By Michael Clancy
The Arizona Republic
September 21, 2004

http://www.azcentral.com/news/articles/0921tucson-main21.html

The Catholic Diocese of Tucson proposed a bankruptcy reorganization plan on Monday that would compensate victims of sexual abuse while resulting in little or no disruption to the operations of its 75 parishes.

But attorneys for 34 sexual-abuse victims dismissed the proposal because it does not count parish assets as part of the financial base of the diocese, blocking plaintiffs from millions of dollars in compensation.

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Monday's Chapter 11 bankruptcy filing had been expected for months as the diocese sought to shield itself from the effects of a Sept. 29 clergy abuse lawsuit in Yuma County Superior Court. The plan, which includes a complex system to compensate victims, must be accepted by the U.S. Bankruptcy Court.

The diocese became the second in the nation to seek bankruptcy protection. The Archdiocese of Portland, Ore., filed for Chapter 11 protection July 6 but has yet to file a reorganization plan.

The Tucson Diocese would fund victim compensation from the sale of $3.2 million of property. The plan also calls for contributions from insurance companies and unidentified parties. What it doesn't include is about $43 million in land and buildings owned by parishes, a sticking point in both the Tucson and Portland cases.

At a news conference, Tucson Bishop Gerald Kicanas said the filing was aimed at fairly compensating victims and enabling the diocese to continue its religious functions.

Attorney Kim Williamson, who represents the majority of the victims in the Yuma case along with Lynne Cadigan, said the plan has never been to put the diocese out of business.

"We don't expect and never asked for the closure of parishes and schools,"

Williamson said. "There are other alternatives. But $3.2 million seems incredibly low, considering the damage done."

Cadigan called the filing a public-relations stunt aimed at making the victims the bad guys. She said there are many more potential claims.

For now, diocesan operations will continue to run normally. The filing relieves the immediate pressure of 22 abuse lawsuits, for which no value was assigned, and other debts, listed at almost $20 million. While it subjects diocesan activities to the supervision of Judge James A. Marlar of U.S. Bankruptcy Court, the diocese likely would operate without interference.

But as debtors begin to have their say, that could change. If Marlar determines parishes should be part of the financial base, for example, the plan would have to be redrafted.

"The time frame is up to the court, even though we filed more than usually is filed," said Susan Boswell, a diocese attorney. "The time frame also will be dictated by victims."

The diocese listed $16.6 million in assets against $20.7 million in liabilities in court documents. The assets do not include nearly $50 million in parish property, and the liabilities do not include the potential effect of the 22 lawsuits.

The biggest portion of the plan details how the diocese would compensate abuse victims. It would establish a fund to pay victims, set a deadline for abuse claims and put all claimants into a settlement pool, eligible for compensation from the fund.

Victims could opt out of the settlement plan and take part instead in a litigation plan in hopes of receiving greater compensation. They also could run the risk of losing their cases.

The filing, which included several hundred pages, came about as the diocese faced the potentially disastrous effects of the Yuma lawsuits. Settlement talks continued until late Friday, as attorneys Cadigan and Williamson insisted the diocese open its books to them. When the diocese refused, the stage was set for Monday's filing.

Kicanas emphasized that Tucson is a "mission diocese," dependent upon outside donations to balance its budget. Much of the filing detailed the diocese's financial challenges, including the presence of an Indian reservation "geographically equivalent to the size of the state of Connecticut," a reference to the Tohono O'odham Reservation.

Parishioners on Monday declared their support for the church and their faith along with sympathy for the victims.

Luis Moreno, 27, said it's time for church members to back the diocese.

"It all boils down to keeping the faith," Moreno said. "This will not make my faith stray."The diocese has paid more than $16 million in settlements to 22 plaintiffs. Kicanas said a $14 million settlement in 2002 was done with the assumption that the 16 plaintiffs involved would be among the last. Instead, he has said, they were among the first.

Kicanas said he hoped the judge would approve the diocese's plan, enabling it to move forward quickly.

"I feel great pain for those who have been harmed," Kicanas said. "I only wish that we could change what has happened and that I could take away some of the suffering you have endured."