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Judge extends church’s date to file reorganization

OneUnited Bank was opposed to allowing Charles Street AME Church time to amend its reorganization plan.Barry Chin/Globe Staff/File/Globe Staff

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.

Ehrlich also restated the bank’s position that the First Episcopal District of Philadelphia, which includes Charles Street AME, should live up to its commitment as a guarantor on the debt.

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.