Tucson Diocese's Filing Seen As Model Similar Bankruptcy Move Eyed in S.D., by Sandi Dolbee, Union-Tribune [San Diego CA], February 25, 2007

Tucson Diocese's Filing Seen As Model
Similar Bankruptcy Move Eyed in S.D.

By Sandi Dolbee
Union-Tribune [San Diego CA]
February 25, 2007

http://www.signonsandiego.com/news/metro/20070225-9999-1m25bankrupt.html

The Catholic Diocese of Tucson was in trouble. It had already paid out $14 million to settle lawsuits involving sexually abusive priests. Then came another wave that could cost millions more in damages.

"The diocese's resources were so depleted that had we tried to make another settlement, there probably would have been nothing left" for other victims, said Tucson Bishop Gerald Kicanas.

So three years ago, the Tucson diocese became the second of four in the nation to seek Chapter 11 reorganization in bankruptcy court, and last weekend the Roman Catholic Diocese of San Diego indicated it might become the fifth.

Last weekend, San Diego Roman Catholic Bishop Robert Brom told parishioners in a letter that if acceptable settlements can't be released in the roughly 150 pending lawsuits, the diocese might be forced to seek Chapter 11 reorganization in bankruptcy court.

ROMAN CATHOLIC DIOCESES BY THE NUMBERS

97,665 Catholics in the Diocese of Spokane, Washington

105,000 Catholics in the Diocese of Davenport, Iowa

350,000 Catholics in the Diocese of Tucson

396,523 Catholics in the Archdiocese of Portland, Oregon

980,777 Catholics in the Diocese of San Diego

SOURCE: Dioceses' statistics

The San Diego diocese was in settlement talks with the plaintiffs' lawyers on Thursday, and those talks are expected to resume tomorrow.

Like other claims across the country, the allegations of sexual abuse involving minors date back for decades. While the San Diego diocese did not mention Tucson by name, it's clear that officials here are aware of that case. San Diego has retained Susan Boswell, who was the lead bankruptcy attorney for the Tucson diocese.

Tucson's plan: Consolidate litigation stemming from the unraveling national priest abuse scandal and protect as many assets as possible so the church could continue its ministry.

"I think some people try to paint Chapter 11 as a way of trying to escape responsibility," Kicanas said. He disagrees. "I think it can be a process where all the victims are fairly and justly compensated and their case heard."

Of the four bankruptcy filings so far, the Tucson diocese is seen as a model of success by many observers.

For one thing, Tucson settled its bankruptcy reorganization plan within a year, while Portland and Spokane, which also filed for bankruptcy protection in 2004, haven't finished their cases. The Diocese of Davenport, Iowa, filed in October.

Second, both sides praised the process when it was over.

"Entering Chapter 11, while frightening because it was new territory for a church, was in the end, I think, a real blessing because it provided a forum by which all those who had been harmed could be fairly and justly compensated," Kicanas said.

Tom Groom, one of the victims involved in the settlement, concurs. "We basically sat down and worked with them and they worked with us and we came to a very agreeable settlement," he said. "We had our tough times, but I think we were able to work it out to the benefit of both."

The bankruptcy judge in the Tucson case worked out a $22 million settlement plan, which included $5 million to be set aside for future claimants. Payouts to victims ranged from $100,000 to $600,000.

"The one in Tucson worked very well," said Fred Naffziger, a business law professor at Indiana University South Bend who has studied the four bankruptcy filings. "For a Chapter 11 bankruptcy to be done in a year is quite superb and it shows that all the parties – the creditors, the bishop, everybody – were interested in a compromise."

In a glowing report in the Norton Bankruptcy Law Adviser, the Tucson bankruptcy judge, along with some of the attorneys, called the process "remarkable."

Naffziger gives mixed reviews to the Portland and Spokane cases. "They were extremely expensive for the church," he said. "I don't know what the ultimate cost was, but they estimate in Portland that the related attorney fees ran between $14 (million) to $16 million. That's a tremendous amount of wasted money that could have gone for much greater needs."

In the Davenport case, Naffziger said it's too soon to tell. However, the Rev. Tom Hitch, an Iowa priest who says his younger brother was molested by a priest in the 1960s, criticizes Davenport's filing as a hiding technique.

"It was the diocese's way of preventing any type of trials in which more information would come out so the public will never know what the diocese did," said Hitch.

Bill Groom, spokesman for the Portland chapter of the Survivors Network of those Abused by Priests, said the three-year-old bankruptcy case there has been bogged down in delays and a court-issued gag order.

"It's been a win-win situation for the church," Groom said. "There's just all kinds of things that are taking place to prolong and drag things out."

Portland archdiocese officials declined comment, citing the gag order. The proposed plan there calls for up to $75 million to be paid out to accusers; parishes and schools would become separate nonprofits and the archdiocese would transfer property to them, according to newspaper reports.

In Spokane, which is hoping to finalize a $48 million plan in April, attorney Shaun Cross argues the process has been arduous but successful.

"I believe that our ability to raise as much money as we have was enhanced by the Chapter 11 filing," said Cross, one of the diocese's attorneys. "Some people would disagree with that but I firmly believe that because of the promise of the finality, we were able to obtain better settlements from the diocese's insurance carriers because they also want finality."

Neither Brom nor other San Diego church officials here will comment beyond what was in the pastoral letter, which also apologized to victims, commiserated with faithful priests and asked Catholics to pray for the abused and the abusers.

Kicanas offered this advice, should San Diego decide to file for bankruptcy reorganization:

"Be as public as possible about the process of coming to this decision so that people can offer their perspective, their thoughts. I think one of the fears is that people see this as a cop-out on the diocese's part."

As for the victims, Kicanas urges continued contact. "Staying in dialogue with the victims is extremely important. Most victims are not trying to destroy the church. They are not trying to rob people of the work of the church. They are people who have been harmed and hurt."