Catholic Church Used Bankruptcy for Sexual-Assault Cases. Now Others Are Following Suit. (#GotBitcoin?)
USA Gymnastics, Boy Scouts of America explore chapter 11 to handle victims’ claims.
The Archdiocese of Portland was the first to do it. Three months later the Roman Catholic Diocese in Tucson, Ariz., followed suit and three months after that the diocese in Spokane, Wash., did it, too. Catholic Church Used Bankruptcy for Sexual-Assault Cases. Now Others Are Following Suit.
They all filed for bankruptcy and since then more than 15 other Catholic dioceses and religious orders have filed for bankruptcy to seek protection from lawsuits by sexual-assault victims, resulting in about 4,000 claims seeking compensation for past wrongdoing. This year, three more Catholic dioceses announced intentions to file.
Now the legal strategy is being adopted beyond religious groups. This month, USA Gymnastics filed for bankruptcy protection and the Boy Scouts of America hired bankruptcy lawyers to explore the option. Both groups are grappling with the legal and financial fallout of sexual-abuse claims.
“There is an expectation in the restructuring community that we will see more of these types of chapter 11 filings,” said Adam Paul, a lawyer with Kirkland & Ellis LLP who specializes in so-called mass tort bankruptcies.
Pioneered by the Catholic Church, the legal strategy uses the law that protects companies from creditors to help preserve its mission and shield assets from claims made by victims of sexual abuse. Filing for chapter 11 freezes lawsuits and provides breathing room to work out a plan to compensate abuse victims. Victims get a collective voice and a guaranteed seat at the negotiating table, and at the end of a bankruptcy a diocese gets a fresh start, free from liabilities tied to past abuse. A federal judge oversees the proceeding and must sign off on the final payment plan.
But the process is long. A typical commercial chapter 11 cases wraps up after about nine months, according to a 2015 study of public companies; diocesan cases on average take more than two years to resolve. Victims have also raised concerns that the process allows dioceses to shield too many assets from their claims.
Catholic dioceses and related entities have paid out nearly $4 billion in costs linked to about 19,000 sexual-abuse allegations, including bankruptcy settlements, according to reports issued by the U.S. Conference of Catholic Bishops.
More such filings are expected after a grand jury in Pennsylvania released this summer found hundreds of Catholic priests sexually abused thousands of children for decades and that church leaders covered it up. Attorneys general in New York, New Jersey, Florida and at least 10 other states have opened investigations into whether Catholic Church officials covered up allegations of abuse.
On Dec. 19, Illinois’s attorney general released a report criticizing the state’s Catholic dioceses for allegedly withholding the names of 500 priests accused of sexual abuse.
“We have to bring light; we have to bring heat,” said Jeff Anderson, a lawyer who represents many of the victims who have filed abuse claims against the Catholic Church. “The only way we know how to do that is to expose them using the legal system.”
The Boys Scouts are facing similar allegations and could be stuck with more liabilities as some states, including New York and Pennsylvania, consider lifting or lengthening the statute of limitations for abuse victims. The national organization has been named in more than 200 lawsuits that alleged child abuse, including one in Idaho that is set for a jury trial in May.
In its most recent annual report, Boys Scouts officials said they were “aware of threatened and expanding litigation.”
In a statement, Boy Scouts of America Chief Executive Michael Surbaugh said local and national programming for the Boy Scouts would continue uninterrupted no matter which path forward it chooses. He also said that at no time did the Boy Scouts knowingly allow a sexual predator to work with youth.
Leander James, a lawyer who represents victims with claims against both Catholic dioceses and the Boy Scouts, likens the Boy Scouts of America’s national organization to a very large archdiocese and local Boy Scouts councils to parishes.
“It’s a very similar structure,” he said. ”You have the larger institution with a great deal of control over the local institutions.”
Much like a Catholic diocese and its parishes, the Boy Scouts are divided into about 270 individual local councils, each of which is separately incorporated. The national organization has about $1.5 billion assets, but the local councils, and their associated trust funds have billions of dollars more. A review of tax records indicates that the combined wealth of the Boy Scouts totals more than $5 billion, according to a Wall Street Journal analysis.
It all goes back to the Archdiocese of Portland, which sought chapter 11 protection in 2004 on the eve of two abuse-related trials. One plaintiff was seeking more than $130 million in compensation and punitive damages and the other was seeking $25 million; it was more than the archdiocese said it could afford to pay.
Absent the appropriate corporate structures and legal walls under civil law, U.S. Bankruptcy Judge Elizabeth Perris ruled that victims did have a right to pursue parish assets. After more than two-and-a-half years in bankruptcy, 170 victims settled with the Archdiocese of Portland and its parishes for about $75 million.
Since then dioceses around the country have created structures to keep their assets in separate locations. Earlier this year, the Archdiocese of Detroit transferred hundreds of parishes to a separate corporation, according to incorporating documents filed by the archdiocese’s Director of Finance. In Pennsylvania, the Diocese of Erie has also begun transferring some of its assets to charitable trusts, according to the Erie County Recorder of Deeds.
Susan Boswell has represented Catholic dioceses and religious orders in bankruptcy and has worked to separately incorporate their parishes. “The bankruptcies, particularly the first ones that field such as Portland and Spokane, brought to the forefront the property issue,” she says.
According to Ms. Boswell, even dioceses that had no financial difficulties as a result of sexual-abuse claims have begun to separate parishes under civil law, even though under canon law parishes have always been separate.
Twenty-two Catholic dioceses and religious orders have filed or announced an intention to file for chapter 11 as a result of mounting sexual abuse claims. Location And Date Filed:
- Archdiocese of Portland [Oregon] (filed 07/06/04)
- Diocese of Tucson Arizona
- Diocese of Spokane Washington
- Diocese of Davenport Iowa
- Diocese of San Diego California
- Diocese of Fairbanks Alaska
- Oregon Province of the Jesuits Oregon
- Diocese of Wilmington Delaware
- Archdiocese of Milwaukee Wisconsin
- Congregation of the Christian Brothers New York
- Diocese of Gallup New Mexico
- Diocese of Stockton California
- Diocese of Helena Montana
- Archdiocese of St. Paul and Minneapolis Minnesota
- Diocese of Duluth Minnesota
- Diocese of New Ulm Minnesota
- Diocese of Great Falls-Billings Montana
- Crosier Fathers and Brothers Arizona
- Archdiocese of Santa Fe New Mexico
- Diocese of St. Cloud [Minnesota] (announced its intention to file 02/28/18)
- Archdiocese of Agana [Guam] (announced its intention to file 11/07/18)
- Diocese of Winona [Minnesota] (announced its intention to file 11/17/18)
Northeast Jesuit Order Releases Names of Priests Accused of Sex Abuse
List Includes Credible Allegations Dating Back To 1950
Leaders of the Jesuits in New York and New England released a list Tuesday of 50 clergy who had credible allegations of abuse of a minor or vulnerable adult made against them since 1950, saying they hoped publicizing these names would contribute toward healing pain and anger.
Many clergy on the list have died, and many alleged incidents were decades old. Some clergy worked at elite Catholic schools and hospitals.
“At the heart of this crisis is the painful, sinful and illegal harm done to children by those whom they should have been able to trust,” said Father John J. Cecero of USA Northeast Province, in the public statement. “We did not know any best practices to handle these violations many decades ago and regrettably made mistakes along the way.”
His statement credits investigative reporting in Boston in 2002 for bringing the problem to light. The release says the Jesuit group has since instituted practices to prevent such abuse and knows of no new abuse cases in its area in the past 15 years, though it lists an admitted child pornography incident in 2008. The Northeast Province includes the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York and northern New Jersey.
Mr. Cecero said the list includes any allegations where the offense was admitted by a Jesuit, or where it was established as credible after an investigation. He said any living Jesuit with a credible allegation of abuse was removed from ministry and assigned to a community that doesn’t serve minors.
Priest Cited in Pennsylvania Abuse Report Sentenced to Up to 14 Years in Prison
Grand jury found evidence of abuse by 300 priests, but only two could be prosecuted.
A Pennsylvania judge sentenced a Catholic priest on Friday to between 2½ and 14 years in prison, after the cleric had pleaded guilty to sexually abusing two boys.
David Lee Poulson, 65 years old, was one of two priests to face criminal charges following a scathing statewide grand-jury report released in August. The report found that church officials covered up abuse by 300 priests of more than 1,000 victims in six dioceses over seven decades.
“Poulson weaponized his faith and used the tools of his priesthood to abuse children,” Pennsylvania Attorney General Josh Shapiro said Friday at a news conference.
The Pennsylvania report has helped spur similar investigations in 14 other states, as well as a nationwide Justice Department probe of sexual abuse by clergymen. Mr. Shapiro said he believed Friday’s sentencing would send a broader message. “There is a reckoning going on in this country,” he said.
Prosecutors said Rev. Poulson assaulted one boy more than 20 times over a period of eight years ending in 2010, including at a hunting cabin and in a church rectory. They said the boy, who was 8 when the abuse began, was then made to confess the abuse to Rev. Poulson. Prosecutors also said the priest attempted to abuse a second boy starting in 2003, when the child was 15.
Mr. Shapiro said church officials knew in 2010 that Rev. Poulson was inappropriately attracted to boys but that he wasn’t suspended from his ministry until 2018.
Rev. Poulson, formerly of the Catholic Diocese of Erie, had pleaded guilty in October to corruption of minors and child endangerment. An attorney for Rev. Poulson couldn’t be reached to comment.
A second priest from western Pennsylvania pleaded guilty to abusing a 10-year-old boy in the early 1990s and in December was sentenced to between 11½ and 5 years in prison.
The other allegations of abuse in the grand-jury report were too old to prosecute, Mr. Shapiro said. On Friday, he reiterated his call for Pennsylvania legislators to pass several bills, including one that would eliminate the statute of limitations for child sexual abuse in the state.
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