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Bank contests reorganization plan for Roxbury church

The Charles Street AME Church filed for bankruptcy protection nearly a year ago.

Pat Greenhouse/Globe Staff/File 2012

The Charles Street AME Church filed for bankruptcy protection nearly a year ago.

A lawyer for OneUnited Bank on Monday contested a revised bankruptcy reorganization plan filed by the Charles Street African Methodist Episcopal Church, arguing that new revelations about the congregation’s finances make it less likely the church can afford to pay its debts.

In a hearing in US Bankruptcy Court in Boston, Lawrence Edelman, the bank’s lawyer, likened the church’s accounting to a “trip through the looking glass.”

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Citing a motion filed by the black-owned bank last week after a number of depositions, he said Charles Street AME had improperly tapped restricted funds from a grant to help cover its operating expenses prior to the church’s 2012 bankruptcy filing. In one case, the church had tapped those funds after the bankruptcy filing — money the church says it has repaid. The grant money is intended to fund a residency program for pastors in training.

Edelman said the church’s use of those funds, and its failure to disclose that fact, amounted to misleading the creditors in the case.

Charles Street AME owes about $5 million to OneUnited Bank, after falling behind on payments for a community center it was building. The church filed for bankruptcy protection nearly a year ago to head off foreclosure, and a major battle between the two prominent black institutions ensued.

The church’s lawyer, Ross Martin, did not dispute that Charles Street AME had tapped funds from its Lilly Endowment grant when it was stretched for cash. He said the use of the money — other than a single transfer last April — had only recently come to his attention.

Charles Street AME has a four-year, $875,000 grant from the Lilly Endowment, a foundation in Indianapolis, to fund its residency program for pastors. In a deposition, the church’s financial officer, the Rev. Opal Adams, testified that the church had $90,000 left in the Lilly account but would need about $430,000 to cover the next two years of the program, meaning it will have to come up with about $340,000 from its own budget.

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The Rev. Gregory Groover, pastor of the historic Charles Street congregation, also was deposed about the grant money and said neither he nor his staff had consulted with the Lilly Endowment about borrowing the funds, according to court filings.

A spokesperson for the Lilly Foundation did not return a call seeking comment.

A frustrated Judge Frank Bailey asked Edelman what, precisely, the bank wanted him to do, given the “nuclear bomb” it had filed in response to the church’s new proposal.

“You think this case should be dismissed,’’ the judge said after a pointed back-and-forth with Edelman, who finally agreed with him. Edelman said the creditors should vote again on the church’s plan, with updated financial information taking into account the use of the Lilly money.

Beth Healy can be reached at bhealy@globe.com.

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