Bank Seeks Permission to Foreclose on Sherman Allen's Church

For Pastor Sherman Allen, things just got a little bit worse.

A Christian credit union has filed a motion in bankruptcy court asking permission to foreclose on the building that houses Pastor Sherman Allen's Shiloh Institutional Church of God in Christ, at 1270 Woodhaven Blvd. in Fort Worth. The Evangelical Christian Credit Union, based in California, finances church construction projects and purchases of church buildings, among other services. Shiloh owes the credit union $3.8 million.

The credit union filed two motions in mid-April that paint a perilous financial picture of Shiloh, founded by Pastor Allen in 1983. In late January, Allen was sued for allegedly beating and sexually abusing a former church member, Davina Kelly. Since that suit was filed, some 35 women have come forth with similar allegations dating as far back as 1983, according to Kelly's attorneys. For earlier stories on the Allen case, see here. Less than a week after the Kelly case was filed, Shiloh declared bankruptcy.

Even before Kelly filed suit, the documents state, Shiloh was $135,000 past due in loan payments. The church is housed in a strip shopping center it owns in the Woodhaven area. Since then, Shiloh has missed its March and April payments, and -- according to the docs -- is making no effort to lease out vacant units in the shopping center to generate more income. Furthermore, the church is not maintaining the building properly and has offered no proof that it has insurance, leaving the credit union potentially exposed to a total loss.

The court papers accuse Shiloh of failing to account for $150,000 in cash, including $100,000 in gas royalties. The credit union also takes the church to task for paying Allen a $30,000 bonus in 2006 -- the year preceding the bankruptcy filing. This payment, the documents allege, "is potentially a fraudulent transfer if not an insider preference, yet no action has been taken to recover the payment." In its June 19 response, Shiloh denies this allegation.

Shiloh's own bankruptcy filings indicate that it brings in $35,000 a month in offerings and nearly $13,000 a month in rent income. In addition to this, however, the court documents note that Allen brings in money from speaking engagements that is deposited under the name of a separate ministry -- beyond the control of the bankruptcy court. Yet Shiloh occasionally transfers money from its account to this separate account.

In a second motion, the credit union asks the court to investigate Shiloh's finances and appoint a trustee to oversee them. Shiloh's response, filed by Fort Worth attorney St. Clair Newbern III, opposes the appointment of a trustee or examiner.

"Of further concern," this second motion states, "… is the fact that the pastor of the church is not preaching in the church on normal Sunday services. Ms. [Laura] Cobb [the church administrator] stated in her testimony that the pastor was indefinitely suspending his presiding duties as pastor of the church. [The credit union evidently wasn't aware in mid-April that Allen had been suspended from all pastoral duties by his denomination, the Memphis-based Church of God in Christ.] Although Ms. Cobb stated the pastor continues to visit the sick in hospitals and conduct marriages and funerals, the pastor is not leading the church on Sundays as normal. In fact, the church has hired and will continue to hire outside preachers to conduct the services on Sundays. Meanwhile, Ms. Cobb stated…that pastor Sherman Allen is still being paid a $1,000 a week salary and is still entitled to live in the million-dollar-plus parsonage and drive the church's vehicles. While the pastor is continuing to reap the benefits of being the pastor of the church, he is failing to undertake his responsibilities as the pastor and leader of the church …"

Shiloh's operating report for May, in fact, shows a generous honorarium of $5,000 paid to guest speaker Evangelist Ella Coaster, and another $1,000 to the Reverend John Black.

The motion continues: "Movant [the credit union] has lost all confidence in the church's ability to prudently manage its finances and real property and would assert that the church is being grossly mismanaged … There is good reason to doubt the trustworthiness of [Shiloh's] overall management in protecting and safeguarding the interests of the estate. The pre-petition and post-petition decisions made by [Shiloh] demonstrate that Pastor Allen and Laura Cobb cannot be trusted to act competently, fairly and equitably and in the best interests of the estate's creditors."

Shiloh has brought in between $900,000 to $1 million in the last three years, the motion says, yet it has not been able to keep up its mortgage, buy insurance or pay its other creditors. (The church denies the claim that it didn't purchase insurance.) In addition, the church saw fit to pay Allen the $30,000 bonus last year and "has continued to provide a million-dollar-plus parsonage to the pastor when the pastor is no longer preaching at the church.

"[Shiloh's] prospects for rehabilitation are weak," the motion says, "in that the Debtor is relying on a speculative donation from an unnamed third party rather than attempting to lease out additional portions of the church property, selling the parsonage and living within the church's means." --Julie Lyons



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