-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: April 14, 2007 11:28:00 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Profits Without Honor
Bankruptcy judge orders Catholic diocese to disclose parish accounts
Catholic News Service, 4/13/2007
http://www.catholic.org/national/national_story.php?id=23761
SAN DIEGO, Calif. (CNS) – At a federal bankruptcy hearing April 11,
Judge Louise DeCarl Adler ordered the San Diego Diocese to refile
its financial disclosure statements and to include this time the
balances in the 770 bank accounts held by the 98 parishes of the
diocese.
She also indicated, in response to a request from the diocese, that
she will appoint an outside expert to analyze the accounting system
in the diocese and its parishes.
Adler asked why any organization would have 770 bank accounts.
"I've had billion-dollar corporations in this court without this
kind of accounting," she said.
Lawyers for the diocese explained that each parish is a separate
entity that needs its own bank accounts because it functions
separately in its financial operations.
When dealing with money that is dedicated to one purpose and cannot
be commingled with other funds, a parish may place that money in a
separate account.
In a hearing April 12, Adler approved an interest-free $14 million
loan from the ALSAM Foundation, a Utah-based charity, for the
diocese to complete the nearly-finished construction of Mater Dei
Catholic High School in Chula Vista.
The loan is the last installment on $50 million in funding ALSAM
has provided to help build the $61 million school. ALSAM, founded
by Catholics Aline and Leonard Samuel Skaggs Jr., gives large
donations to many organizations.
"(The plaintiffs) were trying to shut down our high school," said
diocesan attorney Micheal Webb. "We successfully opposed that
effort and the high school will be constructed and operated. ...
The diocese is delighted with the court's decision."
The San Diego Diocese filed for Chapter 11 bankruptcy protection
Feb. 27, the day before the first of 143 clergy sex abuse claims
against the diocese was to go to trial. It is the fifth U.S.
diocese -- and by far the largest, with nearly 1 million Catholics
-- to enter bankruptcy proceedings in the face of numerous sexual
abuse lawsuits.
For the April 11 hearing reporters and spectators overflowed
Adler's courtroom and filled an adjoining one, where the
proceedings were relayed through audio equipment.
Adler had called the hearing with an order two days earlier
demanding that two San Diego priests and three diocesan attorneys
show cause why she should not hold them in contempt of court for
conspiring with parishes to create new bank accounts and transfer
church funds into them without court authorization.
Her order was based on information that Father Bruce Osborn, on
behalf of the newly formed Organization of Parishes, and Father
Michael Gallagher had written letters urging parishes to create new
bank accounts with new tax identification numbers and transfer
parish funds into them.
At the hearing, according to news reports, diocesan attorneys Susan
G. Boswell and Jeffrey Davis explained that in the initial
bankruptcy hearing March 1, when Adler questioned the use of the
single diocesan tax identification number on all the parish bank
accounts and suggested that separate tax identification numbers
would be a good idea, they understood it as a directive to make
such a change.
Adler said she had given no such order.
The third attorney, Victor Vilaplana, represents the Organization
of Parishes. As in other dioceses that have filed for bankruptcy
protection, the organization was formed after the bankruptcy filing
to give the parishes a legal voice protecting their interests in
court.
The priests told Adler they had acted on the advice of attorneys.
After hearing the explanations for their actions, Adler reportedly
criticized the attorneys for their interpretation of her
observations at the first bankruptcy hearing, but she did not find
them or the priests in contempt.
Like the other dioceses that have made Chapter 11 filings, the San
Diego Diocese did not include parish assets in its financial
disclosure because it says those assets belong to the parishes
themselves and not to the diocese.
Adler did not rule on whether parish assets are part of the
diocese's estate for bankruptcy purposes, but she said she needed
to see documentation of parish funds and how they are spent.
"I do not feel I am getting the kind of independent information I
need," she said.
Charles Zech, an economist at Villanova University in Pennsylvania
and director of its Center for the Study of Church Management, told
Catholic News Service that a parish may need more than one bank
account, especially if a school is involved, "but eight separate
accounts (the average reported for parishes in San Diego) strikes
me as excessive."
He said a need to avoid commingling funds could explain some
multiplication of accounts, but having too many accounts "indicates
a lack of good internal financial controls."
However, Ernest W. Armstrong, director of parish finance for the
Denver Archdiocese and president of the national Diocesan Fiscal
Management Conference, said that virtually every parish would have
separate checking and savings accounts and may have a deposit-and-
loan fund with the diocese. When possibilities of distinct accounts
for things like a school, a youth ministry program or a parish
men's club or women's guild are added, he said, it is easy to
understand how a parish could have multiple accounts.
-------------------
San Diego Catholic Diocese Files for Bankruptcy
The San Diego Union-Tribune
http://www.beliefnet.com/story/213/story_21310_1.html
Feb. 28 - After four years of legal wrangling in the clergy-abuse
scandal, attorneys for Bishop Robert Brom filed for Chapter 11
protection last night, making San Diego the largest Roman Catholic
diocese in the nation to declare bankruptcy.
In a brief electronic filing just before midnight, the diocese said
it had assets of more than $100 million and estimated debts of more
than $100 million.
Brom's action halts the first trial, set to start today, of about
150 lawsuits alleging sexual abuse of children by 60 priests in
incidents dating back decades.
Brom said in a statement: "We put money on the table that would
have stretched our financial capability to the limit, but demands
were made which exceeded the financial resources of both the
diocese and our insurance carrier."
The bishop, who said filing for bankruptcy was "not a cop-out,"
added that the decision to avoid court was made "because early
trial judgments in favor of some victims could so deplete diocesan
and insurance resources that there would be nothing left for other
victims."
Brom concluded that the diocese, which has nearly 1 million
members, remains committed to "reach out with pastoral concern and
care to victims of sexual abuse and their families, and to promote
healing and reconciliation with them."
Plaintiffs' attorneys, who filed most of the cases in 2003,
expressed outrage at the filing. The diocese and plaintiffs'
attorneys failed to reach a settlement during two days of
negotiations before a Los Angeles judge. Yesterday, some accused
the diocese of negotiating in bad faith with a callous disregard
for the victims of clergy abuse.
"(The bankruptcy) is nothing more than a cynical attempt to stop
the truth from coming out," said John C. Manly, whose Orange County
firm represents 18 of the San Diego plaintiffs.
"It is ironic that a Catholic bishop would be allowed to seek
bankruptcy protection in an attempt to deny justice to hundreds of
children raped by priests," Manly added.
Terry Giles, an attorney for Nicki Rister, whose case was to have
begun this morning, characterized the diocese's final settlement
offer -- delivered at 10:30 a.m. yesterday -- as "nonexistent."
"While they will talk about numbers, they won't say how the victims
would be paid, when they would be paid, nor what the collateral on
the settlement would be," said Giles, who practices in Texas and
California.
In 32 years of practice, Giles said, he had "never seen such bad
faith in negotiations. This is the only diocese in the country who
destroyed records of their criminal priests in order to protect them.
"They are so afraid that, through a trial, we will finally explain
to the public what was going on, they are going to hide behind this
cowardly act of bankruptcy and try to make it sound like we're
being greedy," Giles said.
"If I were a Catholic in San Diego, I'd be embarrassed."
San Diego follows bankruptcy-protection filings by dioceses in
Tucson, Portland, Ore., Spokane, Wash. -- all in 2004 -- and
Davenport, Iowa, which filed in October.
Tucson has emerged from bankruptcy, and settlement agreements in
Portland and Spokane are awaiting final approval. The process here
could last years.
As part of the bankruptcy filing, Brom said, the diocese will
present to the court "an accurate statement on available diocesan
assets and we will propose a comprehensive plan for compensating
the victims and hearing their cases."
At the same time, the bishop continued, "we will be disclosing the
names of those accused . . . as well as the extent of their abuse,
and we will verify that no known abuser is functioning in ministry."
Neither side would reveal specific offers exchanged in the
negotiations.
But diocese attorney Micheal Webb said the diocese offer was "a
staggering amount of money."
The amount, Webb said, was "the highest offer any diocese has made
in terms of absolute dollars. It was the final offer, it was
everything we were able to muster."
Plaintiffs' attorneys, however, accused Webb of putting a positive
spin on the offer.
Last year, the Archdiocese of Los Angeles settled 45 of more than
500 pending cases for $60 million, or an average of about $1.3
million apiece. In 2004, the Diocese of Orange County settled 90
abuse claims for $100 million -- $1.11 million apiece.
A source close to the San Diego negotiations said yesterday that
the San Diego diocese's offer was "hundreds of thousands of dollars
lower per case than what we saw in Orange County."
Giles said plaintiffs understood that the diocese did not "have
proper insurance, and we were willing to discount the settlement
below the average in California to take that into account. But this
negotiation was a total fraud -- they had bankruptcy in mind from
the start."
Webb countered that "filing for bankruptcy was regrettable." He
said the two sides were far apart in negotiations last week but
that yesterday "the diocese came up (in its offer) a lot."
In a pastoral letter to parishioners released at Masses over the
weekend of Feb. 17, Brom suggested that the diocese may have to
file for bankruptcy protection.
Besides the Nicki Rister case, three other sex-abuse suits had been
scheduled for trial between now and June 1.
Rister, now 53, was the only victim alleged to have been molested
by the Rev. Patrick O'Keeffe. The priest, who lives in Ireland,
coaxed her into having sex when she was 17, according to her lawsuit.
The other three cases set for trial accuse priests of being serial
pedophiles:
Edward Anthony Rodrigue, a defrocked priest who was released from
state prison in 2006 after serving eight years for molesting a
disabled boy, was accused of sexually abusing 22 children.
The late William Kraft, monsignor of St. Therese parish in Del
Cerro for many years, was accused of regularly molesting a boy for
five years, beginning at age 11, and trying to rape him in church
in 1969. The plaintiff is one of several to name Kraft.
The late Rev. Franz Robier was accused of molesting many
youngsters, including four orphaned sisters from Germany in the
1950s, at a San Diego orphanage operated by Catholic Charities.
Sixty other cases have been released from a stalled mediation
process and are awaiting trial dates.
Though the trials have been "stayed," or suspended, for now, a
bankruptcy judge overseeing the Chapter 11 reorganization process
could order the trials to go forward in the coming months.
Responding to the diocese's bankruptcy filing, a spokeswoman for a
victims' advocacy group said Brom's main concern was not money, but
not revealing dark church secrets.
"This is a morally corrupt move by a self-serving bishop who's
afraid to face tough questions about his coddling and concealing
pedophile priests," said Mary Grant of Long Beach, who represents
an advocacy group, Survivors Network of those Abused by Priests.
"We asked Brom to disclose his diocese's wealth, consult with
parishioners and let just this one trial go forward. He ignored all
three requests."
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