by-laws of its regional governing authority. Those rules enable the First District presiding Bishop, Richard Franklin Norris, to move money from one church to another at will — and move money from one church to the First District.
In letters to OneUnited, submitted as exhibits in the bankruptcy hearings, the First District assured OneUnited officials that it would step up if its local church faltered. Its chief financial officer at the time, Clarence Fleming, wrote a confirming memo to Amanda Feng, OneUnited’s vice president for asset management.
“As discussed with you today,” Fleming wrote on Feb. 9, 2009, “the First Episcopal District does not track loan guarantees. The reason is that our practice is to rescue any one of the churches that is troubled, for that reason, we view each church as having a built-in guarantee.”
The First District’s promised support has not materialized.
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; and an unspecified amount is owed to “no more than 20” other creditors.
Given the enormous debt the Church was accumulating, it was astounding to learn that Groover testified during last week’s hearings that 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.
Groover’s attitude was formerly more positive. Several months before the public fight erupted, Groover wrote OneUnited a letter extolling their professionalism — and patience.
In a letter dated June 11, 2010, Groover thanked OneUnited “for [its] extraordinary support and assistance…stepping up to the plate when other lenders wouldn’t even consider us…”
Groover went on to write to OneUnited that its treatment of Charles Street “exhibits OneUnited’s long-held tradition of empowering people and institutions of color in such cities as Boston, Miami and Los Angeles through economically revitalizing their communities.”
It is inexplicable that Groover would then launch what amounted to a smear campaign to discredit the bank, including what OneUnited attorneys characterized as “a scheme” to short-change the bank and give the church a $3.6 million windfall.
Groover authorized Bain Capital, the wealthy venture capital firm, to offer OneUnited about a million dollars to settle the matter — or about 30 cents on the dollar. Given the stated wealth of Charles Street’s co-signer, OneUnited rejected that offer.
According to court documents filed by Charles Street attorney Ross Martin, Ryan Cotton, a principal at Bain Capital since 2003, was part of the church’s financial team that offered OneUnited $1 million to buy the church’s outstanding construction loan.
Martin further explained in his brief that Cotton also helped develop a business plan for the church’s Renaissance Center, and, most importantly, assisted in raising funds for the First District’s estimated $1.5 million donation to complete the Center.
Cotton is expected to testify when the hearings resume next month and he will be cross-examined about his role in arranging a questionable $1 million donation to Charles Street that would appear to come from the First District.
According to bank attorneys, the donation was designed to eliminate the obligations of the First District.
In a series of emails between Cotton and the church’s attorney D. Ross Martin, the two discussed a proposed letter for Bain Capital’s Managing Director Steven Pagliuca to sign and mail that would pledge “a $1 million donation” to the First District. The specific purpose of the donation was to finish the church’s proposed Roxbury Renaissance Center in Grove Hall.
But during an earlier deposition, Rev. Vernard Leak, the reported chief financial officer of the First District, stated that he was not aware of Bain’s efforts to raise any donation for Charles Street. Leak also testified that he had never talked with Cotton or anyone else at Bain.
When a OneUnited attorney specifically asked Leak what, if anything, the First District has done to advance fundraising for the completion of the center, Rev. Leak responded with a question: “As in an active way of initiating fundraising?”
“Anything,” the OneUnited attorney asked.
“I am not aware of anything,” Leak answered.
| Aug 25 23:32pm by Another Observer [24.128.77.229] | |
Why would any business, bank or institution of any kind accept an offer of 30 cents on the dollar when the co-signer of the loan, namely the mother AME church, has upwards of $50 million in assets to cover the debt? As a previous poster stated, business is business, and the bank would be foolish to settle for less than what they are owned in full when the co-signer and loan guarantor has the money (and then some) to pay the debt. That is exactly what a co-signer is for. And where are the questions about what happened to the millions the church took in the first place and where is the outcry for the local contractor who is owed more than $600,000, not to mention all of the other local workers waiting to be paid for their hard labor??? Manly has done outstanding work here and deserves much credit for exposing this fraud. |
|
| Aug 25 0:03am by Observer [151.204.227.191] | |
After reading this article I must ask what's the point? Bain's offer was not illegal....under federal law it would be considered an offer in compromise. If one understands bankruptcy at the end of the day that may be all the secured creditors get. So to make this sound like some scheme to undermined the bank is to say the least disingenuous. Bain made the offer and the bank turned it down.....end of story. |
|
| Aug 24 11:51am by David: Community Resident [64.61.50.34] | |
Sir or Madam: I respond with great respect for your reasoned and well stated comment. Howard Manly is a journalist of years of integrity. He is also a gentleman and a person worthy of immense respect in our community. That having been said, the article bearing his byline remains unbalanced in its presentation of both sides of the issue. Balance requires discussion of the cause of the crisis, even if it’s just a paragraph, as well as the effects of the crisis. Balance does not just cite court documents, which are quotations of the bank’s attorneys, but discussion(s) with the subject of the article so he can state his side of the issue. Because I know Mr. Manly to be a person of integrity, I attribute that lack of balance to pressure from his employer. With regard to a double standard for “community” transactions, my argument is different from your description. Allow me to clarify. A loan is a business transaction. It’s just business. When a deal goes bad, business people work the deal out. They renegotiate; they develop different payment plans; they lower payments and extend the term so that, in the end, everyone maximizes their “profit.” At least that’s how business is done in my world. People foreclose as a last resort in business, when no deal can be reached, usually because there is no money to be made. Why? Because everyone loses. Banks seldom recover all of their loans and the business at stakes is no longer operating to provide any payment to the bank. (I know that has not happened in the housing foreclosure crisis, but that fact reinforces my frustration with banks in general). But let’s be honest, even a loan shark doesn’t kill the debtor (unless he just can’t pay). Why? Because he knows that he’ll never recover the money if that happens. It is extremely unlikely that OneUnited will recover its loan(s) by foreclosing and selling Charles Street Church at auction. Will any bidder, in this market, offer enough to make OneUnited whole? Will it really help the bank’s bottom line to throw a congregation out of its building instead of receiving a modified, but longer, stream of income? In a city with so many resources, and with so many people offering to help intervene, isn’t there a business deal that can be struck? My understanding of the articles concerning such efforts, recorded in other newspapers, indicates that such discussions and offers to mediate were rejected by OneUnited. If my insinuations regarding Mr. Manly are insulting, please accept my apologies. I hold him and his work in high regard. If you accuse me of expecting more from our Black institutions (going the extra mile, renegotiating a deal), especially concerning institutions trying to revitalize our community, then I plead guilty and do not apologize. Irish expect the same from Irish institutions, as do Jews, Latinos . . . pick you group. Your final comment, concerning the disappearance of black owned media or black owned banks, is one worthy of great consideration. May I respond with a question? If our black owned media and/or black owned banks do not serve us any better than their white counterparts and, indeed, appear to harm our community more, why on earth do we need them? |
|
| Aug 24 9:59am by response to David [209.113.154.170] | |
David - so you're saying that business transactions that take place in the "community" should be handled differently than other business transactions? That should really make other financial institutions very reluctant to do busines in the "community" because they will see that there are two standards. You insult the writer Howard Manly - who has decades of journalist experience when you say that the publisher influenced his article. You clearly don't know Howard. Also, read the article and you can see all of the stated facts come from an court proceeding or documents- what facts are being manipulated here?? There is a huge wealth gap between black and white communities and its this type of thinking that keeps us from building wealth in the community. The Bank should operate as all other banks when it comes to investing in the community. It's not a HAND OUT! You hold a double standard for both the black press and how business is transacted in the community. Check out who sits on the boards of other newspapers, and what boards other publishers sit on - you are very insulting with your insuations and probably be the first to cry when you no longer have a black owned media or a black bank. No wonder black institutions are disappearing in Boston.
|
|
| Aug 24 8:59am by David: Community Resident [64.61.50.34] | |
ITS JUST BUSINESS: Before condemning Rev. Groover or the church, let's examine the facts. Rev. Groover said the church never missed a payment. He didn't lie. He NEVER said the church wasn't late on payments. The church was late on many payments, but it made them all. And the church also paid all the extraordinary charges that banks and credit cards hit us with when we make late payments. As a business man and a parent, I understand late payments. If I pay late I pay the penalties. That's just business. Of course, I wish I could charge the bank when they post things to my account late and checks bounce, but that is a different matter. The fact remains that there is a huge difference between a late payment and missing a payment. Rev. Groover did not lie. Charles Street AME took a chance on turning a blighted section of Warren Street, that no bank or developer seemed to want to do anything with, and is attempting to turn it into a community asset. The bank makes a "big deal" of this partnership. As the largest minority bank in the country and as one that claims concern about the community, OneUnited bank SHOULD be investing in community revitalization. Isn't that why we support OUR institutions; so they will support our communities? If anyone should take a risk on helping to rebuild our community, it should be the bank WE have accounts in despite the fact that it has the fewest branches and sometimes the worst service of all the banks in Boston. Rev. Groover admits that "mistakes were made." I agree. A church took a chance on community revitalization just before the banking industry drove the economy into the toilet. One of which banks holds the mortgage on the property at stake here. But the article doesn't mention how our tax dollars bailed out OneUnited Bank for far more than is at issue in this suit. Of course, I wouldn't mention any of those facts either, if I sat on the board of directors of OneUnited bank and ran the larges Black owned newspaper. I'd tell my reporters to demonize the minister and make the bank look like a hero. That way I could keep those OneUnited Bank checks coming into my pocket also. But I digress. This is just business. When it isn't personal, people sit down and work out a deal. This happens in the business world all the time. Every day, in fact. However, when someone is trying to foreclose on a religious institution that helped end slavery in this country, something is wrong. Definitely wrong. Maybe our institutions, newspapers and banks, should look at ways of supporting our community change agents, and not condemning them. Today, the target is churches. Tomorrow it will be the nonprofits. Next . . . well, community residents, you'd better watch out. Big Black business may be taking YOU to court next. |
|
| Aug 23 23:23pm by B;ackyacht [108.49.5.7] | |
this is the first time reading aboui this matter and I noiice that there ix one thing missing; who is the individual or individuals that lined thier pockets while all this has been going on as in other matters uf this type in America? I suspect that someone has hhat title happen What Happenedto the donations by the congregation before the Rev told them to stop If the church was constanlly defauting pathents to the bank( the builing Fund; new center Fund; and regular church fund) Hate to say it but it is almost the American way |
|
| Aug 23 22:57pm by Former Church Member [24.128.77.229] | |
Rev. Groover wouldn't know the truth if it hit him in the face. How can he continue to serve as pastor of this once great church and chairman of the School Committee? What a disgrace for those who continue to blindly support him and his falsehoods. |
|
| Aug 23 13:37pm by Conflictofinterest? [71.234.102.92] | |
What is the publisher of The Bay State Banner role in this? You seem to have left that out of the article. |
|
| Aug 23 6:23am by Anjela [71.124.191.177] | |
WOW! And this fool had GOOD people supporting him and rallying behind him and he was lying. Things like this (and the countless other mishaps/behaviors of church leaders) just further support my decisions to stay as far away from churches as I can. smh! |
|
related articles
OneUnited allowed to depose Bain exec in church bankruptcy
A federal bankruptcy judge ruled in favor of OneUnited Bank this week and will allow bank attorneys to question a Bain Capital official about his role in arranging a questionable $1.5 million donation to the historic Charles Street AME church.
According to bank attorneys, the donation was part of a scheme to short-change the bank and eliminate the obligations of the First District African Methodist Episcopal Church as a co-signer on Charles Street's original $3.6 million construction loan.
Ryan Cotton, a principal at Bain Capital since 2003, first came to OneUnited's attention in August 2010 when he informed the bank that he represented Bain's "restructuring group" and that his firm was prepared to buy the church's outstanding loan for $1 million or the bank would "endure a raft of bad publicity." The bank rejected the offer.
U.S. bankruptcy judge continues Charles Street hearings
A federal bankruptcy judge last week continued hearings until later this month on the latest motions in the case between Charles Street AME and OneUnited bank, two of Boston's leading black institutions.
One of the motions, filed by OneUnited attorneys, asks Judge Frank Bailey to allow bank officials to question under oath officials from both Çharles Street and its regional affiliate First Episcopal District of the African Methodist Episcopal Church in order to determine the financial relationship between the two entities.
Corporate structure and financial management are two issues that have emerged in public hearings as a result of OneUnited's efforts to collect about $4 million in outstanding loans from the church, the largest of which was co-signed by the First District.
At the time, the First District, based in Philadelphia, claimed it had $65 million in cash and nearly $500 million in assets.
The clock is ticking
The increasingly nasty legal fight between two of Boston's leading black institutions took a public turn for the worse last week. About 300 people packed the pews of Charles Street African Methodist Episcopal church to show support for the church and demand justice from OneUnited Bank, which is moving ahead on its plans to foreclose on church property.
Amid cries of hallelujah and praises to God Almighty, speaker after speaker, mostly members of the black clergy, told the jubilant crowd that the fight was not over, that somehow, someway, Charles Street would be able to maintain its property and finish construction on its proposed Roxbury Renaissance Center.
