PATERSON — The city’s oldest black Baptist church is in default for $3.3 million after allegedly falling victim to fraud by a purported mortgage lender.

The church, led by the Rev. Albert P. Rowe, was forced to shut down its adult medical day care center.

Calvary Baptist Church hasn’t made a mortgage payment since February to its lender, Goldstar Trust Co., according to a foreclosure complaint filed in state Superior Court. To relieve its financial straits, Calvary’s pastor has put up pension money he’s accumulated for decades, and individual members have made thousands of dollars in added contributions.

Even so, the church was forced to shut down its adult medical day care center, which it had sought money to build. Unable to afford to operate the program, staff members had to be laid off, Barry Cohen, a lawyer for Calvary Baptist, said Wednesday.

Cohen said that because Goldstar has a lien against the church, it’s possible Calvary Baptist could lose its East 18th Street church building, and it’s unclear whether the church would be bailed out by another organization.

“They have no one to turn to, unlike some other church entities,” said Cohen, explaining that Calvary Baptist is an independent church, not part of a larger, hierarchal structure. “This would be a shame if this is not resolved.”

How did one of Paterson’s most prominent churches wind up in such trouble?

A decade ago, church leaders began planning to build a 20,000-square-foot addition to the East 18th Street location that would combine an adult medical day care, preschool, teen education classes and foster-family programs.
Fast facts

    * Paterson's oldest black Baptist church, Calvary Baptist, at 575 E. 18th St., was founded at a meeting place on Main and Fair streets in 1879. The congregation began construction of its first church -- at a cost of $1,740 -- 10 years later on Lawrence Street.
      
    * Rev. Albert P. Rowe, Calvary Baptist's pastor since 1968, broke ground for the Family Life Center near the church in 2006 with then-U.S. Sen. Jon Corzine. Heritage Capital Credit Corp., a Delaware-based group, touting itself as a lender to the “underserved and disenfranchised,” gave the church a $3.5 million loan, when no local lenders would finance the project. The principals of HCCC were convicted on fraud and conspiracy charges in October.
      
    * The church, its membership in decline for decades, now has 300 members. The church has 120 children enrolled in its pre-school programs.
      
    * Rev. Rowe, who marched in civil rights demonstrations in the South with Martin Luther King Jr., has been Calvary Baptist's pastor since 1968.

In 2004, the Rev. Albert P. Rowe, Calvary Baptist’s pastor for 40 years, met Edward Johnson, who presented himself as a financier and promised a $6 million loan to finance the project. In a special presentation at the church, Johnson told the church’s board that he was a former bank president with a history of providing financing to religious institutions. He and his wife, G. Carol Johnson, invited Rowe and his wife to their estate near Princeton.

The board wrote checks to Johnson’s company, MERL Financial Group, believing the payments, nearly $200,000, were going into an escrow account.

Cohen, who became involved with Calvary Baptist a year after the church began dealing with the Johnsons, said he was suspicious of the couple’s claims. At a meeting in the offices of a large law firm in Philadelphia, Cohen said Johnson told him and Rowe that their loan was being consolidated with similar loans; he said the financing would be delayed because of underwriting issues with the other loans.

Cohen did a Web search after that meeting and learned that Edward Johnson was a convicted felon and that the Securities and Exchange Commission was pursuing charges against him and his company for issuing fraudulent stocks.

Edward Johnson was convicted on Oct. 29 of 14 counts of fraud, and his wife was convicted on 12 fraud counts, federal court records show. A September 2008 indictment alleges the couple schemed to falsely claim that their Wilmington, Del.-based companies, Heritage Capital Credit Corp. and MERL, could fund commercial loans and lines of credit. They would collect fees for services but never delivered on the financing.

Cohen said the Johnsons scammed a number of church groups in poor communities, including one in Hudson County. Court documents show the couple also defrauded groups in Pennsylvania, Delaware and Florida, and prosecutors estimated they took from their victims a total of more than $1.5 million.

Rowe said the church wasted two years attempting to finance the Family Life Center building. Though the church eventually was able to finance construction through a lender that issued bonds, it borrowed at a much higher interest rate than Johnson had promised.

“It was a very expensive way to finance, and they were just overwhelmed,” Cohen said Wednesday.

Rowe said the first contractor did shoddy work and eventually defaulted on the project. He estimates that cost the church $750,000 in damages and corrective work.

“We thought once the adult day care center opened that we would be able to pull it together. But we weren’t because we were insufficiently funded, so we had to pull money from the church and everywhere we could,” Rowe said.

Rowe deposited all the money from his 40-year pension in an effort to keep the project afloat, and many church members each made thousands of dollars in additional donations.

“[The congregants’] faith has been shaken because this has not been resolved as quickly as they thought it would be,” Rowe said.

Rowe said the church is in discussions with a Kansas City-based church lender about bailing the church out of its financial troubles.

Though the church fell victim to a scam, Rowe said local banks did nothing to help Calvary Baptist when the Family Life Center project first was conceived.

“The most disgusting thing is no bank in Paterson — not one — will lift a hand to help,” Rowe said. “We bank with them, and our church members bank with them, but they won’t’ lift a hand. If I [were] located in Wayne and they didn’t see my face, I would get the money.”

Cohen said he doubts Goldstar, the lender, is interested in taking the church and auctioning it, and he hopes the church’s debts can be resolved.

E-mail: mandell@northjersey.com

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