Bishops Shifting Assets to Dodge Hit From Sex Abuse Claims

by Stephen Wynne  •  •  December 6, 2018   

Effort underway to limit financial fallout over predator priests

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SANTA FE, N.M. ( - Just a week after the archdiocese of Santa Fe announced it will file for bankruptcy to cover the cost of dozens of active sex abuse claims, victims' advocates are warning that Church officials are quietly shifting archdiocesan assets in an attempt to limit financial damages.

In a Nov. 29 statement, Abp. John Wester 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," Abp. 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 is motivated purely by self-interest.

They point out that in just the past few months, the archdiocese of Santa Fe has shelled out hundreds of thousands of dollars in attorneys' fees in an attempt to scuttle various sex abuse claims.

They're also sounding the alarm over the fact that in the past few years, the archdiocese has transferred tens of millions of dollars in real estate to individual parishes, effectively minimizing the quantity of assets in archdiocesan hands.

According to watchdog groups, Santa Fe's subtle asset shifting appears to be part of a developing trend.

No one thinks for a moment that the bishop is relinquishing control of these assets, he just hopes the bankruptcy judge won't consider them assets.

In September, a Pennsylvania newspaper noted that similar transfers were occurring in the Erie diocese. In an article titled "Why is the Catholic Diocese of Erie Transferring Property?" Ed Palattella of the Erie-Times News reported: "Over the past several months, before and after the release of the statewide grand jury report on clergy sexual abuse, the diocese has executed transfers for a number of churches in Erie County."

Palattella noted that each diocesan transfer shifts control of "the real estate of a church or other entity from Erie Catholic Bishop Lawrence Persico, as head of the Catholic Diocese of Erie, to Persico as trustee of a charitable trust, such as the St. Stanislaus Parish Charitable Trust, the subject of a deed recorded on March 20."

Erie Bp. Lawrence Persico

"Why are these transfers happening?" Palattella asked. "The answer, based on interviews, research and examination of the deeds, is that the diocese is reorganizing its assets, partly for liability reasons."

Erie isn't the only Keystone State diocese to move in this direction. According to CBS, documents associated with the Pennsylvania grand jury report "included letters between church officials and attorneys that talked about pushing assets around."

A similar pattern has been observed in dioceses across the country.

Since 2004, clerical sex abuse payouts have pushed almost two dozen U.S. Catholic dioceses into bankruptcy; of these, dioceses in California, Minnesota, Tennessee and Wisconsin, among others, are known to have shifted assets to their parishes or other funds.

In 2010, the archdiocese of Indianapolis initiated a "parish incorporation" program under which each parish was legally designated a separate non-profit corporation, with the archbishop responsible for appointing members to the board and approving the acquisition, sale and transfer of parish property.

Some of the nation's most powerful bishops have pioneered or presided over sweeping asset-shifting efforts. According to a CBS report published on Wednesday:

In one of the most publicized cases, lawyers for abuse victims accused Cardinal Timothy M. Dolan of New York of creating a trust fund to hide money from their clients when he was archbishop of Milwaukee. Dolan wrote to the Vatican in 2007 that transferring more than $50 million in assets would provide "improved protection of these funds from any legal claim and liability."

Dolan had dismissed allegations that he was trying to shield church assets, and an appeals court later ruled that the fund was not protected from creditors.

The Wisconsin case spilled over into the archdiocese of St. Paul and Minneapolis where, according to Bishop Accountability co-founder Terence McKiernan, officials tried to stanch their financial losses by valuing a vast archdiocesan cathedral at just $1.

"The Catholic Church is real estate wealthy beyond our wildest dreams," McKiernan told CBS. "And it's a bit of a conundrum — how much is the diocese worth? How do you value ecclesiastic property?"

Cdl. Timothy Dolan, archbishop of New York

McKiernan described the asset-shifting trend as "a shell-game," saying: "No one thinks for a moment that the bishop is relinquishing control of these assets, he just hopes the bankruptcy judge won't consider them assets."

According to some attorneys, efforts to financially separate dioceses from their parishes are futile. They argue that dioceses will still be culpable for any parish forced to pay damages of whatever kind.

Speaking to CBS, New Mexico attorney Paul Linnenburger warned dioceses can no longer absolve themselves of responsibility for clerical sex abuse.

"The writing is on the wall now," Linnenburger said, "and it's going to come out and once it does, the people of New Mexico are finally going to see and understand just how much damage the church did to them over decades."

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