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Home News National News Originally published August 22, 2012

Money Squabble in Boston Snares Black Church, Bank

by Zenitha Prince
Special to the AFRO

    Charles St. Church (African Methodist Episcopal Church), built in 1807. (Courtesy Photo/Boston Public Library)
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An ongoing legal dispute between OneUnited Bank and the venerable Charles Street African Methodist Episcopal Church in Boston is taking a heavy toll on the city’s Black community, leaders and residents say.

The financial drama features millions of dollars, a leading Black church, a major black financial institution and Bain Capital, the venture capital firm that Mitt Romney, former Republican governor and the party’s presumptive nominee, helped create and later sold.

Last week, lawyers for the two Black institutions gave oral arguments in a Massachusetts bankruptcy court as the bank tried to stop the church’s Chapter 11 filing. The case was the latest in a prolonged battle over more than $4 million in loans.

“It’s disappointing that the two institutions have not been able to come to a resolution,” said Boston City Councilor Tito Jackson, in whose district, District 7, both the bank and the church are located.

“Both institutions are very valuable to our community—Charles Street AME is one of the oldest and most beloved faith institutions in the city, and OneUnited is one of the only Black-owned banks.”

As one of many Black leaders who tried to help broker an agreement between the parties, Jackson said he was discouraged by the way the matter was being played out in the public eye. “My attempts and work was to try to bring both parties together to find some resolution because this public rhetoric and story is damaging to both institutions and to the fabric of our community.”

The beginning of this story seemed to be a happy one. In October 2006, according to information provided by the bank, Charles Street AME was granted two loans: a $1.5 million church loan that was to be repaid in full in five years; and a $3.6 million construction loan that matured in 18 months and for which the AME Church’s First Episcopal District was a co-signer. The construction loan was earmarked for the building of the church’s Roxbury Renaissance Center, a facility many said would be a vital resource in the community.

A senior bank official told the AFRO that at first the relationship was amicable: while the church was late on a majority of its payments (the church’s attorney said that while late, payments were always made with the requisite late fees), the bank tried to be flexible, offering the church five three-month extensions and even introducing church officials to potential donors.

But that relationship soured, the bank official and court documents allege, when the church took on Bain Capital to help with its debt restructuring. On Aug. 6, 2010, during a conference call, Bain Vice President Ryan Cotton supposedly said his firm was prepared to purchase the church’s outstanding loan for $1 million, and the bank could accept the offer or “endure a raft of bad publicity.” The bank refused the offer, construction halted on the Center, and the matter went to court.

Earlier this year, after the bank announced its intent to foreclose on the church’s property and the church filed for bankruptcy to stave off that foreclosure, Bain Capital popped up again. Bank attorneys allege that the Rev. Gregory Groover Sr., pastor of Charles Street AME, and his attorneys “contrived a scheme” in which Bain’s Cotton and Steve Pagliuca, the firm’s managing director, would route $1.5 million in donations to the First District’s bank account. The First District would then donate that money to complete construction on the center with the condition that it be released from its obligations under the terms of the original loan.

According to a Bain Capital spokesman, Cotton and Pagliuca were above board in their dealings.

"Individuals that work at Bain Capital have provided advice and counsel on a volunteer basis to the Charles Street AME,” the spokesman said in an e-mail. “They became involved because they believe strongly that the church is a vital community resource and want to see the church continue its important work. All interactions in this matter were completely professional."

According to Charles Street’s attorney, D. Ross Martin, of Ropes & Gray LLP, it is OneUnited that failed to exert due diligence before extending the loan and later, derailed the possibility of a peaceful solution.

“It is indisputable that the bank sued first,” Martin told the AFRO. “And it is indisputable that after they filed the foreclosure sale and before the church filed for bankruptcy the bank refused to meet with the church. That speaks volumes.”

He added, “I can’t quite figure out why they’re doing it this way. I do this for a living and usually people negotiate things, but they’re not negotiating…. It’s a very odd situation.”

Community reactions to the feud have been mixed. During a rally at Charles Street AME, attended by about 500 persons, many were angry and frustrated at OneUnited’s attempted foreclosure and lawsuit, said Jackson, the lawmaker.

“OneUnited Bank is a business. [And] the perception [about the nature of businesses] became a precursor to reality. So this didn’t look good, feel good…,” he said.

William Murrell, an information services consultant who has been following the twists and turns of the public quarrel, agreed, but said some are also seeing the bank’s point of view, especially since more details of the case were revealed in court.


“At first it seemed that the bank was being heavy-handed and the prevailing thought was that OneUnited should cut the church a break. But, as the story has played out, it appears that that was untrue,” Murrell, creator of AboutBlackBoston.com, said.

Observers will have more information to weigh in the comings weeks: In addition to last week’s hearings, Judge Frank Bailey will hear testimony on Sept. 19, 20 and 28.

In its debt restructuring plan, offered as part of the bankruptcy filing, Charles Street has offered to pay back the back the OneUnited loan in full, with interest, over a period of 30 years.

OneUnited has balked at the timeline and has challenged the bankruptcy filing. Citing the AME Church’s canon of doctrine, OneUnited said Charles Street is ineligible for Chapter 11 relief, since its assets are held “in trust” for the First Episcopal District, and the First District is thus responsible for discharging the church’s liabilities—including the balance on the OneUnited loan.

The argument is ludicrous and faulty, Martin, Charles Street’s attorney said.

“Charles Street AME has been an independent entity in Boston since 1839,” Martin said. “The real estate deeds are absolutely clear that Charles Street AME holds this property. Everyone in the (broader) AME (denomination) agrees Charles Street is independent. But somehow a bank is saying that it knows AME doctrine better than the AME?”

The escalating tiff has cast a pall over Boston’s Black community as residents remain torn over their interests in preserving an historic 194-year-old church and supporting the solvency of a Black-owned bank.

“This is a financial matter and this happens in the business world all the time,” Councilor Jackson said. “We’re speaking about a substantial sum of money, and we’re at the point now where this is in litigation and lawyers are involved so this process will have to play itself out.

“But when it’s two institutions that are in our community, and [the situation] gets played out in the way it’s being played out, it’s much more frustrating.”