Published November 14, 2011
SANTA ANA, Calif. – A federal bankruptcy court hearing aimed at settling the future of the financially ailing Crystal Cathedral turned into a bidding match Monday with a university and the Roman Catholic Diocese of Orange competing to buy the church's sprawling grounds.
The daylong hearing also highlighted a deepening rift between the Rev. Robert Schuller and the ministry he created more than 50 years ago over intellectual property rights and lifetime payments to the founder of the megachurch.
The Diocese -- which wants to use the gleaming 3,000-seat sanctuary for a countywide cathedral -- boosted its bid for the property to $57.5 million from $55.4 million to ensure enough money would be available to cover yet-to-be-quantified claims made by the Schuller family.
"We felt it was important to increase the offer to address the feasibility concerns," Alan Martin, an attorney for the diocese, said on a break from a hearing Monday.
In response, Orange County's Chapman University -- which wants to expand its health services offerings and possibly start a medical school on the site -- offered to alter its $51.5 million bid to include a 15-year lease of key buildings on the 40-acre campus like the Crystal Cathedral, bell tower and cemetery for $1 a month, if the church desired.
Under this plan, the Crystal Cathedral would have more cash to cover its expenses but would no longer have the same repurchase right on the property, said Marc Winthrop, an attorney for the church.
At the end of the session, U.S. Bankruptcy Court Judge Robert N. Kwan said that the original bid from the university and the Diocese's offer both appeared to be feasible and that the church would need to decide which, if any of the outstanding proposals, were preferred ahead of a final hearing set for Thursday afternoon.
Many church members have been pushing for the offer from Chapman University -- which is also preferred by the ministry's board -- because they want the glass-spired church and cemetery to remain in Protestant hands. But the Schullers' attorney, Carl Grumer, said he backed the Diocese's proposal because the extra money would help cover some of his clients' claims against the church, which filed for Chapter 11 bankruptcy last year to be able to keep operating while getting its finances in order.
Much of the at-times heated discussion Monday focused on how big a reserve fund the church needs to cover these claims by Schuller, his wife and daughter over rights to use of his books and sermons, and an agreement by the church to pay the elderly couple's housing allowance, travel expenses and insurance until they die.
Grumer had suggested the court set the reserve fund at $6.5 million. But Kwan found that no money was needed to cover intellectual property claims, citing a lack of sufficient evidence, and that only $500,000 was needed to cover a gap in the annual payments owed to the Schullers under an earlier agreement, noting the church recently voted to pay them $290,000 a year for life.
Upset by the decision, Carol Milner, the Schullers' daughter, said her parents have dedicated their lives to building the ministry and have refrained from filing an intellectual property lawsuit to help the church get back on its feet.
Milner said her father has continued to help with fundraising and his image is still used everywhere, but she doubted that would continue much longer under the strained relationship with the church.
"We're really treading on thin ice here. This is going to be a slap in the face," she told reporters after the hearing.
Schuller started the Southern California ministry as a drive-in church in the 1950s. Predicated on the "power of positive thinking," the church evolved into an international televangelism empire with the weekly "Hour of Power" broadcast beaming into 1 million homes.
In 1980, the church opened its now-famous building made of more than 10,000 panes of glass. A decade later, the church added a bell tower and spire that shimmer from miles away.
Church leaders say the recession took its toll in 2008 as donations and ticket sales for holiday pageants began to drop. But some experts say the church failed to attract younger members while alienating older churchgoers with an ill-fated attempt to turn the church over to Schuller's son, ending in a bitter and public family feud.
As revenues declined, the church laid off more than half its employees, cut salaries and canceled contracts with more than 100 television stations nationwide. But unpaid bills along with a $36 million balance remaining on the church's mortgage pushed the Crystal Cathedral's debts to more than $43 million.
The church declared bankruptcy last year. Today, the decline in revenue is slowing, Michael VanderLey, a corporate finance consultant hired by the church, told the court Monday. Church revenue fell to $4 million in December 2010 from $6.7 million in December 2009 and is expected to reach about $3.5 million this December, he said.
About 70 percent of the church's revenue stems from the "Hour of Power" program, VanderLey said.