McBirnie Group Seniors Complex in Bankruptcy Court
The foundation that owns the Concord senior-citizen housing complex here has filed for protection from creditors in U.S. Bankruptcy Court and announced plans to sell the building.
Concord tenants made national headlines three years ago when they filed a class-action lawsuit to block an earlier attempt to sell the building by the Senior Housing Foundation, which is headed by the Rev. William Steuart McBirnie, the financially and legally troubled Glendale-based minister.
Attorneys for both the tenants and the foundation said neither the bankruptcy petitions nor the proposed sale would affect the occupants of the 150-unit apartment building at 275 Cordova St. It is operated under a rent-subsidy program of the U.S. Department of Housing and Urban Development. Under terms of the 1982 settlement reached by HUD, the foundation and the tenants, residents will be allowed to remain in the subsidized-rent program until well after the turn of the century, HUD attorney Joseph Gelletisch said.
Gelletisch said HUD will not permit the building to be sold unless a buyer can be found who agrees to maintain the subsidized program, a development he considers highly unlikely. “It certainly would be our intent to see that nothing happens to the low-income people in that building,” he said. “They’re (the foundation) not going to get off just as quick and easy as they think.”
Residents said they believe the settlement terms protect them in any case. “It doesn’t bother me,” said Clem Gordon, who has lived at the Concord for 10 years and who spearheaded the drive to stop the sale. “We’re not concerned, because they’ve promised us we can’t be put out and we’ll have government subsidy as long as we’re here.”
Philip McNutt, an attorney representing the foundation in its Aug. 14 filing in the U.S. Bankruptcy Court in Washington, said the foundation intends to dissolve as a nonprofit corporation. Control of the building would then be transferred to Community Churches of America, the Glendale-based umbrella organization for McBirnie’s religious enterprises.
Community Churches of America, which also has filed for protection, would then sell the Concord to satisfy its creditors, McNutt said, adding that he will ask the court to consolidate the bankruptcy cases. Both organizations filed Chapter 11 petitions seeking permission to reorganize their operations and restore solvency to repay creditors rather than liquidate assets.
The foundation, which was formed in 1979 to purchase the Concord, ran into legal difficulties in 1982 when it paid off $1.7 million it owed on a 50-year, 3% mortgage held by HUD, put the building up for sale and notified tenants that their rent would be doubled. The lawsuit halted the sale and kept the Concord under the authority of HUD’s subsidy program.
“I think the shenanigans that were involved in (the attempted sale of) the building a couple of years ago were one of the reasons why the law (regulating such a sale) is as tight as it is,” Gelletisch said.
Asked why the bankruptcy petitions were filed in Washington rather than California, McNutt said that Community Churches of America intends to move its operations to the Washington area. “That is the place where the business, if it can rehabilitate, will rehabilitate,” McNutt said. “The whole status with HUD has created a real bad atmosphere in California. There is substantial litigation going (and) the debtor has no hope of conducting viable business.
“Even though we have an asset (the Concord) that can be used, we can’t use it because HUD won’t allow it to be sold. It’s just not fair. There was some bad feeling among the parties (HUD and the foundation) that might interfere with good judgment. Our hope is that by changing the atmosphere from California to Washington, we can get somebody to focus on the interests of the creditors.”
“Obviously, if we can satisfy HUD, we will do it,” McNutt said. “If we can’t do it and the only way to satisfy the creditors is to sell (the building) outside the HUD agreement, we will do it. We are not trying to buck the federal government. The government is a very large entity, but it is only one entity and there may be several hundred creditors.”
Meanwhile, the California Graduate School of Theology, a nondenominational seminary McBirnie opened in Glendale in 1969, filed a Chapter 11 petition with the U.S. Bankruptcy Court in Los Angeles on the same day the foundation filed its bankruptcy petition in Washington.
The bankruptcy filings are the latest in a series of complicated financial and legal actions by McBirnie’s once-flourishing religious empire, which has been ordered by civil court judges in Glendale and Los Angeles to repay more than $1.3 million borrowed from former followers of the minister. McBirnie faces several pending lawsuits brought by disgruntled members of his church, many of them elderly Glendale residents who claim to have invested their life savings in his enterprises.
According to its bankruptcy petition, Concord Senior Housing Foundation has $5,279,000 in debts and $5 million in assets, primarily the 14-story apartment building. It also lists more than 300 creditors, many the same parties cited in the bankruptcy petitions filed by Community Churches of America and California Graduate School of Theology.
The theology school claims to have assets of $1.7 million and liabilities of $4.6 million. A listing of the school’s 20 largest creditors includes two other McBirnie-headed organizations, former parishioners who have sued McBirnie to collect outstanding loans, former employees and a Baptist church in Indianapolis. The school has more than 300 creditors, most of them individuals or couples, the petition says.
The bankruptcy filings will make it harder to collect court-ordered judgments awarded to former parishioners because payment now must be arranged through the bankruptcy court, said Christ Troupis, an attorney who last May won a $1.2-million judgment for 24 former parishioners of McBirnie’s United Community Church in Glendale. The judgment against eight different McBirnie-headed organizations is being appealed.
Community Churches of America, the theology school and the housing foundation also were ordered by a Los Angeles Superior Court judge in July to reimburse a Culver City couple $128,000 in unpaid loans and accrued interest.
Other McBirnie-headed organizations involved in lawsuits stemming from the unpaid loans are Voice of Americanism, United Community Churches of America, Heritage Foundation, United Community Church and World Emergency Relief Foundation.
The unpaid loans supposedly were used to buy property and make improvements on the complex of buildings in downtown Glendale where McBirnie runs his enterprises. Most of the loans, which were to bear 8% to 10% interest annually, were for $1,000 to $25,000 and were solicited between 1972 and 1980. Troupis claims that the theology school does not need to go through the bankruptcy procedure to satisfy its debt.
“They have property,” Troupis said, referring to several pieces of property in downtown Glendale owned by the school. “I don’t think they have enough cash lying around. If they sold their property, they could pay their debts.”
John H. Craig, an attorney representing the theology school in its bankruptcy action, declined comment, other than to say a statement would be issued soon.
