By Erick Johnson
Reverend Dr. Leon Finney, Jr. is busy these days. And it’s not just the Lord who is keeping the prominent leader on his toes.
One month after the Chicago Sun-Times published an investigative story that alleged fraud and corruption at some 17 organizations tied to Finney, the longtime prominent leader has filed an appeal in federal court to save the Woodlawn Community Development Corporation.
It’s an institution Finney ran for 47 years starting in 1972. Finney’s congregation at Metropolitan Apostolic Community Church in Bronzeville remains supportive of their pastor.
The Corporation helped thousands of Blacks find quality, affordable housing when there were few options available and when many whites still lived in Woodlawn before fleeing the neighborhood as people of color moved in.
Today, Finney remains a respected leader who is fighting not only for his legacy, but for the future of an organization that has done so much for low-income residents on the South Side.
On November 2, Finney will be honored with the Arthur M. BazierAward for Church and Community Advancement at the Apostolic Church of God in Christ in Woodlawn where Dr. Byron Brazier is pastor.
For Finney and his supporters, it will be a refreshing boost after the Sun-Times’ investigation threatened to destroy a legacy of community leadership that spanned nearly five decades.
Recently, U.S. Judge Carol A. Doyle of the Northern District of Illinois appointed a Chapter 11 trustee and ordered the Woodlawn Community Development Corporation to sell all its assets after it filed for bankruptcy on October 24, 2018.
Auction notices have been slapped on some of the properties, including the former site of Urban Broadcast Media at 4108 S. King Drive. That property is scheduled to be auctioned on October 28.
But Finney is fighting back.
On October 17, Finney and the Woodlawn Community Development Corporation filed a 14-page appeal in federal court, appealing the forced liquidation of its assets.
Finney’s attorney said the Woodlawn Community Development Corporation was never allowed to reorganize like most bankrupt institutions. They say rather than review the history of Finney’s leadership in the community, the court labeled Finney a “bad guy” and tied him to the problems of the corporation’s current management, which did not involve Finney, who has been experiencing health problems in recent years.
The appeal also says the Committee of Creditors is seeking to punish Reverend Finney as a “bad guy,” and there were efforts to “systematically destroy the community organization without any attempt to propose an alternative solution seeking its rehabilitation rather than destruction.”
The Committee of Creditors denied accusations that they were racially insensitive to African-American organizations. The appeal cites the 1982 U.S. Supreme Court case, General Bldg. Contractors Assn Inc. v. Pennsylvania.
In that case, Justice Thurgood Marshall wrote, “Although flagrant examples of intentional discrimination still exist, discrimination more often occurs ‘on a more sophisticated and subtle level,’ the effects of which are often as cruel and devastating as the most crude form of discrimination.”
It’s a familiar situation for many Blacks heading bankrupt institutions. In 2017, a federal judge ordered Woodlawn’s Laundryworld owner Lloyd Hughes to sell the business that he founded and operated for 50 years for making an unauthorized $354 repair on a washing machine. Hughes appealed and reopened the business in 2018.
Finney’s situation is different and more complex.
His Woodlawn Community Development Corporation is a nonprofit organization that has been accused of fraud, corruption and misappropriating taxpayers’ money as it collected $20 million while managing a quarter of the Chicago Housing Authority public housing units in Chicago.
Finney’s attorneys say the committee’s assertion that a not-for-profit organization is not provided any special treatment under Chapter 11 as opposed to a moneyed business, is simply wrong.
They also argue that a bankruptcy law prohibits creditors and prevents a non-money business to a Chapter liquidation case without the consent of the debtor. Finney’s attorneys say the code “allows nonprofit organizations, such as Woodlawn, to voluntarily reorganize their financial affairs without the threat of forced liquidation.”
The committee said the move was justified when: 1) the Woodlawn Corporation failed to pay more than $1.5 million in pre-petition payroll taxes; 2) when the Corporation failed to collect rents from Finney’s company, Lincoln South Central; and 3) Woodlawn’s $35,000 petition payment to Dr. Clarence Nixon.
However, Finney’s attorneys say the appointment of a Chapter 11 trustee was “abuse of discretion” because the committee focused on whether the current management “engaged in the kind of dishonesty which warranted the appointment of a trustee under current laws.”
The committee accuses the Woodlawn Community Development Corporation of missing three quarters of payroll taxes.
In the appeal, Finney’s attorneys don’t dispute the accusation of missing paying payroll taxes for two quarters in 2017 and one in 2018. However, Finney’s attorneys attribute these problems to the Corporation’s current management where Finney was not on the Board of Directors and was not involved in the daily affairs of the organization.
Finney’s attorneys said the court “conveniently” ignored the testimony of Dr. Nixon, who said Finney was not a member of the Board of Directors, but a consultant.
Finney ran the Woodlawn organization for 47 years as its founder. His attorneys argue that the committee ignores the clean history of the organization under Finney’s leadership, where he “had almost unfettered control over the daily affairs of Woodlawn.”
Finney’s attorneys also argue that the court is incorrect in imputing Finney’s “bad acts” to the “current management because the organization lacked the internal controls to discover the wrongdoing for an extended period of time.”
Attorneys for Finney said the court should focus on “whether current management, having discovered the prior malfeasance, is taking the necessary steps to address the prior issues and instituting procedures to prevent their reoccurrence.”
The appeal also states, “Neither the Committee nor the UST (appointed trustee) have produced a scintilla of evidence to impute his “bad conduct” upon the current management to have been tainted with the misdeeds of the past for the appointment of a Chapter 11 Trustee, the movant must show that either current management participated in those activities or current management was aware of the malfeasance when it was occurring, condoned it and failed to act to stop it or prevent it from happening. Neither basis is present in this case, and therefore, the Court’s finding was clearly erroneous.”
Finney’s attorneys also blame the current management of the Woodlawn Community Development Corporation on its failure to collect rents from Finney’s Lincoln-South Central property at 1500 E. 63rd Street. Finney’s attorneys say there is no evidence of fraud, dishonesty or gross mismanagement. They also say there are plans to remove Nixon and the Board from operating the property.
According to Finney’s attorneys, their client should have been granted a hearing to determine whether the organization should be given the option to reorganize rather than be forced to liquidate. The appeal said the court relied on information from the Creditor’s Committee, attorneys for the organization’s creditors and the CHA.
“It was an assumption by the Court that because these handful of attorneys supported the motion, the creditor body must be in favor of the motion as well,” according to Finney’s appeal.
“Judge Doyle made these findings without the benefit of a hearing, the introduction of evidence into the record or otherwise providing the Debtor [Finney] with the opportunity to demonstrate the feasibility of the Plan.
“This is particularly troublesome because the Court, which from the very beginning was favorably inclined to appoint a Chapter 11 Trustee, did not afford basic due process to the Debtor to establish that its Plan was indeed feasible.
“But the error of the Bankruptcy Court was its failure to give this venerable community organization the opportunity to reorganize before appointing a Chapter 11 Trustee.”