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Wednesday, November 28, 2012
Ind. Courts - " Judge stalls on decision in Anderson church bankruptcy case: ‘Life Legacy’ financing plan at center of dispute "
Great story today by Maureen Hayden of CNHI, here in the Anderson Herald Bulletin. The long story begins:
INDIANAPOLIS — Members of an Anderson church who’ve been praying for relief from a complicated bankruptcy case that threatens both the church and its affiliated school will have to wait awhile longer.If you've read this far, you will want to read the rest of the story ...
After hearing hours of testimony in the case Tuesday, U.S. Bankruptcy Judge Frank Otte delayed making a decision on how to resolve the legal dispute between Lindberg Road Church of Christ, 2625 Lindberg Road, and the bank it blames for its failed finances.
In a moment of candor from the bench, Otte told church members who crowded his courtroom that he didn’t know if he had the power to prevent the Fort Wayne-based Star Financial Bank from shutting down their church through foreclosure.
“I haven’t decided,” Otte said. “But it’s a tough one.”
The 75-year-old judge’s comments came late in the day, hours after he decided to deny Star Financial Bank’s request to toss out evidence that the church’s attorney described as “very damning.”
That evidence included confidential emails, culled from more than 17,000 documents that the bank was compelled to turn over, that showed some senior bank officials had serious doubts about a financing plan it promoted to the church as a way to cover a major construction and renovation project in 2006.
That financing plan required church leaders to take out life insurance policies on some of their older church members and then use the death benefits, or the sale of the policies on a secondary market, to pay off a $2.5 million loan.
“I have a very unusual case in front of me,” Otte told the bank’s attorney, Tom Scherer, after denying his request to block the emails. “And a story that needs to be told and it’s going to be told.”
What that story was varied dramatically, depending on who told it.
[More] See also Cory Schouten's just posted IBJ story. His long story concludes:
The church is not alone in facing financial troubles stemming from a reliance on life-insurance proceeds. The pattern is typical of life-insurance-finance programs that were promoted and sold to charities and churches across the country in recent years, usually with bad results for buyers, insurance experts told IBJ for a story in October.
The key to the plan was the insurance, which was supposed to pay off either in death benefits or through a sale of the policies on the secondary market. Neither avenue materialized, as too few church members died, and the secondary market dried up during the recession.
Posted by Marcia Oddi on November 28, 2012 01:02 PM
Posted to Indiana Courts