By Sandi Dolbee
Union-Tribune
March 9, 2007
http://www.signonsandiego.com/news/metro/20070309-9999-1m9mater.html
Chula Vista – The San Diego Catholic diocese's petition for bankruptcy is only a week old – and already the wrangling has begun.
Among the questions: whether money to build the almost-completed Mater Dei Catholic High School in Chula Vista was a loan or a gift.
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"It was a loan," said Micheal Webb, the diocese's in-house counsel. "It definitely was a loan."
Webb said the ALSAM Foundation, a charitable organization, gave the diocese a $50 million, interest-free loan to help build the school. In return, the diocese agreed to repay that amount within four years of completion, with a possible one-year extension, he said.
A 2005 year-end report from the ALSAM Foundation also describes it as an interest-free loan. So does a former foundation officer, who said in an interview that it was a loan from the beginning.
But attorneys representing people alleging they were sexually abused by priests when they were minors are not convinced.
"We think we can prove this interest-free loan on Mater Dei was originally a gift," said Terry Giles, one of the attorneys involved in the approximately 150 civil lawsuits that have been put on hold by the bankruptcy filing.
"If you know you are going into bankruptcy and you make a big gift look like a loan, that puts a lien on the Mater Dei property and destroys $50 million on the balance sheet," Giles said. "It's all about trying to make your assets look smaller."
Asked about ALSAM's 2005 report, Giles said other documents initially described it as a grant.
"A grant is a gift, not a loan," Giles said. "When this is all over, it will become a gift again."
The diocese filed for Chapter 11 reorganization on Feb. 27, just hours before it was scheduled to be in court for the first trial of the civil lawsuits.
"We have decided against litigating our cases because of the length of time the process could take and, more importantly, 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," Roman Catholic Bishop Robert Brom wrote last week in a letter to priests and parishioners.
Many of the lawsuits' allegations involve incidents dating back decades. Brom wrote in his letter that he plans to disclose the names of accused priests and "will verify that no known abuser is functioning in ministry."
San Diego is the fifth diocese in the country to seek Chapter 11 bankruptcy reorganization in response to sexual-abuse claims. It's also the largest diocese to do so, with nearly 1 million Catholics in San Diego and Imperial counties.
This week's Mater Dei motions in U.S. Bankruptcy Court dealt with whether the diocese could withdraw money from the ALSAM fund to complete the high school.
On Wednesday, the diocese's attorneys asked Judge Louise DeCarl Adler for permission to use the balance of the fund, about $14 million, for construction costs. Without the money, they said, the school might not be able to open in the fall to replace the smaller Marian High School in Nestor. Marian would be closed and sold.
Adler balked at the request, saying she needed more details – including whether the diocese would have to subsidize the school once it opened. But yesterday the judge agreed to a temporary compromise, hammered out by attorneys on both sides, allowing the diocese to withdraw approximately $2.7 million to cover construction costs until April 11, when another hearing is scheduled.
"I think this is a good solution for the interim," Adler told the attorneys.
Diocesan attorney Webb lauded the decision. "This was significant to us in that we were allowed to continue (construction) uninterrupted," he said.
Irwin Zalkin, another attorney representing plaintiffs who filed abuse lawsuits, said his side isn't looking to scuttle the new high school. "It's our position to determine whether there is a $50 million debt associated with that high school," he said.
Staff writers Mark Sauer and Chris Moran contributed to this report.
Sandi Dolbee: (619) 293-2082; sandi.dolbee@uniontrib.com
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