SIOUX CITY -- Cornerstone World Outreach filed for Chapter 11 bankruptcy protection Monday, the day before the church's property was to be auctioned at a sheriff's sale.
About 118 acres of land, including the church building east of Sioux City, was scheduled to go up for sale this morning to pay off a $3.65 million court judgment.
The Rev. Cary Gordon, a pastor at Cornerstone, said in a statement that the church filed for bankruptcy protection after negotiations with Cincinnati United Contractors, an Ohio builder seeking to foreclose on a $4.99 million lien, broke down in recent months.
"Due to obstacles encountered during construction; complications arising from an inability to achieve funding during the economic and political climate, and an unfortunate breakdown of ongoing negotiations between our church and Cincinnati United Contractors (CUC), Cornerstone World Outreach (CWO) is regretfully forced to seek the protection offered by Chapter 11 reorganization," the statement said.
In January, Cornerstone was ordered to sell property to pay Cincinnati United, which had sued the church for unpaid bills in connection with work it did on Cornerstone's new worship center on Glenn Ellen Road.
However, Woodbury County Assistant Chief Deputy Doug Boetger said Monday that the sheriff's sale scheduled for this morning has been canceled as a result of the bankruptcy filing.
According to the filing, Cornerstone has $8,132,606 in assets and $3,981,308 in liabilities. The vast majority of those liabilities -- all but $21,880 it owes U S Bank -- were secured claims.
The $3.65 million owed to Cincinnati United makes up the bulk of the secured claims. The next-largest claim is to Sioux City resident Melissa Tjeerdsma, who is owed $275,000.
According to the filing, Cornerstone put up its old headquarters, 6000 East Gordon Drive, as collateral for $250,000 of the debt to Tjeerdsma. The last $25,000 of that debt was secured by several vehicles, business equipment and real estate.
According to the statement, Cornerstone received about $1.7 in contributions and other income in 2009 and 2010 and has paid $224,180 to creditors
The bankruptcy petition also listed salary and benefits packages paid to its worship team and administrators within the past year.
According to the petition:
* Pastor Larry Gordon received $101,512: a $48,307 salary, $35,326 for housing, $13,336 in health or life insurance and a $4,542 bonus. His wife, Eileen Gordon, received $42,593 in salary and for housing during the same time period.
* Pastor Doug Daniels, also a church administrator, received $58,174: $704 salary, $43,097 for housing, $13,336 in health or life insurance and a $1,036 bonus.
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* Pastor Donna Smith received $35,816: $11,561 salary, $18,141 for housing, $5,334 for health or life insurance and a $780 bonus.
The petition did not list any information about Cary Gordon's salary and benefits package.
PROLONGED LEGAL WRANGLING
Sioux City attorney Donald Molstad, who represents Cornerstone, said the church filed for Chapter 11 protection in order to restructure its assets.
He said it was unclear how long that process would take but said church officials have already started internal restructuring to cut down on expenses.
"It's an ongoing process," he said.
Molstad expected the church to file a proposal in the next 30-60 days in a disclosure statement. There will also be a meeting with the church's creditors, likely in June, where they can ask questions about the church's assets and affairs, Molstad said.
He said creditors will be able to vote on the plan, but it must ultimately be approved by a judge.
The bankruptcy filing comes after more than 3 1/2 years of legal wrangling over construction of the new church building, which has been in use since August 2008.
In April 2010, Cincinnati United joined a lawsuit three local contractors had filed against Cornerstone, seeking payment for work they had done on the building. The church resolved the local contractors' claims and signed a confidential agreement in August with Cincinnati United but never fulfilled the terms.
In Monday's statement, Gordon said the church was confident all of its creditors would be paid upon restructuring of the corporation.
But Cincinnati United CEO Chuck Kubicki said Monday afternoon he doesn't think he'll ever get his money and believes his company will still end up with the church's property.
With the bankruptcy filing, Kubucki said, the church lost all hope of getting financing to pay what it owes.
"When they filed bankruptcy ... they will never get financing," he said. "Who would give them money when they've filed bankruptcy?"