Schuller family claims may delay cathedral vendor payments

Vendors who have been waiting for years to be paid after Crystal Cathedral Ministries fell into bankruptcy could see further delays because of a financial dispute involving church founder the Rev. Robert H. Schuller and some family members.

Schuller; his wife Arvella; daughter Carol Schuller Milner; and her husband, Timothy Milner, have filed a number of claims in Bankruptcy Court alleging that the church owes them money for copyright infringement, intellectual property violations and unpaid contracts.

Those claims are delaying $12.5 million in payments to some creditors. The payments, combined with a steep decline in donations, mean the church could be left with virtually no money for its ministries, including the “Hour of Power” broadcasts, said Nanette Sanders, attorney for the creditors.

“They are basically holding the case hostage,” she said, referring to the family’s claims.

The church was sold to the Roman Catholic Diocese of Orange in February for $57.5 million. Payment to creditors was expected this spring, but because some claims are for unknown amounts and the Milners and Schullers have not agreed to set a payment reserve, vendors cannot be paid until those amounts are determined by the court, Sanders said.

“If these claims are allowed in the amounts that they are asserting, there would be nothing left for the ministry and the vendors would not be paid in full,” she said.

Donations dropped during its traditional best month for giving. In December 2010, Crystal Cathedral Ministries collected $7.3 million. According to court records, that number dropped by 68% last December, to $2.3 million.

Another blow came Monday afternoon, when it was announced that the church’s thriving Spanish-language ministry, headed by the popular Rev. Dante Gebel, will be moving to the Anaheim Convention Center next month. “We knew sooner or later that we would need to relocate to a larger location,” Gebel said in a statement.

Hints of the financial stress facing Crystal Cathedral Ministries came late last month, when Senior Pastor Sheila Schuller Coleman told the Edmonton Journal in Alberta, Canada, that donations from that country have declined. Those donations, which pay for airtime, could result in the “Hour of Power” being shortened to 30 minutes in some markets.

When asked about her comments, church officials declined to elaborate but said in a statement that the “Hour of Power” will continue. John Charles, interim chief executive, said the priority is to pay vendors.

“We anticipate that creditors will be paid 100% of the money owed them,” he said in the statement. “Whatever is left, we’re confident that it will be enough to continue bringing our message of hope to Orange County and the world.”

Although major debts, such as county taxes and a mortgage, have been paid, many of the so-called mom-and-pop vendors have not.

The frozen funds have left many frustrated, including some who worked in the Christmas and Easter pageants. Both events were canceled last year.

“The ones who have really needed to have their bills paid once again are being held up,” Sanders said.

Wes Lasken, a small-business owner, is owed about $2,000 from work on pumps and plumbing performed in 2009. Lasken, of Running Springs, said he is lucky to pull in $20,000 per year in contracts. The money, he said, would help.

“It would actually give me some leeway,” he said.

One claim involving Schuller and his corporation, Robert Harold Inc., asserts that Crystal Cathedral Ministries used his “intellectual property beyond the scope of any license, including, for example, offering it over the Internet.” In a separate document, he says: “Portions of my works have been incorporated and used by the ministry in other works, without my approval or consent.” The family’s known claims add up to $5.6 million.

Some vendors, meanwhile, have sold their claims to firms that purchase debt. Juliet Noriega, a wardrobe supervisor for the pageants, said she was owed about $10,000 and settled for “substantially more than half.”

“I didn’t figure I’d see any of it from the cathedral,” she said. “I just figured that some now is better than none later.”

Others say that they are owed too little to settle but that payment would make a difference. Gary Halopoff, a trumpet player from Fullerton, is owed $4,000 for playing at the 2009 Christmas pageant and “Hour of Power” services in 2010.

“It’s a pain in the neck to not have the $4,000 that I would certainly like to have, and it would certainly help me,” he said.

Halopoff said that he continued to play for the church “on good faith.” He said he feels betrayed but hopes the Schullers can “figure things out.”

“I do look forward to the day I get paid,” he said.

nicole.santacruz@latimes.com