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	Diocese Calls Transfers Mix-Up By Mark Sauer and Sandi Dolbee Union-Tribune [San Diego CA] April 11, 2007 http://www.signonsandiego.com/news/metro/20070411-9999-1n11diocese.html An apparent attempt to transfer church funds without a federal judge's permission was called a misunderstanding in declarations filed in bankruptcy court yesterday by attorneys representing the Roman Catholic Diocese of San Diego. The lawyers were responding to federal Judge Louise DeCarl Adler's "order to show cause" why they and certain pastors should not be held in contempt and face sanctions. The diocese sought Chapter 11 bankruptcy protection Feb. 27 in the face of numerous lawsuits alleging sexual abuse by priests in the diocese dating back decades. At issue is what the judge said was an apparent conspiracy by church officials and their attorneys to create new bank accounts, separate from diocese accounts, without her permission. Diocese lawyers conceded yesterday that a March 17 letter sent by the Rev. Michael Gallagher to his parishioners at Our Lady of Grace in El Cajon mistakenly said the court had ordered that new bank accounts be established. They also acknowledged that Susan Boswell of Tucson, the diocese's lead bankruptcy attorney, was unaware that Bishop Robert Brom regularly received bank statements regarding accounts of the diocese's nearly 100 parishes when she told the court otherwise during a March 1 hearing. But church attorneys and officials insisted there was no intention to misrepresent finances. Online: For the diocese attorneys' responses to the judge's order, go to http://uniontrib.com/more/diocese "Credibility is at the core of what (Brom) stands for," the diocese's attorneys wrote. They said the diocese is "prepared to put in place procedures to ensure that the court is informed fully and accurately at all times." The misunderstanding arose, the attorneys said, from the fact that 770 bank accounts used by the diocese's various parishes and schools were distinct from the diocesan bank, which is money directed by Brom for construction and other parish projects. Other than being informed of account balances, the bishop "has no knowledge of the activity in the 770 bank accounts," the diocese attorneys said. The attorneys also said the funds in the diocesan bank would be "frozen until the status of those funds is resolved by court order." Attorneys representing more than 150 people suing the diocese for alleged sexual abuse by priests said they would reserve comment until after a hearing on the matter today. Boswell also refused to discuss yesterday's filings or the judge's order. "I'm just not going to comment on matters pending before the court until the court has had an opportunity to consider them," she said. Boswell did criticize previous information from the plaintiffs' attorneys, saying that "allegations are being made that are not founded" and are resulting in media reports that are "inaccurate and slanted." Yesterday's responses were filed minutes before the judge's 5 p.m. deadline. Their tone was contrite, with one outright apology. "On behalf of (the diocese), I apologize for any concerns or confusions which our pleadings or statements have created," wrote Richard Mirando, the diocese's finance director. In her declaration, Boswell said: "I did not see Monsignor Gallagher's letter before it was sent. When I saw the letter, I recognized that it made some misstatements" regarding orders made by the courts and both the bank accounts controlled by the parishes and parish funds held in trust by Brom. Boswell said she notified Victor Vilaplana, an attorney representing the newly formed Organization of Parishes, of Gallagher's errors. But she did not notify the court. Vilaplana said that while Gallagher's letter is regrettable, "there was no prejudice or negative consequences incurred." According to the court filings, the parishes are in the process of setting up a new account for money collected after the bankruptcy petition was filed. Boswell pledged that "the post-petition account will be disclosed to the court and to creditors." How much money is at stake in these 770 parish accounts isn't clear. James Stang, the Los Angeles bankruptcy attorney representing the creditors, notes in court papers that the diocese's finance policy has capped the parish accounts at about $50,000 each; the excess is transferred to the diocese trust account. "Even with the $50,000 cap, there is potentially $38.5 million of cash at the parish level," according to Stang. Boswell also stated in her declaration that a March 29 memo by the Rev. Bruce Orsborn laying out for pastors a step-by-step plan on how to create new bank accounts was "not inconsistent with the court's rulings." Orsborn's memo states that "with the advice of the Organization's (of parishes) bankruptcy counsel and with the concurrence of the bankruptcy judge overseeing the Chapter 11 case of the San Diego Diocese," each pastor should promptly create new accounts. Attorney Jeffry Davis, who originally represented the Organization of Parishes but has since been replaced, said in his statement that he misunderstood the judge's comments and thought the bank account changes would not be a problem. Davis said that the organization advised pastors in mid-March to put on hold further efforts to change parish bank accounts. However, Orsborn's memo was dated after that and, according to a declaration filed by a branch manager for Union Bank of California, a representative from Our Lady of Guadalupe in Chula Vista approached her with the memo on March 30. Rosa Lopez-Gonzalez, manager of Union Bank's Castle Park branch in Chula Vista, said the bank refused to change the parish's account because of the pending bankruptcy case. "I understand that the same requests were made at other branches by other parishes, and the bank also declined those requests," Lopez-Gonzalez said. The diocese filed for bankruptcy protection hours before the first of the civil trials alleging priest abuse was due to begin. So far, more than 240 motions, reports and other documents have been filed in the bankruptcy case. From the first hearing on March 1, Adler appeared to recognize this was no ordinary request for reorganization. "This is a case of enormous importance to our community," she said. The challenge for the diocese, she said, was to "fairly and promptly compensate persons who claim they've been injured by the actions of priests who worked in the diocese while continuing the excellent work that it's done for the community by the church and not destroying its ability to provide those services in the future." The judge acknowledged that her son attended Catholic schools. "He's been out of the system now for 12 years," she told the courtroom. "I was satisfied with the experience. It does not affect my ability to judge matters in this case in a fair and neutral manner." Mark Sauer: (619) 293-2227; mark.sauer@uniontrib.com
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