by Kevin Taylor & r & When doing a Chapter 11 bankruptcy reorganization, file locally and settle globally. This seems to be the strategy in play by the Catholic Church.
Portland, Tucson and Spokane are vastly different in many ways, but in each city, the Catholic Church broke legal ground last year by filing Chapter 11 bankruptcies in federal court as a way to settle claims of child sexual abuse by clergy.
Strikingly, each diocese sought Chapter 11 protections just as a sex-abuse case was on the verge of trial. The closer a bishop gets to the witness stand, the more likely a bankruptcy filing becomes, Minnesota attorney Jeffrey Anderson told an Arizona newspaper weeks before the Portland diocese filed for Chapter 11 -- successfully predicting the imminent actions of the Portland church leadership.
John Vlazny, the Archbishop of Portland, filed for bankruptcy on July 6, 2004 -- the same morning the archdiocese was to defend itself against allegations that the Rev. Maurice Grammond molested more than 50 boys in the 1980s.
Tucson Bishop Gerald Kicanas filed bankruptcy on Sept. 20, 2004, just as the diocese was in court to defend Rev. Juan Guillen -- already in jail on a child molestation conviction -- from charges that he sexually abused two teenage brothers.
Spokane Bishop William Skylstad herded this diocese into Chapter 11 on Dec. 6, 2004, sidestepping a scheduled trial in which three brothers allege they were molested by Rev. Patrick O'Donnell -- who has admitted sexually abusing children in Spokane and who once shared a house with Skylstad.
"We would love to get the bishop on the witness stand," says Seattle attorney Tim Kosnoff, who represents many of the 80-plus victims of sexual abuse suing the Spokane diocese.
Churches filing bankruptcy is just a way of avoiding lawsuits, critics contend. Nonsense, counter the bishops and their attorneys. Faced with a growing number of claims and a limited pot of money, the only fair thing is to bring everybody together and divvy up what money there is into what is called a global settlement.
But Chapter 11 bankruptcy reduces people seeking redress for being raped or molested as children into just another group of creditors standing in line for a reduced payout on what is owed.
Father Al and the CleanUp Bishop & r & So with all this common baggage, how did Tucson skate through bankruptcy inside of a year while Spokane and Portland appear to have made so little progress?
"In the end, it's all about numbers," says Marci Hamilton, a keen observer of the Catholic Church sex abuse scandal. Hamilton has testified on First Amendment issues relating to church and state all around the nation, including Spokane. She is the public law chair at Cardozo School of Law at Yeshiva University in New York City.
And when it came to numbers, attorneys in Tucson say, the math was just simpler there. The Spokane diocese is facing 82 sex-abuse claims and lists as little as $6 million in liquid assets. Portland is facing more than 100 claims and the diocese says it has already spent $53 million to settle previous lawsuits.
"In Tucson there were a limited number of valid claims -- which is a horrible way of saying the [Arizona] statute of limitations works," says Clifford Altfeld, a Tucson bankruptcy attorney representing victims of sexual abuse. "The diocese here did a phenomenal job of raising money -- they really shook down their insurance companies, and they sold some land when the market was hot. So if you have 50 claims and $15 million, the math is easy."
The Tucson bankruptcy resulted in a $22.2 million settlement fund to cover 56 people who had sex-abuse claims against the church. Payouts began in October, with victims receiving anywhere from "compromise" checks of $15,000 on up to settlements of $600,000.
There were other factors at play in Tucson.
First, Altfeld says, "We had Father Al."
Second, "They had what I call the cleanup bishop," says Los Angeles-based bankruptcy attorney Jim Stang, who is representing plaintiffs against the Spokane Diocese.
Rev. Al Schifano -- a savvy accountant and former labor negotiator -- and Bishop Kicanas were church officials committed to ending the scandal and getting money to victims of sex abuse.
"Father Al would sit with us and do Power Points and spreadsheets," Altfeld says. "He is a knowledgeable accountant who has the confidence of the bishop. He would say, 'We have this amount of money and this amount of claimants -- let's start running scenarios.' And once people in the room start running scenarios, the goal is to get there."
Schifano has the kind of "street cred" few priests can claim. He spent 35 years doing mergers, acquisitions and negotiations for Lockheed and for Sundt Corp., a Southwest contractor. It was only after his wife died that Schifano, now 67, decided to become a priest. He has served for just more than four years.
"It's weird to sit with a priest who shows you pictures of his grandkids," Altfeld says.
"I see this through the eyes of a parent and a grandparent," Schifano says of the sex abuse scandal, adding he was nauseated when he reviewed the reports of sex abuse by Tucson clergy. "It was the most terrible week of my life. I was devastated to read what happened to these children."
He was determined, he says, to make the most of the available money and get it to the people who needed it.
The bankruptcy in Tucson also proceeded smoothly because Kicanas had recently replaced longtime Bishop Manuel Moreno, Stang says.
Moreno had no credibility left after it became clear he had been aware of priests preying upon children in the diocese but did little about it. The most notorious was Monsignor Robert Trupia, who was so openly predatory that other Tucson priests called him "Chicken Hawk." They were told to mind their own business when they reported concerns to superiors.
Into this atmosphere, Kicanas became a fresh voice calling for closure.
"I never seen a human being more on-task," Tucson attorney Altfeld says of Kicanas, who formerly was head of public affairs for the U.S. Conference of Catholic Bishops. "No matter what he is talking about, he always starts by saying these are valid claims. He always speaks of the horrors of abuse. He always says it will never happen again. He met with people who trashed the church for the last 10 years. He is brilliant and focused when it comes to public relations."
Attorney Stang says Kicanas functioned much like Archbishop Sean O'Malley, who replaced the embattled and tainted Cardinal Bernard Law in Boston and broke the logjam on settlements there.
Two Hands Clapping & r & "If Moreno was still in Tucson, that bankruptcy would not have gone so smoothly," Stang says. "That case was pushed right along. Some say they pushed too fast."
One of those is Kosnoff, an attorney for plaintiffs in Spokane. Tucson, he says, "was the sound of two hands clapping." Kosnoff contends attorneys there got too chummy with each other and bought into the PR machine.
"While they may have served their particular clients well, they did not serve the plaintiffs very well," Kosnoff says. The Chapter 11 reorganization there -- unlike those in Spokane and Portland -- did not even raise the question of whether the diocese owns all its associated parishes, churches, land and schools and thus is worth far more than church officials say.
In Portland, for instance, the official value could jump from $50 million to $500 million if U.S. Bankruptcy Judge Elizabeth Perris rules -- as U.S. Bankruptcy Judge Patricia Williams did in Spokane -- that the diocese owns all its associated properties. Arguments were heard last week, with church officials saying that internal church law states a diocese merely holds parishes in trust and cannot use them as liquid assets.
"There is no First Amendment defense for these claims," says Hamilton, the New York law professor. "Property ownership is property ownership in this society."
Still, Williams' ruling to that effect in Spokane has been appealed both by the diocese and by the local association of parishes. In Portland, Perris expects to rule on parish ownership by the end of the month.
Slow Going in Spokane & r & Unless the Vatican suddenly promotes Skylstad -- current president of the U.S. Conference of Catholic Bishops -- to a position in Rome, as happened with Law, it seems unlikely Spokane will have the benefit of a cleanup bishop.
Nor are we likely to see Father Al.
Asked if he could become a traveling "spreadsheet wizard" moving from troubled diocese to troubled diocese, Schifano laughed and demurred. It doesn't hurt to ask, but he is busy right now helping Tucson's 74 parishes organize as separate 501(c)(3) nonprofit corporations in the wake of the bankruptcy. And, he says bluntly, the numbers don't look so good here.
"I'm guessing the underlying issue [in Spokane] is dollars. It's hard to put scenarios together when there is nothing in the pot," Schifano says.
Unlike Tucson, there will be nothing in the pot for Spokane's victims of clergy sexual abuse unless the diocese is held to Judge Williams' ruling on parish ownership. And unlike Kicanas or Schifano in Tucson, there appears to be no force in the diocese pushing bankruptcy along.
Williams, in fact, scolded the diocese for stalling tactics during a Nov. 18 hearing in which the church was to disclose all its assets and liabilities. After she reviewed the document, Williams said the disclosure statement "is amazing. It didn't have any numbers in it. It didn't have any numbers for assets. It didn't have any numbers for liabilities. [It] didn't even reveal how many insurance policies are at issue."
The document was so inadequate she said, that no creditor could develop any estimate of payments.
Spokane attorney Shaun Cross, representing the diocese in the bankruptcy, told Williams he was doing the best he could and that he modeled Spokane's plan on Tucson's.
"Then this plan could have been filed the day this petition was filed," Williams said. "We have wasted 11 months."
Cross said this week that the diocese will file an amended disclosure statement by Dec. 30 that will contain "a ton more information she is interested in." He also said a "bar date" -- by which time all potential claimants must file for a place in the global settlement -- will be up in March. Once that number is more certain, reluctant insurance companies will likely be more amenable to contribute to a settlement.
He says the diocese didn't want to list the values of parish properties "without the permission of the association of parishes."
But Kosnoff says the plaintiffs "are the one-million-pound gorilla in the room. The diocese has to deal with us -- they can't get out of this without putting up what the liquid value of the diocese is."
There are two questions in the Chapter 11 procedures, Kosnoff says: "'What is the amount of claims?' and 'What is the amount of assets?' Here we are a year later and they have not been answered. This is a deliberate strategy of stonewalling."
"That is just not true," diocese attorney Cross responds. "This is an exceedingly complicated case. We are not just dealing with complex law, but also politics. There are 100,000 Catholics in the region, and even the bishop can't say we will sell this or that."
Again, unlike Tucson, where parties largely worked together, tensions are high in Spokane.
For example, as L.A.-based bankruptcy attorney Stang points out, Skylstad and attorneys for the plaintiffs had agreed to a $300,000 sale of a church-owned house in St. Anne's Parish. By agreement, none of the money would go to attorneys, with Stang remarking that "It was $300,000 that could have started what I call the charity thermometer." Instead, Catholic Charities filed an objection to the sale, which is now stalled.
Stang calls this an example of a lack of leadership in Spokane.
Time is Money & r & Bankruptcy, says Hamilton, the New York legal scholar, "is not a great thing for victims at all. Chapter 11 is not about being penniless; it is all about protecting your assets. The dioceses are doing this in hopes of a one-time solution to an enormous problem and in a way that will bring down the value per claim."
The other side also has numbers to crunch, she says, citing the fallout of being sexually abused as a child. "An actuarial expert could come in and say there is drug addiction, there is loss of a spouse, three attempts at suicide. A settlement of $2.1 million per victim is probably in the ballpark," Hamilton says. This is in a different universe than the Tucson settlements.
Whether a church really doesn't have money -- or is only saying it really doesn't have money -- ultimately becomes irrelevant, Tucson attorney Altfeld contends.
"The ultimate test is 10 years from now, take the money our guys got now versus the money your guys got after time delay," Altfeld says. "One dollar today is as good as $1.09 a year from now because of the time value. A settlement of $100,000 today is worth as much as $300,000 four years from now because it's real money, it's not taxed and it allows people to put the psychology of being a victim behind them."
Hamilton agrees that settlements have a different value for people who were molested as children. "It's not that victims just want the money," she says. "They really want someone in the larger culture to say that what happened to them was not their fault."
This should be doable, but Hamilton says she is troubled when dioceses across the nation continue to keep secrets and continue to fight the parish ownership question (thus keeping settlement pots small). "They are using every legal trick in the book," Hamilton says. "They are insisting on not taking responsibility."
Hamilton says she was encouraged a couple of years ago when the U.S. Conference of Catholic Bishops vowed a new era of openness and accountability. Instead, she was na & iuml;ve, she writes in a recent legal affairs column, that the bishops merely have taken to referring to sex abuse as an episode from the past.
Last month, just days before a federal bankruptcy judge slammed his diocese for stalling, Hamilton writes, "Bishop William Skylstad told his fellow bishops that 'There is no question, brothers, that these past few years have taken a great toll on us.'"
She was critical that, under Skylstad, the bishops often met in closed sessions this year, and "Adding insult to injury, he not only relegated the church's abuse to the past but suggested the Church itself was somehow a helpless victim of its own crimes."
Bishops across the country have failed, she says, to make public any record of abusive priests. And the church continues to fight claims made by victims of sex abuse. The latest scandal is erupting in Philadelphia, where church leaders say it is "fundamentally unfair" if the statute of limitations is changed to allow old allegations of molestation into the courts.
Philadelphia prosecutors say it is more unfair that two cardinals hid evidence of the sex crimes for decades.
This leads, Hamilton says, to speculation about a different form of bankruptcy: We expect this sort of cat fighting -- denials, foot-dragging, denigrating victims -- from asbestos manufacturers or drug manufacturers.
"At first, it is so hard to believe a church would think in those terms," Hamilton says. "This is not a pretty picture. If they are still being irresponsible for the harm they have caused, in the end they are being morally bankrupt."
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