Montana Diocese Sued Over $70 Million in Assets to Pay Sex Abuse Victims

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by Alexander Slavsky • ChurchMilitant.com • December 22, 2017

15th U.S. diocese to file bankruptcy over sex abuse lawsuits

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GREAT FALLS, Mont. (ChurchMilitant.com) - The diocese of Great Falls-Billings, Montana may have to liquidate more than $70 million in assets to pay victims of clerical abuse.

On Monday, a complaint was filed in U.S. Bankruptcy Court by a committee representing eight sex abuse victims, disputing the matter of $70 million worth of diocesan assets. In response, the diocese is arguing that the disputed assets should not be made available, as they are held in trust for the diocese's parishes and thus not part of the bankruptcy estate.

The diocese filed for Chapter 11 bankruptcy protection in March, which was part of sex abuse settlements involving more than 400 victims in a lawsuit filed against clergy and staff. Church officials claimed the diocese and its insurers would give to a fund for victims, along with providing additional funds for future claims. A settlement was set up before the bankruptcy filing, creating a $21 million fund for victims in current and future lawsuits, but a negotiation with both parties has not been settled.

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Attorney James Stang, of Los Angeles, California, who represents the committee, said they are hoping to reach a settlement and that the complaint is "part of the process." In the past, Stang has represented other committees in 11 other Catholic church bankruptcies since 2004, which ended with a negotiated resolution.

The suit claims that the diocese believes that it legally owns the 14 parishes named in the complaint as part of its trust, so the properties are not included in the assets available to survivors of sex abuse.

Despite [bankruptcy], speedy resolution is unlikely and the future of the diocese remains clouded.

In a news release Wednesday, the diocesan chancellor, Darren Eultgen, notified the public of the lawsuit and said that the diocese will be challenging the claims over the parishes in question. The diocese "strongly disagrees with this claim and insists the Diocese holds these assets in trust. We also believe that the 14 affected parishes disagree," said Eultgen.

The bishop of Great Falls-Billings, Michael Warfel, called the committee's lawsuit "a most unfortunate and unnecessary distraction," noting that the diocese will "fully contest" the committee's complaint and hire lawyers to challenge the suit's claim to the parishes.

"This is a most unfortunate and unnecessary distraction from the tasks at hand in the bankruptcy, in creating and ultimately distributing a fair and just settlement to the abuse victim[s]," Warfel said. "The diocese will continue in its commitment and efforts to reach a fair resolution of these claims in the bankruptcy."

Timothy Kosnoff, a Seattle lawyer who has represented victims in various Montana dioceses, told Reuters that bankruptcy is the only option left to settle the claims. An obstacle to settlement is the resistance of insurance companies to pay out victims.

"Let there be no illusions," he said. "Despite this sensible step forward, speedy resolution is unlikely and the future of the diocese remains clouded."

The diocese has had abuse prevention programs — screening and training for volunteers, employees, seminarians and priests and a separate board to review claims — in place for more than 20 years, according to Church officials.

After The Boston Globe broke the clergy sex abuse scandal in 2002, a number of dioceses had lawsuits filed against them and had to pay out victims. The U.S. church has paid $4 billion in settlements since 1950, and more than 6,500 clergy accused of abuse and hundreds more have been removed from ministry.

The diocese of Great Falls-Billings is the latest to file for bankruptcy protection in the midst of clergy sex abuse claims. At least 15 other U.S. dioceses have filed for bankruptcy amidst an ongoing sex abuse scandal, including the diocese of New Ulm, Minnesota and the diocese of Stockton, California in the past two years. In 2014, the diocese of Helena, Montana filed for bankruptcy in the wake of 362 claims of sex abuse, which ended with a $21 million fund for those survivors. In November, the archdiocese of New York announced that it paid $40 million to sex abuse victims while also running a $200 million capital campaign to raise funds for various archdiocesan initiatives.

The Montana diocese is the 15th in the United States to file bankruptcy over sex abuse settlements.

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