Charles Street AME Church to file for bankruptcy to block OneUnited’s foreclosure action

The Charles Street A.M.E. Church is filing for bankruptcy protection to halt foreclosure action by One United Bank.(Pat Greenhouse/Boston Globe)

With their lender unwilling to negotiate or halt foreclosure proceedings, members of the Charles Street African Methodist Episcopal Church voted Tuesday night to file for federal bankruptcy protection, heading off OneUnited Bank’s plan to auction the historic congregation’s property this week.

At a special meeting held at the Roxbury church Tuesday evening, lawyers for Charles Street AME laid out options for avoiding foreclosure on a $1.1 million loan. The estimated 250 members members in attendance voted to proceed with a Chapter 11 reorganization filing, to forestall the threatened sale of the church on Thursday, the church’s lawyer, Ross Martin, said.

The action comes after a pitched battle between two prominent black institutions over roughly $4 million in loans. OneUnited, among the nation’s largest black-owned banks, ignored pleas from lawmakers, ministers, and business leaders to talk, and ultimately left the church with little room to maneuver.

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“Their decision to immediately move to foreclosure, and the senseless way that they did it, from the church’s viewpoint, is inconceivable,’’ Reverend Gregory G. Groover Sr. said in an interview with the Globe. The bankruptcy filing, he said, “allows the church to go on and continue to operate and focus on our ministry.”

Under the bankruptcy petition, which lawyers planned to file electronically Tuesday night, Charles Street is offering to repay the money it owes OneUnited—totaling about $4.2 million—over 30 years. That includes both the $1.1 million loan secured by the church property and $3 million the church borrowed to build a community center a block away.

The bank could not immediately be reached for comment. In recent weeks, its officials have insisted that it gave Charles Street plenty of time to repay its loans, and declined to discuss its high-profile customer.

Under the bankruptcy petition, the church is looking to keep all its property, including a house in Milton that has served as a pastor’s residence (it’s not currently in use) and retail space near the church. It’s looking to extend the payments for the loans over 30 years, more like a home mortgage than a commercial loan, at a rate of 5.25 percent.

The umbrella organization that includes Charles Street, the First Episcopal District of Philadelphia, would raise $1.5 million to help repay the debt.

In 2007, OneUnited chief executive Kevin Cohee touted his “partnership” with Charles Street as a show of commitment to the community and a catalyst for opening his new Grove Hall bank branch that year. He agreed to lend the church $3.7 million to build the Roxbury Renaissance Center, even though the church couldn’t afford the $800,000 down payment, according to legal filings. When the church needed an extension on the loan in 2008, he granted it.

Then came the financial crisis, and big investment losses for the bank. OneUnited got $12 million in federal bailout funds with the help of Congressman Barney Frank, as well as US Representative Maxine Waters, whose husband owned stock in the bank. Waters became the subject of a House Ethics investigation in the matter.

Cohee, meanwhile, was fending off allegations from regulators that he had mismanaged the bank and spent lavishly on pay and perks. Both Cohee and his wife, the bank’s president, have declined repeated requests for interviews.

By 2009, when the church, struggling amid the recession, could not repay the construction loan, OneUnited stopped payments to the contractor and the project halted, unfinished. Charles Street says it kept paying interest on the loan until the bank sued in September 2010.

Around that time, a group of investors and philanthropists, including Bain Capital’s Stephen Pagliuca, offered to pay off the loan on the community center, at a discount. But the bank refused to take less than 100 percent of the loan value.

Since then, US senators, Governor Deval L. Patrick and city officials have urged the bank to renegotiate the loan. Harvard Law School professor Charles Ogletree has offered to mediate, to no avail. The city’s most prominent black ministers have rallied to support the 1,000-member congregation; some have called for a boycott of the bank.

Groover said the church did its best to avoid bankruptcy. “We will continue to hold our heads up high,” he said, “We will not walk around in any shame.’’

Charles Street also owes other creditors, including about $450,000 to a credit union for roof repair, and more than $629,000 to Thomas Construction Co., the Dorchester contractor that was building the Renaissance Center.

The church also is pursuing a counter-claim against the bank, which an appeals court has ruled can go forward. If the church were to prevail in that lawsuit, arguing that the bank loan was fraudulent, it could cut the amount it owes.