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Tiny congregation agrees to scrutiny of church finances

Under pressure from the attorney general's office, a small, wealthy Beacon Hill church has agreed to submit its finances to government scrutiny and to control ''excessive spending" by new church leaders, including a self-described former con man, who have been accused in a lawsuit by disgruntled coreligionists of trying to loot one of the richest, if one of the more obscure, congregations in the city.

After months of private negotiations, the office of Attorney General Thomas F. Reilly said yesterday it had reached an agreement, known legally as a consent judgment, with the Boston Society for the New Jerusalem, which runs the Swedenborgian Church on Bowdoin Street, across from the State House. The small Protestant sect follows the teachings of the 18th century Swedish scientist and philosopher Emanuel Swedenborg.

Under the agreement, which could be approved by a Superior Court judge as soon as tomorrow, the church will hire an independent chief financial officer; submit any expense or sale of church property worth more than $10,000 to the attorney general for review; and convey assets worth more than $10,000 only if two-thirds of church members agree.

The agreement says the financial officer will report to the attorney general and the church board of trustees, and a primary responsibility of the officer will be to ''make sure that any compensation paid is reasonable and appropriate." Under the judgment, the attorney general's oversight would last for three years.

Reilly's office, which is just around the corner from the 186-year-old church, began investigating last November after disgruntled members complained that new leaders had pushed out old members and stacked the church's boards and pews with cronies in an attempt to cash in on the church's considerable assets.

Although the church has about 100 members, it owns an 18-story apartment building over its chapel that churns out $1 million in clear profit each year and is worth about $30 million. Reilly's investigators became concerned when they learned that one of the new church leaders was Edward J. MacKenzie Jr., a convicted drug dealer who last year wrote a memoir about his life of crime as a legbreaker for the fugitive gangland leader James ''Whitey" Bulger.

The investigators became even more concerned after the Globe reported in March that the new leaders had changed the church's bylaws to make it easier to sell church property, had removed a prohibition against church leaders personally profiting from such sales, and had approached property developers to convert the apartments into condominiums, in a project that could yield as much as $75 million.

According to Assistant Attorney General Jamie W. Katz, chief of the Public Protection Division, one of the first steps for the new financial officers will be to review and, where necessary, reduce the compensation and benefits paid to church officers.

Katz said that under the state law that his office cited in demanding the church's financial records, he was forbidden from disclosing any specific amounts about salaries and benefits paid to church members and officers. But in a complaint filed yesterday, Reilly said his office took legal action ''to control excessive spending of charitable assets that has resulted in substantial and, on occasion, excessive payments and other benefits to certain officers, directors, and their relatives."

Katz said the church cooperated with his office after it demanded the church's financial records in November. He said that while it is not unusual for the attorney general's office to look into questionable financial practices by religious institutions, the consent judgment filed yesterday is ''very unusual." State officials said they could not recall any other case in which a church had agreed to such strict financial oversight.

Two of the church's lawyers, Richard J. McCarthy and Gerald P. Hendrick of the firm Edwards & Angell, said that while the church had agreed to sign the consent judgment, it had not accepted the attorney general's assertion that it had engaged in excessive spending.

Asked why the church had agreed to allow such oversight of its finances by the attorney general, McCarthy said the agreement ''is a way of satisfying a combination of interests, and it's done in a way to allow the church to conduct its affairs as it wishes to."

Hendrick said the agreement ''was a win-win for everybody" and will allow the church to ''get back to the discharge [of] its mission" of helping needy people and paying for college scholarships.

Several church members interviewed for a lengthy Globe report about the church published in March described a freewheeling situation in which church officers were paid tens of thousands of dollars for part-time work, while friends of church leaders received lucrative contracts for services, and church leaders spent lavishly on meals and hotels.

MacKenzie joined the church two years ago, after convincing the pastor, the Rev. G. Steven Ellis, that he was a changed man, and was quickly made treasurer.

Some church members accuse MacKenzie of orchestrating a takeover of the church by stacking its membership with friends and relatives, often in violation of the church's bylaws. Church records obtained by the Globe showed that 45 of its 105 members joined the church over the past two years, 28 of them in just the past year.

Yesterday, MacKenzie hailed the consent judgment as proof that he and other new leaders had not engaged in the wholesale looting of the church that his critics had charged in a lawsuit.

''I see this as vindication," said MacKenzie, who stepped aside as treasurer last year after the attorney general began investigating, but remains the church's director of operations and a powerful figure in the church leadership. ''We didn't do anything wrong."

Katz, however, described the settlement as a vindication of the attorney general's responsibility to ensure that the church abides by its nonprofit status and that individuals do not enrich themselves with funds that are supposed to be used for charity. Katz said the attorney general does not have the authority to call for the expulsion of any church members.

Disgruntled church members say MacKenzie is being paid $110,000 a year as the church's director of operations, which they say is a part-time job created for him after he was forced out as treasurer. MacKenzie called that amount absurd, but refused to say how much he was being paid. Earlier, he had denied to the Globe that he was taking any salary. ''If I told you what my salary was, every ex-wife I had in the universe would come after me," he said.

George Chapin, one of three church members who asked the attorney general to investigate, welcomed the agreement, saying it showed the new leaders had to be reined in. ''We're making progress," said Chapin, a member of the church for 50 years who is a plaintiff in a pending federal lawsuit that accuses MacKenzie and other church leaders of racketeering in their takeover of the church. 

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