Bishops Allegedly Using Bankruptcy to Shield Assets

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DETROIT (ChurchMilitant.com) - An attorney who has represented victims of clergy sex abuse victims for nearly 40 years claims that Catholic bishops often hide assets in bankruptcy cases, particularly to minimize payouts to sex abuse victims.

Jeff Anderson, who represented scores of victims in the largest clergy sex abuse bankruptcy settlement in the archdiocese of St. Paul and Minneapolis, has long been warning that bishops will protect Church assets in unscrupulous ways in order to minimize settlement payouts.

"They have the upper hand," Anderson said. "They have the advantage that they don't have to adhere to outside scrutiny like corporations. The court of public opinion would have that bishops wouldn't do those kinds of things, but they do, and they have the upper hand."

When Anderson started representing victims of clergy sex abuse almost 40 years ago, he had a big problem convincing people that priests were capable of such heinous crimes. The laity in the U.S. almost deified their priests and bishops as models of virtue that could do no wrong. However, many subsequent investigations scandals have changed that attitude.

Digging for Financial Disclosure

The bigger challenge now for Anderson is to get the bishops to disclose all their diocese's financial assets. For example, the diocese of Harrisburg last week announced it had filed for federal bankruptcy protection in the midst of mounting clergy sex abuse lawsuits. The filing comes two years after a grand jury investigation implicated the diocese and five others in widespread and systemic clergy sex abuse and cover-up.

Anderson argues that, barring a court order, a full disclosure of the diocese's true assets may be hard to ascertain.

Beyond its constitutional religious protections and its tax exemption, the Harrisburg diocese notes in the bankruptcy filing that its 89 parishes and schools are financially autonomous and not involved in the filing. Hence, the 15-county diocese only lists assets of between $1 million and $10 million.

Anderson faced a similar situation in 2015 with the bankruptcy of the archdiocese of St. Paul and Minneapolis. Attorneys for the chancery argued that all its parishes, schools and approximately 10 cemeteries were separate entities from the archdiocese. Church leaders put the archdiocese's worth at less than $50 million. Anderson and a handful of other lawyers for victims put the number closer to $1.7 billion.

"The games the bishops play in bankruptcy is to file only the diocese in the corporation but that corporation is a small fraction of the actual assets under his control," Anderson said.

Bishops' vs. Victims' 'Best Interests'

"Who presides over these parishes? The bishop," Anderson asserted. "He's the CEO. The bishop owns the schools, the real estate, the investment portfolios, all the parishes. Everything is under his control in the entire diocese," he said. "That's under Church law and their own articles of corporation."

Anderson claims that many dioceses effectively use the bankruptcy code to hide assets in order to under-report their ability to pay, and thus undervalue the claims made by survivors. "There is serious chicanery in use of reorganization of Catholic dioceses," he said. "It's a moral crisis."

However, the dioceses see it much differently. Matt Haverstick, an attorney for the diocese of Harrisburg, said that the bankruptcy filing is "the most responsible thing we can do for victims and survivors." He claims it is not an attempt to force survivors or litigants into settlements of lower values. "This is an attempt to try to do right by everybody, not short-shrift one group over another," Haverstick stated during the press conference in which the Harrisburg diocese announced its filing.

Some dioceses have succeeded in shielding vast assets from disclosure in bankruptcy cases; others have not done as well.

In 2007, for instance, a bankruptcy judge threatened to hold the diocese of San Diego in contempt of court for questionable practices that included grossly misrepresenting assets. The question of whether assets of individual parishes and social service programs were a part of the diocese's total assets was a hotly contested issue throughout that case.

In the end, the diocese of San Diego agreed to pay $198 million to settle 144 claims of clergy sex abuse. The diocese had initially offered around $95 million to settle those claims as part of its bankruptcy reorganization plan.

Courts 'Less Deferential' to Prelates

The San Diego case illustrates an increasingly aggressive attitude in the courts for clergy sex abuse cases, said Anderson. In the 18 years since the first massive clergy sex abuse scandal broke out in the archdiocese of Boston, the courts and the public have increasingly grown less deferential of priests and bishops, he noted.

"They no longer get the deference they used to get," said Anderson. "It used to be that if the bishop said, 'that's the way it is', that's the way the people would accept it. But their word is no longer being accepted."

The credibility of bishops has certainly taken a hit, especially since the breaking news of the "summer of shame," taking most Catholics by surprise. This was when the McCarrick scandal surfaced and the findings of the Pennsylvania Grand Jury was made public.

As Church Militant reported in December, Abp. John Wester of Santa Fe vowed that abuse victims are his top priority, and suggested that in the face of dwindling archdiocesan resources, a bankruptcy declaration is the best means of guaranteeing compensation.

"I wish to make clear that our first and foremost concern is the victims of sexual abuse and our desire to do all we can to provide for their just compensation," Wester said. "We believe that Chapter 11 is the most equitable way for the archdiocese to address its responsibility to the victim-survivors." But victims' representatives counter that New Mexico's largest diocese, like other dioceses, is motivated by self-interest.

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