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.