Before it's over, the Archdiocese of Milwaukee bankruptcy is likely to produce many thousands of pages of legal documents - motions, affidavits, schedules, transcripts, the list goes on and on.
Now, anyone ravenous enough to read that much can access most if not all for free without setting foot in the federal courthouse.
The records are being made available online by Kurtzman Carson Consultants, a Los Angeles firm hired by the archdiocese with the court's approval to serve notices of every official development in the case on the 2,700 potential creditors or parties of interest.
Of course, the official record of the Chapter 11 proceedings is on file at the Clerk of the Bankruptcy Court in the Eastern District of Wisconsin in Milwaukee. It's available online at PACER, or the Public Access to Court Electronic Records, database maintained by the federal court system, but PACER charges by usage. The Kurtzman Carson Consultants site is free at www.kccllc.net/archmil - with the caveat that, white it makes every attempt to ensure the accuracy of the information, it is "not the complete, official record."
Sunday, January 16, 2011
Saturday, January 15, 2011
Creditors to question archdiocese
Creditors, including victims of clergy sex abuse, will have their first chance to question the Archdiocese of Milwaukee about its financials at a meeting Feb. 11 at the federal courthouse.
The first meeting of creditors - called a 341 meeting for the section of the bankruptcy code that requires it - will be 11:30 a.m. in the offices of Assistant U.S. Trustee David Asbach, according to electronic court records.
Often uneventful, the procedural meetings can become a forum for creditors to raise concerns about the debtor, and the meeting may shed light on some of the issues that are likely to be raised in the bankruptcy proceedings, legal experts said.
"It can be a chance for plaintiffs to come and vent, but whether they'll be shut down, I don't know," said Jonathan Lipson, a University of Wisconsin-Madison law professor who has written on the clergy sex abuse bankruptcies.
"It's a formality," he said, "but an important one: You do need some part in the procedure where creditors can look the representative in the eye and say, 'This is what you told us your assets are. Is it true?' "
In other matters related to the bankruptcy:
• The archdiocese has appealed a decision absolving its insurers of liability in pending clergy sex abuse cases to the Wisconsin Supreme Court. But the appeal was put on hold this week because of its Chapter 11 bankruptcy proceedings.
The bankruptcy, filed last week, essentially stays all related civil actions, including the fraud cases now pending in Milwaukee County Circuit Court and the Dec. 23 appeal by the archdiocese on the insurance issue.
In that filing, the church asked the high court to review a November Court of Appeals decision, which absolved its insurer of liability because the acts alleged in the fraud lawsuits were intentional rather than accidental.
But attorneys for the insurer wrote a letter to the Supreme Court this week, saying it would not file its response without approval of the bankruptcy judge, out of concern that it may violate the stay order.
David Muth, one of the archdiocese's attorneys, declined to say whether they would ask the bankruptcy court to lift the stay so the Supreme Court could respond to the appeal. The attorney for the insurer did not immediately return a telephone call seeking comment.
• Before it's over, the bankruptcy is likely to produce thousands of pages of legal documents. Now, anyone ravenous enough to read them all can access them for free without setting foot in the federal courthouse.
The records are being made available online by Kurtzman Carson Consultants, a Los Angeles firm hired by the archdiocese with the court's approval to serve notices of every official development in the case on the 2,700 potential creditors or parties of interest.
The official record is on file at the Clerk of the Bankruptcy Court and available online at the Public Access to Court Electronic Records database maintained by the federal court system, though PACER charges by usage.
The Kurtzman Carson Consultants site is free at www.kccllc.net/archmil.
The first meeting of creditors - called a 341 meeting for the section of the bankruptcy code that requires it - will be 11:30 a.m. in the offices of Assistant U.S. Trustee David Asbach, according to electronic court records.
Often uneventful, the procedural meetings can become a forum for creditors to raise concerns about the debtor, and the meeting may shed light on some of the issues that are likely to be raised in the bankruptcy proceedings, legal experts said.
"It can be a chance for plaintiffs to come and vent, but whether they'll be shut down, I don't know," said Jonathan Lipson, a University of Wisconsin-Madison law professor who has written on the clergy sex abuse bankruptcies.
"It's a formality," he said, "but an important one: You do need some part in the procedure where creditors can look the representative in the eye and say, 'This is what you told us your assets are. Is it true?' "
In other matters related to the bankruptcy:
• The archdiocese has appealed a decision absolving its insurers of liability in pending clergy sex abuse cases to the Wisconsin Supreme Court. But the appeal was put on hold this week because of its Chapter 11 bankruptcy proceedings.
The bankruptcy, filed last week, essentially stays all related civil actions, including the fraud cases now pending in Milwaukee County Circuit Court and the Dec. 23 appeal by the archdiocese on the insurance issue.
In that filing, the church asked the high court to review a November Court of Appeals decision, which absolved its insurer of liability because the acts alleged in the fraud lawsuits were intentional rather than accidental.
But attorneys for the insurer wrote a letter to the Supreme Court this week, saying it would not file its response without approval of the bankruptcy judge, out of concern that it may violate the stay order.
David Muth, one of the archdiocese's attorneys, declined to say whether they would ask the bankruptcy court to lift the stay so the Supreme Court could respond to the appeal. The attorney for the insurer did not immediately return a telephone call seeking comment.
• Before it's over, the bankruptcy is likely to produce thousands of pages of legal documents. Now, anyone ravenous enough to read them all can access them for free without setting foot in the federal courthouse.
The records are being made available online by Kurtzman Carson Consultants, a Los Angeles firm hired by the archdiocese with the court's approval to serve notices of every official development in the case on the 2,700 potential creditors or parties of interest.
The official record is on file at the Clerk of the Bankruptcy Court and available online at the Public Access to Court Electronic Records database maintained by the federal court system, though PACER charges by usage.
The Kurtzman Carson Consultants site is free at www.kccllc.net/archmil.
Friday, January 14, 2011
Bankruptcy filing could hurt tithing, priests fear
The Rev. Ken Knippel wasn't surprised when the Milwaukee Archdiocese announced last week it was filing for bankruptcy protection.
"I'm pretty certain no one's shocked by this news because we heard that there were financial difficulties," said Knippel, the pastor at St. John Vianney parish in Brookfield.
It's the reason for the filing - ongoing expenses associated with clergy sex abuse claims - that has Knippel troubled.
"It's not really about the parish or about the good work that we're doing," he said. "It's about a very unfortunate situation from years back that we're still paying the price for and trying to manage the best we can."
Archbishop Jerome Listecki has said that parishes and schools will not be affected by the bankruptcy filing because they are separately incorporated entities, but Knippel fears parishes will be affected in another way.
"We get concerned about people being very negative about this and then withdrawing giving," he said. "We don't want that to happen."
"People react with their checkbooks."
The Rev. Peter Drenzek at Wauwatosa's St. Bernard Parish also said he wasn't surprised by the archdiocese's decision - "It could have come yesterday or tomorrow," he said last week.
He, too, thinks some parishioners will react to the news by withholding funds.
Knippel said last week that he has heard "remarkably little" from parishioners about the announcement, but that was before a recorded message from Listecki about the decision to file for financial reorganization was played at most weekend Masses.
St. John Vianney has included information about the bankruptcy filing and related issues in its weekly bulletins and on its website.
"I want people to have information," Knippel said.
St. John Vianney also will offer a prayer service for survivors of clergy sexual abuse at the church in March. Knippel said it's "just an attempt to reach out" to victims who are still hurting.
The bankruptcy is "a humbling experience" for the church, Drenzek said, but one he expects Catholics will recover from in time.
"Somehow out of this I have to think some truth and goodness will come, but there may be some pain before we get there," he said.
Knippel agreed.
"We face reality, and we go on," he said. "Hopefully, it'll be to the betterment of mission and service."
"I'm pretty certain no one's shocked by this news because we heard that there were financial difficulties," said Knippel, the pastor at St. John Vianney parish in Brookfield.
It's the reason for the filing - ongoing expenses associated with clergy sex abuse claims - that has Knippel troubled.
"It's not really about the parish or about the good work that we're doing," he said. "It's about a very unfortunate situation from years back that we're still paying the price for and trying to manage the best we can."
Archbishop Jerome Listecki has said that parishes and schools will not be affected by the bankruptcy filing because they are separately incorporated entities, but Knippel fears parishes will be affected in another way.
"We get concerned about people being very negative about this and then withdrawing giving," he said. "We don't want that to happen."
"People react with their checkbooks."
The Rev. Peter Drenzek at Wauwatosa's St. Bernard Parish also said he wasn't surprised by the archdiocese's decision - "It could have come yesterday or tomorrow," he said last week.
He, too, thinks some parishioners will react to the news by withholding funds.
Knippel said last week that he has heard "remarkably little" from parishioners about the announcement, but that was before a recorded message from Listecki about the decision to file for financial reorganization was played at most weekend Masses.
St. John Vianney has included information about the bankruptcy filing and related issues in its weekly bulletins and on its website.
"I want people to have information," Knippel said.
St. John Vianney also will offer a prayer service for survivors of clergy sexual abuse at the church in March. Knippel said it's "just an attempt to reach out" to victims who are still hurting.
The bankruptcy is "a humbling experience" for the church, Drenzek said, but one he expects Catholics will recover from in time.
"Somehow out of this I have to think some truth and goodness will come, but there may be some pain before we get there," he said.
Knippel agreed.
"We face reality, and we go on," he said. "Hopefully, it'll be to the betterment of mission and service."
Thursday, January 13, 2011
Bankruptcy Could Force Milwaukee Archdiocese To Put Insurance Tapping on Hold
The Milwaukee Archdiocese might have to wait until it emerges from bankruptcy before it can try again to tap insurance to pay off victims of priest molestation.
The Catholic church filed an appeal 2 days before Christmas, asking the State Supreme Court to reverse an appellate court decision from November. But the case was put on hold after the archdiocese filed its petition for Chapter 11 bankruptcy last week.
The church said part of the reason for the bankruptcy was that the church could not use insurance money to pay claims filed by those sexually abused by priests a number of years ago.
Milwaukee’s appellate judges said it would be wrong for the church to tap insurance to pay the claims, because the sex abuse alleged in over a dozen lawsuits was intentional and not an accident.
The church could ask the bankruptcy court to lift the hold order so the Supreme Court could act on the appeal. But archdiocese attorney David Muth would not say if he would seek such a move.
The bankruptcy petition also delayed action on the lawsuits filed by the abuse victims.
The Catholic church filed an appeal 2 days before Christmas, asking the State Supreme Court to reverse an appellate court decision from November. But the case was put on hold after the archdiocese filed its petition for Chapter 11 bankruptcy last week.
The church said part of the reason for the bankruptcy was that the church could not use insurance money to pay claims filed by those sexually abused by priests a number of years ago.
Milwaukee’s appellate judges said it would be wrong for the church to tap insurance to pay the claims, because the sex abuse alleged in over a dozen lawsuits was intentional and not an accident.
The church could ask the bankruptcy court to lift the hold order so the Supreme Court could act on the appeal. But archdiocese attorney David Muth would not say if he would seek such a move.
The bankruptcy petition also delayed action on the lawsuits filed by the abuse victims.
Wednesday, January 12, 2011
Wilmington diocese offers $74 million abuse settlement
The Roman Catholic Diocese of Wilmington, Delaware, has offered $74 million to settle 150 claims of sexual abuse by priests, an increased offer it said would be the largest settlement per case of its kind.
The diocese, which filed for bankruptcy in 2009 due to mounting sex abuse claims dating as far back as the 1950s, said on its website the average payout was about $750,000, far higher than the average in five comparable settlements.
An attorney representing the majority of the purported victims rejected the offer as "woefully inadequate" and said the diocese was misleading about the size of the offer.
"We're almost half way there to what a reasonable settlement would be," said Wilmington attorney Thomas Neuberger, who represents 98 people.
Payouts under the new offer would likely range from $75,000 to $3 million, depending on the severity of the alleged abuse, the diocese said on its website.
U.S. Roman Catholic archdioceses have collectively paid some $2 billion in settlements to victims since the priest sex scandals first erupted in Boston nearly a decade ago.
Neuberger criticized the Wilmington diocese for comparing its offer to five settlements obtained in bankruptcy court.
Neuberger said from a legal standpoint a better comparison was the $660 million paid by the Los Angeles archdiocese outside of bankruptcy. The watchdog website BishopAccountability.org estimated the Los Angeles settlement at $780,000 per victim.
The Wilmington Diocese, with a Catholic population of about 233,000, increased its offer from around $55 million after a state jury found that St. Elizabeth Parish owed purported victim John Vai $3 million.
Vai had claimed he was molested as a teenager in the 1960s by Francis DeLuca, a priest who was later defrocked.
Under the latest settlement offer, victims are required to agree to drop all legal action against the diocese and parishes, which are not part of the bankruptcy.
"Lawyers for some survivor-claimants have said that the parishes want to buy their way out of litigation cheaply. But a settlement fund of $74 million ... is hardly cheap," said a letter from Francis Malooly, the bishop of the Wilmington diocese.
Neuberger said the diocese and parishes combined have $1.7 billion in resources and said the victims had been working on a payout of $1.3 million on average with the prior bishop, who died in 2009.
The settlement was increased by contributions from outside the diocese, including $53 million from a Catholic foundation started 80 years ago by John Raskob, the builder of New York's Empire State Building.
The Wilmington diocese said its offer was higher than the average claims paid by five other dioceses in bankruptcy court settlements: Fairbanks, Alaska; Davenport, Iowa; Spokane Washington; Tucson, Arizona and Portland, Oregon.
The diocese, which filed for bankruptcy in 2009 due to mounting sex abuse claims dating as far back as the 1950s, said on its website the average payout was about $750,000, far higher than the average in five comparable settlements.
An attorney representing the majority of the purported victims rejected the offer as "woefully inadequate" and said the diocese was misleading about the size of the offer.
"We're almost half way there to what a reasonable settlement would be," said Wilmington attorney Thomas Neuberger, who represents 98 people.
Payouts under the new offer would likely range from $75,000 to $3 million, depending on the severity of the alleged abuse, the diocese said on its website.
U.S. Roman Catholic archdioceses have collectively paid some $2 billion in settlements to victims since the priest sex scandals first erupted in Boston nearly a decade ago.
Neuberger criticized the Wilmington diocese for comparing its offer to five settlements obtained in bankruptcy court.
Neuberger said from a legal standpoint a better comparison was the $660 million paid by the Los Angeles archdiocese outside of bankruptcy. The watchdog website BishopAccountability.org estimated the Los Angeles settlement at $780,000 per victim.
The Wilmington Diocese, with a Catholic population of about 233,000, increased its offer from around $55 million after a state jury found that St. Elizabeth Parish owed purported victim John Vai $3 million.
Vai had claimed he was molested as a teenager in the 1960s by Francis DeLuca, a priest who was later defrocked.
Under the latest settlement offer, victims are required to agree to drop all legal action against the diocese and parishes, which are not part of the bankruptcy.
"Lawyers for some survivor-claimants have said that the parishes want to buy their way out of litigation cheaply. But a settlement fund of $74 million ... is hardly cheap," said a letter from Francis Malooly, the bishop of the Wilmington diocese.
Neuberger said the diocese and parishes combined have $1.7 billion in resources and said the victims had been working on a payout of $1.3 million on average with the prior bishop, who died in 2009.
The settlement was increased by contributions from outside the diocese, including $53 million from a Catholic foundation started 80 years ago by John Raskob, the builder of New York's Empire State Building.
The Wilmington diocese said its offer was higher than the average claims paid by five other dioceses in bankruptcy court settlements: Fairbanks, Alaska; Davenport, Iowa; Spokane Washington; Tucson, Arizona and Portland, Oregon.
Tuesday, January 11, 2011
The History in Delaware
2002
A scandal erupts nationwide over how the Catholic Church handled accusations of child sexual abuse against hundreds of priests. The Vatican outlines a new policy defining abuse and outlining how bishops should deal with allegations.
January 2003
The Diocese of Wilmington says it has received credible allegations of sexual abuse of children against 18 priests dating to 1952. Three are named: two who had resigned and one who had been relieved of his duties. The diocese refuses to release the names of the remaining 15 priests, saying seven were dead and none was in active ministry.
January 2004
The diocese acknowledges that 60 people have accused priests of abuse in the past 50 years, and that the diocese has paid $1.6 million to victims and families. The diocese says substantiated claims had been made against one now-deceased priest, bringing the total to 19.
February 2005
The diocese acknowledges a $65,000 payment to a former Wilmington man to reimburse him for counseling needed after years of abuse by a diocesan priest, the Rev. Edward B. Carley, who died in 1998.
October 2005
The Philadelphia District Attorney's Office releases an extensive grand jury report about sexual-abuse allegations in the Archdiocese of Philadelphia. That report reveals the names of several priests from the Diocese of Wilmington.
October 2005
The News Journal makes the first public attempt to chronicle how church leaders in Delaware handled molestation claims. The diocese now has acknowledged that at least 30 priests had been accused of molesting more than 60 children since 1950, but refuses to release a full list of names, saying it sees no compelling reason to do so. The newspaper's review showed that in many ways, the Diocese of Wilmington followed the same pattern revealed in Boston, Philadelphia and other dioceses, where abusive priests were quietly transferred from parish to parish.
October 2006
A former Delaware priest, the Rev. Francis G. DeLuca, is arrested on child sexual-abuse charges in Syracuse, N.Y.
November 2006
The diocese releases the names of 20 diocesan priests about whom there have been "admitted, corroborated or otherwise substantiated" allegations of child sexual abuse.
July 2007
Delaware's Child Victim's Act becomes law. It eliminates the civil statute of limitations in cases of child sexual abuse and opens a two-year legal "window" during which victims whose cases have been previously barred by Delaware's two-year limit can file suit.
December 2007
Vatican protocol requires bishops to retire at age 75. Speculation begins about a possible successor for Wilmington Bishop Michael A. Saltarelli, whose 75th birthday was Jan. 17, 2007.
July 2008
After one year, Delaware sees fewer cases than expected filed under the Child Victim's Act. Three men win settlements and 10 others file claims.
May 2009
The first Delaware lawsuit filed in the wake of the Catholic clergy sex-abuse scandal is settled out of court. It is the Diocese of Wilmington's third settlement since January, and at least the sixth since the scandal emerged in 2002. The settlement, for an undisclosed sum, includes an apology and acknowledgement from the bishop and a permanent revocation of the accused priest's authority to minister in the diocese. Saltarelli also apologizes to the victim and his parents and expresses deep regret for the abuse.
July 7, 2009
W. Francis Malooly is named the ninth bishop of the Diocese of Wilmington.
July 2009
More than 140 plaintiffs have filed more than 170 civil lawsuits during the two-year window.
Oct. 8, 2009
Michael A. Saltarelli, bishop emeritus of the Diocese of Wilmington, dies at age 77.
Oct. 18, 2009
The Diocese of Wilmington files for bankruptcy, freezing lawsuits against it.
October 2009
John Michael Vai's personal-injury lawsuit against the Rev. Francis G. DeLuca, 79, is scheduled to be the first clergy-abuse lawsuit to go to trial on Oct. 19.
Aug. 13, 2010
Bankruptcy Judge Christopher Sontchi clears nine priest-abuse cases to go forward to trail. All name a parish as a defendant and seven of the group name defrocked priest Francis DeLuca as a defendant.
September 2010
Diocese fails to reach an out-of-court settlement with abuse victims, files a bankruptcy plan with Judge Sontchi that survivors object to.
Oct. 26, 2010
The first of the parish cases cleared by Sontchi, John Vai v. St. Elizabeth Parish, goes to trial in Kent County Superior Court before President Judge James T. Vaughn Jr.
December 2010
The jury finds in favor of plaintiff John Vai, ordering defrocked priest Francis DeLuca to pay him $60 million in punitive and compensatory damages. The jury also orders St. Elizabeth Parish to pay $3 million of that award to Vai, finding the parish was partially responsible for the abuse Vai suffered as a teenager in the late 1960s.
Jan. 10, 2011
Diocese files amended bankruptcy plan with Judge Sontchi, increasing the amount of money set aside to compensate victims of abuse.
Sunday, January 9, 2011
Some of the issues likely to surface in Milwaukee
Parishes and trusts:
Creditors in the Milwaukee bankruptcy are almost certain to challenge the archdiocese’s assertion that parish assets are off-limits because parishes are separately incorporated. The first salvo came in the line of questioning by victims’ attorney James Stang in a hearing Wednesday. Stang questioned John Marek, the archdiocese’s chief financial officer, about parish corporation boards, which includes the archbishop and his vicar general.Both Stang and archdiocese attorney Bruce Arnold declined to be interviewed.Legal experts said bankruptcy courts have respected the autonomy of parishes in Davenport and Wilmington, where they are separately incorporated.
But some trusts have not been ironclad.
Trust structures were contested in Portland, Spokane and Wilmington. In Wilmington, the court ruled that millions of dollars in an investment trust held by the diocese for parishes, schools, cemeteries and other organizations would become part of the estate because they had been commingled with diocesan funds and couldn’t be traced to their original sources – a decision that is now affecting pensions for lay employees.
Real estate:
During bankruptcies, creditors’ attorneys have challenged the amount of real estate initially identified by dioceses as available to pay settlements, in some cases bringing in forensic specialists to mine tax and property rolls, experts said.In San Diego, where the bankruptcy filing was dismissed after an outside agreement with victims was reached, creditors had accused the diocese of significantly undervaluing its holdings. News coverage at the time of the bankruptcy’s dismissal put the assessed value of church properties there at more than $400 million, saying it included single family homes, vacant residential and commercial lots, multiuse buildings and condominiums.
Lawyers for that diocese said Friday that diocesan ownership of the properties was never established at trial.
But U.S. Bankruptcy Judge Louise DeCarl Adler was troubled enough to rebuke the diocese at the close of the bankruptcy, calling it “disingenuous” and saying it had enough assets to settle its claims without ever going to bankruptcy.
Future claims and a final call for sex abuse lawsuits:
One of the advantages of bankruptcy for dioceses fearful of looming court judgments is that it creates a finite pool of money and a deadline for claimants to come forward.That’s the theory, but everyone is testing that now, of the so-called “bar dates” that have traditionally imposed narrow deadlines for compensation.
In Portland, for example, the court set an April 2005 deadline for most claims. But it left the door open for more than 20 years for certain claimants: minors, and those with repressed memories who didn’t recall the abuse in time or didn’t connect it to their injuries, such as addictions or emotional problems, according to the Portland archdiocese.
“Future claims is one of the big issues on the table,” in bankruptcy cases, said Marci Hamilton, the Verkuil chair in public law at Cardozo Law School, who has represented victims in church bankruptcy cases in San Diego, Spokane and Portland. She also represented victims in the Wisconsin Supreme Court case that opened the door for civil fraud lawsuits. “The two things that will be debated are the deadline when people have to come forward, and what happens to those who don’t.”
Non-monetary terms:
While the bankruptcy proceedings rarely result in the release of significant documents – or depositions like the one Milwaukee victims wanted of retired Bishop Richard Sklba – bankruptcy settlements have included non-monetary terms.Across the country, dioceses that declared bankruptcy agreed to make public apologies; identify abusive priests, including those of religious order priests (that’s now being litigated by the priests); build a monument to survivors; and other provisions.
One of the most important issues that comes up very quickly is that the survivors are never solely interested in just compensation and damages.
Even with large financial settlements, many victims are left with emotional damage that money can’t assuage. They rarely get the documents and revelations that for some were the primary reason to sue.
I don’t know of any cases where the victims group was satisfied with the level of information revealed by the diocese in bankruptcy.
In the end, bankruptcy can clear the slate and give an archdiocese some level of certainty about its financial obligations. However, there are risks, including the potential loss of operational control, and the possibility that the negotiated settlement could be greater than it initially expected.
It’s a gamble. The last thing a diocese wants is for outsiders to control their decisions, and they’re careful not to go there.Across the country, dioceses have had to sell or mortgage properties, cut programs, and ask or compel parishes and the faithful to help shoulder the cost of settlements.
They’re mortgaging their futures,and cutting back on ministries that are vital to the growth and future of the dioceses.
Archdiocese assets to be put under microscope - Milwaukee Journal Sentinel - January 8, 2010
When the Archdiocese of Milwaukee announced Tuesday that it would seek bankruptcy protection to deal with its clergy sex abuse claims, Archbishop Jerome Listecki was adamant it would involve only the assets of the archdiocese itself.
Parishes and schools are protected, he said, because they're separately incorporated. Endowments and trusts - holding everything from the $105 million Faith in Our Future campaign funds to money meant for the perpetual care of cemeteries - he insisted, cannot be tapped.
But a look at Catholic Church bankruptcies across the country suggests that every one of those - every account, every asset, every legal contract that controls them - is likely to be scrutinized, litigated and negotiated as lawyers try to hammer out a settlement in which the archdiocese would compensate victims and emerge from bankruptcy intact.
In the end, if cases elsewhere are an indication, the ramifications will be felt for years - by victims, the dioceses and Catholics in the pews.
"This process will be a challenge to the faith and hope of the people involved," said Mark Chopko, a Washington, D.C., attorney and former chief counsel to the U.S. Conference of Bishops, who advised several dioceses during their bankruptcies. "This is a very painful and long process to go through."
Milwaukee, which already has spent nearly $30 million on the sex abuse crisis, including settlements and legal fees, is the eighth U.S. diocese to seek Chapter 11 protection to deal with looming claims. Across the country, bankruptcies have resulted in multimillion dollar settlements in dioceses in Tucson, Ariz.; Portland, Ore.; Spokane, Wash.; Fairbanks, Alaska; Wilmington, Del.; San Diego; and Davenport, Iowa.
Milwaukee filed for bankruptcy after a failed attempt to settle 24 pending claims for $4.6 million. Listecki said the Chapter 11 filing was the most equitable way to fairly compensate current and future victims, and continue the church's essential missions.
The diocese lists about $98 million in assets on its latest financial statement, though it argues almost all of that is in restricted accounts and trusts. Diocesan officials say earlier settlements already exhausted much of its cash and property. Of the remaining assets, it said it has $1.6 million in cash and $5.5 million in property to pay settlements - figures that Charles Zech, director of the Center for the Study of Church Management at Villanova University, called "highly unusual" for an archdiocese the size of Milwaukee.
"It's unusual and dangerous, because they'd be living right on the edge," he said.
The archdiocese cannot tap insurance funds, under a court ruling, though the archdiocese has said it may appeal that decision.
It's impossible to predict how Milwaukee's bankruptcy will shake out, experts say. Each one differs based on a diocese's assets, financial and operational structures, and how its state statutes intersect with federal bankruptcy laws.
But a review of cases nationally suggests some of the issues likely to surface in Milwaukee:
Both Stang and archdiocese attorney Bruce Arnold declined to be interviewed for this article.
Legal experts said bankruptcy courts have respected the autonomy of parishes in Davenport and Wilmington, where they are separately incorporated.
But some trusts have not been ironclad.
Trust structures were contested in Portland, Spokane and Wilmington. In Wilmington, the court ruled that millions of dollars in an investment trust held by the diocese for parishes, schools, cemeteries and other organizations would become part of the estate because they had been commingled with diocesan funds and couldn't be traced to their original sources - a decision that is now affecting pensions for lay employees.
In San Diego, where the bankruptcy filing was dismissed after an outside agreement with victims was reached, creditors had accused the diocese of significantly undervaluing its holdings. News coverage at the time of the bankruptcy's dismissal put the assessed value of church properties there at more than $400 million, saying it included single family homes, vacant residential and commercial lots, multiuse buildings and condominiums.
Lawyers for that diocese said Friday that diocesan ownership of the properties was never established at trial.
But U.S. Bankruptcy Judge Louise DeCarl Adler was troubled enough to rebuke the diocese at the close of the bankruptcy, calling it "disingenuous" and saying it had enough assets to settle its claims without ever going to bankruptcy.
"That's the theory, but everyone is testing that now," Chopko said of the so-called "bar dates" that have traditionally imposed narrow deadlines for compensation.
In Portland, for example, the court set an April 2005 deadline for most claims. But it left the door open for more than 20 years for certain claimants: minors, and those with repressed memories who didn't recall the abuse in time or didn't connect it to their injuries, such as addictions or emotional problems, according to the Portland archdiocese.
"Future claims is one of the big issues on the table," in bankruptcy cases, said Marci Hamilton, the Verkuil chair in public law at Cardozo Law School, who has represented victims in church bankruptcy cases in San Diego, Spokane and Portland. She also represented victims in the Wisconsin Supreme Court case that opened the door for civil fraud lawsuits. "The two things that will be debated are the deadline when people have to come forward, and what happens to those who don't."
Across the country, dioceses that declared bankruptcy agreed to make public apologies; identify abusive priests, including those of religious order priests (that's now being litigated by the priests); build a monument to survivors; and other provisions.
"One of the most important issues that comes up very quickly is that the survivors are never solely interested in just compensation and damages," said Hamilton.
Even with large financial settlements, many victims are left with emotional damage that money can't assuage. They rarely get the documents and revelations that for some were the primary reason to sue.
"I don't know of any cases where the victims group was satisfied with the level of information revealed by the diocese in bankruptcy," said Zech of Villanova.
In the end, bankruptcy can clear the slate and give an archdiocese some level of certainty about its financial obligations. However, there are risks, including the potential loss of operational control, and the possibility that the negotiated settlement could be greater than it initially expected.
"It's a gamble," said Zech. "The last thing a diocese wants is for outsiders to control their decisions, and they're careful not to go there."
Across the country, dioceses have had to sell or mortgage properties, cut programs, and ask or compel parishes and the faithful to help shoulder the cost of settlements.
"They're mortgaging their futures," Chopko said, "and cutting back on ministries that are vital to the growth and future of the dioceses."
Parishes and schools are protected, he said, because they're separately incorporated. Endowments and trusts - holding everything from the $105 million Faith in Our Future campaign funds to money meant for the perpetual care of cemeteries - he insisted, cannot be tapped.
But a look at Catholic Church bankruptcies across the country suggests that every one of those - every account, every asset, every legal contract that controls them - is likely to be scrutinized, litigated and negotiated as lawyers try to hammer out a settlement in which the archdiocese would compensate victims and emerge from bankruptcy intact.
In the end, if cases elsewhere are an indication, the ramifications will be felt for years - by victims, the dioceses and Catholics in the pews.
"This process will be a challenge to the faith and hope of the people involved," said Mark Chopko, a Washington, D.C., attorney and former chief counsel to the U.S. Conference of Bishops, who advised several dioceses during their bankruptcies. "This is a very painful and long process to go through."
Milwaukee, which already has spent nearly $30 million on the sex abuse crisis, including settlements and legal fees, is the eighth U.S. diocese to seek Chapter 11 protection to deal with looming claims. Across the country, bankruptcies have resulted in multimillion dollar settlements in dioceses in Tucson, Ariz.; Portland, Ore.; Spokane, Wash.; Fairbanks, Alaska; Wilmington, Del.; San Diego; and Davenport, Iowa.
Milwaukee filed for bankruptcy after a failed attempt to settle 24 pending claims for $4.6 million. Listecki said the Chapter 11 filing was the most equitable way to fairly compensate current and future victims, and continue the church's essential missions.
The diocese lists about $98 million in assets on its latest financial statement, though it argues almost all of that is in restricted accounts and trusts. Diocesan officials say earlier settlements already exhausted much of its cash and property. Of the remaining assets, it said it has $1.6 million in cash and $5.5 million in property to pay settlements - figures that Charles Zech, director of the Center for the Study of Church Management at Villanova University, called "highly unusual" for an archdiocese the size of Milwaukee.
"It's unusual and dangerous, because they'd be living right on the edge," he said.
The archdiocese cannot tap insurance funds, under a court ruling, though the archdiocese has said it may appeal that decision.
It's impossible to predict how Milwaukee's bankruptcy will shake out, experts say. Each one differs based on a diocese's assets, financial and operational structures, and how its state statutes intersect with federal bankruptcy laws.
But a review of cases nationally suggests some of the issues likely to surface in Milwaukee:
Parishes and trusts:
Creditors in the Milwaukee bankruptcy are almost certain to challenge the archdiocese's assertion that parish assets are off-limits because parishes are separately incorporated. The first salvo came in the line of questioning by victims' attorney James Stang in a hearing Wednesday. Stang questioned John Marek, the archdiocese's chief financial officer, about parish corporation boards, which includes the archbishop and his vicar general.Both Stang and archdiocese attorney Bruce Arnold declined to be interviewed for this article.
Legal experts said bankruptcy courts have respected the autonomy of parishes in Davenport and Wilmington, where they are separately incorporated.
But some trusts have not been ironclad.
Trust structures were contested in Portland, Spokane and Wilmington. In Wilmington, the court ruled that millions of dollars in an investment trust held by the diocese for parishes, schools, cemeteries and other organizations would become part of the estate because they had been commingled with diocesan funds and couldn't be traced to their original sources - a decision that is now affecting pensions for lay employees.
Real estate:
During bankruptcies, creditors' attorneys have challenged the amount of real estate initially identified by dioceses as available to pay settlements, in some cases bringing in forensic specialists to mine tax and property rolls, experts said.In San Diego, where the bankruptcy filing was dismissed after an outside agreement with victims was reached, creditors had accused the diocese of significantly undervaluing its holdings. News coverage at the time of the bankruptcy's dismissal put the assessed value of church properties there at more than $400 million, saying it included single family homes, vacant residential and commercial lots, multiuse buildings and condominiums.
Lawyers for that diocese said Friday that diocesan ownership of the properties was never established at trial.
But U.S. Bankruptcy Judge Louise DeCarl Adler was troubled enough to rebuke the diocese at the close of the bankruptcy, calling it "disingenuous" and saying it had enough assets to settle its claims without ever going to bankruptcy.
Future claims and a final call for sex abuse lawsuits:
One of the advantages of bankruptcy for dioceses fearful of looming court judgments is that it creates a finite pool of money and a deadline for claimants to come forward."That's the theory, but everyone is testing that now," Chopko said of the so-called "bar dates" that have traditionally imposed narrow deadlines for compensation.
In Portland, for example, the court set an April 2005 deadline for most claims. But it left the door open for more than 20 years for certain claimants: minors, and those with repressed memories who didn't recall the abuse in time or didn't connect it to their injuries, such as addictions or emotional problems, according to the Portland archdiocese.
"Future claims is one of the big issues on the table," in bankruptcy cases, said Marci Hamilton, the Verkuil chair in public law at Cardozo Law School, who has represented victims in church bankruptcy cases in San Diego, Spokane and Portland. She also represented victims in the Wisconsin Supreme Court case that opened the door for civil fraud lawsuits. "The two things that will be debated are the deadline when people have to come forward, and what happens to those who don't."
Non-monetary terms:
While the bankruptcy proceedings rarely result in the release of significant documents - or depositions like the one Milwaukee victims wanted of retired Bishop Richard Sklba - bankruptcy settlements have included non-monetary terms.Across the country, dioceses that declared bankruptcy agreed to make public apologies; identify abusive priests, including those of religious order priests (that's now being litigated by the priests); build a monument to survivors; and other provisions.
"One of the most important issues that comes up very quickly is that the survivors are never solely interested in just compensation and damages," said Hamilton.
Even with large financial settlements, many victims are left with emotional damage that money can't assuage. They rarely get the documents and revelations that for some were the primary reason to sue.
"I don't know of any cases where the victims group was satisfied with the level of information revealed by the diocese in bankruptcy," said Zech of Villanova.
In the end, bankruptcy can clear the slate and give an archdiocese some level of certainty about its financial obligations. However, there are risks, including the potential loss of operational control, and the possibility that the negotiated settlement could be greater than it initially expected.
"It's a gamble," said Zech. "The last thing a diocese wants is for outsiders to control their decisions, and they're careful not to go there."
Across the country, dioceses have had to sell or mortgage properties, cut programs, and ask or compel parishes and the faithful to help shoulder the cost of settlements.
"They're mortgaging their futures," Chopko said, "and cutting back on ministries that are vital to the growth and future of the dioceses."
Saturday, January 8, 2011
Expert on bankruptcy filing by the Archdiocese of Milwaukee
The University of Wisconsin-Madison's Jonathan C. Lipson, a professor in the University of Wisconsin Law School and an expert on bankruptcies in the Roman Catholic church, is available to answer questions about the implications of the Archdiocese of Milwaukee's bankruptcy. Lipson is the author of the leading scholarly paper on Catholic church bankruptcies, "When Churches Fail: The Diocesan Debtor Dilemmas" and is frequently interviewed and quoted on these cases.
Lipson says it's likely that the plaintiffs' lawyers' claims about the reason for the bankruptcy — to hide assets and records — are wrong, as bankruptcy usually leads to greater judicial and public scrutiny of a debtor. Nevertheless, he said, "these cases present many difficult choices for bankruptcy courts, because it is hard to balance sensitivity to the religious mission of the churches with the need to assure creditors that they receive payment."
Lipson can be reached at 608-890-3749 or jlipson@wisc.edu.
Lipson says it's likely that the plaintiffs' lawyers' claims about the reason for the bankruptcy — to hide assets and records — are wrong, as bankruptcy usually leads to greater judicial and public scrutiny of a debtor. Nevertheless, he said, "these cases present many difficult choices for bankruptcy courts, because it is hard to balance sensitivity to the religious mission of the churches with the need to assure creditors that they receive payment."
Lipson can be reached at 608-890-3749 or jlipson@wisc.edu.
Friday, January 7, 2011
Archdiocese decision to file for bankruptcy fraught with risks
The strategy is fraught with risks and could backfire, possibly inflicting a catastrophic toll on Catholic parishes, schools and hospitals throughout Wisconsin.
This week the Archdiocese of Milwaukee joined at least seven other U.S. Catholic dioceses in seeking Chapter 11 bankruptcy protection amid fraud lawsuits fueled by sex abuse cover-ups.
The goal is to keep the archdiocese running and also compensate current and future sex abuse claimants. But if the archdiocese and claimants aren’t able to agree on a bankruptcy settlement, a subsequent bankruptcy trial could pull in other Catholic organizations.
“If you push this and litigate, there’s obviously some risk that the court could rule against some of the parishes or some of the other related entities and drag more assets into the bankruptcy estate in a way that would have long-term consequences,” said Stephen Lubben, a professor at Seton Hall Law School in New Jersey and bankruptcy expert. “It’s usually best to try to work out some sort of reasonable settlement.”
Bankruptcy trials can be particularly unfavorable to dioceses because it’s often unclear what property the diocese owns and which assets it has spun off. For example, if a diocese isn’t sufficiently independent from a local Catholic Charities organization, the two could be lumped together in a court judgment.
“This has been a big issue in some of the prior diocese bankruptcies,” Lubben said. “That would obviously have devastating consequences for the charity’s ability to fulfill its mission, because its assets would suddenly be available to pay towards (claimants).”
This week the Archdiocese of Milwaukee joined at least seven other U.S. Catholic dioceses in seeking Chapter 11 bankruptcy protection amid fraud lawsuits fueled by sex abuse cover-ups.
The goal is to keep the archdiocese running and also compensate current and future sex abuse claimants. But if the archdiocese and claimants aren’t able to agree on a bankruptcy settlement, a subsequent bankruptcy trial could pull in other Catholic organizations.
“If you push this and litigate, there’s obviously some risk that the court could rule against some of the parishes or some of the other related entities and drag more assets into the bankruptcy estate in a way that would have long-term consequences,” said Stephen Lubben, a professor at Seton Hall Law School in New Jersey and bankruptcy expert. “It’s usually best to try to work out some sort of reasonable settlement.”
Bankruptcy trials can be particularly unfavorable to dioceses because it’s often unclear what property the diocese owns and which assets it has spun off. For example, if a diocese isn’t sufficiently independent from a local Catholic Charities organization, the two could be lumped together in a court judgment.
“This has been a big issue in some of the prior diocese bankruptcies,” Lubben said. “That would obviously have devastating consequences for the charity’s ability to fulfill its mission, because its assets would suddenly be available to pay towards (claimants).”
Thursday, January 6, 2011
The Bankruptcy Files
Wisconsin firm Whyte Hirschboeck Dudek is serving as general bankruptcy counsel to the archdiocese in its Chapter 11 case. Daryl Diesing, a former chair of the firm's real estate and commercial law team, is advising the archdiocese, along with managing director Bruce Arnold.
Both lawyers are billing $475 per hour for their services and associates from their firm are billing between $165 and $275 per hour. Court filings by Whyte Hirschboeck show that the firm was paid $228,191 by the archdiocese in the year prior to its bankruptcy filing. The firm has also received an advance of $432,352 for the bankruptcy case.
Leverson & Metz, a Milwaukee bankruptcy boutique that opened in 2007, is serving as conflicts counsel to the archdiocese. Name partners Leonard Leverson and Mark Metz have requested a $25,000 advance to cover their expected fees in the bankruptcy case.
Robert Buikema, president of Waukesha, Wis., firm Buelow Vetter Buikema Olson & Vliet, and employee benefits head Matthew Flanary are serving as special union and collective bargaining counsel to the archdiocese. The firm has received a prepetition fee advance of $25,000 and estimates that its total fees will not exceed $50,000.
Partners John Gehringer and Seth Dizard from Milwaukee firm O'Neil Cannon Hollman DeJong & Laing are serving as special real estate counsel to the debtor. The firm states in court filings that it's received a $25,000 advance from its client and estimated its total fees at no more than $100,000.
Court records show that Quarles & Brady real estate cochair David Muth and litigation partner John Rothstein have also been advising the archdiocese. Milwaukee solo practitioner Joseph Fenzel is representing Park Bank, a secured creditor for the archdiocese.
The unsecured creditors of the archdiocese predominantly consist of personal injury plaintiffs represented by Jeff Anderson of Minneapolis firm Jeff Anderson & Associates. Anderson questioned the motives behind the archdiocese's bankruptcy filing in an interview with The Associated Press. (Anderson's firm has carved out a national reputation for representing victims of sexual abuse, providing documents to The New York Times last year showing that the Vatican declined to defrock a priest in Milwaukee who abused nearly 200 deaf boys.)
Late last year, the Catholic Diocese of Wilmington filed for bankruptcy in Delaware the day before a civil trial over sex abuse allegations was supposed to start. The Chapter 11 filing postponed those proceedings indefinitely, putting more than 100 civil suits, many of which were filed by Anderson, on the back burner.
Lawyers for the Wilmington diocese--represented by Delaware firm Young Conaway Stargatt & Taylor--said in bankruptcy court on Tuesday that their client would file an amended reorganization plan next week, which would give sex abuse victim creditors the choice of continuing with litigation or pursuing a settlement. Young Conaway partner Anthony Flynn, Sr., told Bloomberg that the average maximum payment to victims will now exceed $349,000 under the new reorganization plan.
Both lawyers are billing $475 per hour for their services and associates from their firm are billing between $165 and $275 per hour. Court filings by Whyte Hirschboeck show that the firm was paid $228,191 by the archdiocese in the year prior to its bankruptcy filing. The firm has also received an advance of $432,352 for the bankruptcy case.
Leverson & Metz, a Milwaukee bankruptcy boutique that opened in 2007, is serving as conflicts counsel to the archdiocese. Name partners Leonard Leverson and Mark Metz have requested a $25,000 advance to cover their expected fees in the bankruptcy case.
Robert Buikema, president of Waukesha, Wis., firm Buelow Vetter Buikema Olson & Vliet, and employee benefits head Matthew Flanary are serving as special union and collective bargaining counsel to the archdiocese. The firm has received a prepetition fee advance of $25,000 and estimates that its total fees will not exceed $50,000.
Partners John Gehringer and Seth Dizard from Milwaukee firm O'Neil Cannon Hollman DeJong & Laing are serving as special real estate counsel to the debtor. The firm states in court filings that it's received a $25,000 advance from its client and estimated its total fees at no more than $100,000.
Court records show that Quarles & Brady real estate cochair David Muth and litigation partner John Rothstein have also been advising the archdiocese. Milwaukee solo practitioner Joseph Fenzel is representing Park Bank, a secured creditor for the archdiocese.
The unsecured creditors of the archdiocese predominantly consist of personal injury plaintiffs represented by Jeff Anderson of Minneapolis firm Jeff Anderson & Associates. Anderson questioned the motives behind the archdiocese's bankruptcy filing in an interview with The Associated Press. (Anderson's firm has carved out a national reputation for representing victims of sexual abuse, providing documents to The New York Times last year showing that the Vatican declined to defrock a priest in Milwaukee who abused nearly 200 deaf boys.)
Late last year, the Catholic Diocese of Wilmington filed for bankruptcy in Delaware the day before a civil trial over sex abuse allegations was supposed to start. The Chapter 11 filing postponed those proceedings indefinitely, putting more than 100 civil suits, many of which were filed by Anderson, on the back burner.
Lawyers for the Wilmington diocese--represented by Delaware firm Young Conaway Stargatt & Taylor--said in bankruptcy court on Tuesday that their client would file an amended reorganization plan next week, which would give sex abuse victim creditors the choice of continuing with litigation or pursuing a settlement. Young Conaway partner Anthony Flynn, Sr., told Bloomberg that the average maximum payment to victims will now exceed $349,000 under the new reorganization plan.
Wednesday, January 5, 2011
Delaware Diocese to Raise Offer to Pay Victims to End Sexual Abuse Cases
On January 4, 2011, the Catholic Diocese of Wilmington, which oversees churches in Delaware and part of Maryland, will increase its offer to pay victims of sexual abuse by priests under a new plan to exit bankruptcy.
The maximum payout would exceed $349,000, on average, for the 157 adults who claim to have been molested as children, church lawyer Anthony Flynn said in an interview today. The exact range will be disclosed next week when the diocese files a new reorganization plan, church attorney Robert Brady told the judge overseeing its bankruptcy in Wilmington, Delaware. “You can expect the average to be higher, much higher,” Flynn said after the hearing.
Under the current plan, the alleged victims would split between $32.9 million and $54.9 million, with the money coming from cash, insurance and other investments held by the diocese, according to court documents. Catholic entities that aren’t in bankruptcy will help finance the payments, Brady told U.S. Bankruptcy Judge Christopher Sontchi.
Attorneys for abuse victims haven’t seen the offer, said Robert Jacobs, who represents more than 90 people who claim they were abused by diocese priests. It will probably be higher than a settlement proposed as part of court-ordered arbitration, he said. “If not, then somebody has been smoking marijuana,” Jacobs said in an interview after the hearing.
Previous Payments
The diocese’s average payout may exceed those of its bankrupt peers, according to court records. The average payment was $323,000 in the bankruptcy cases of the Roman Catholic dioceses of Davenport, Iowa; Spokane, Washington; Portland, Oregon; and Tucson, Arizona, according to court records filed in Wilmington.
The cash pool may be used to pay abuse victims and other creditors of the diocese under the proposed reorganization plan. Sontchi said today that the lawsuit resembles the claims of individual parishes, which said in court papers that their money was mistakenly put into the diocese investment pool.
In 2009, the Delaware diocese became one of at least six in the U.S. to file for bankruptcy to settle lawsuits from current and former parishioners who say they were sexually molested by priests.
The Archdiocese of Milwaukee, which serves 644,000 Catholics in southeastern Wisconsin, today filed for bankruptcy citing cases alleging sexual abuse by priests. The petition listed as much as $50 million in debts, not including any payments that may need to be made related to personal-injury lawsuits.
The bankruptcy case is In re Catholic Diocese of Wilmington Inc., 09-13560, U.S. Bankruptcy Court, District of Delaware, (Wilmington).
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