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	Court Cases, New Details on Abuse Increase Pressure on Milwaukee Archdiocese By Tom Heinen Milwaukee Journal Sentinel February 2, 2008 http://www.jsonline.com/story/index.aspx?id=713999 With Archbishop Timothy M. Dolan at the helm, the Catholic Church here is navigating turbulent times with a growing storm of financial pressures, embarrassing documentation of old sexual-abuse coverups, and the opening of long-closed routes for childhood victims of clergy molestation to file lawsuits in Wisconsin. Dolan cautioned parish leaders last week to prepare to be rocked by the release of Milwaukee church documents from a California lawsuit that show how an abusive priest with multiple accusations was quietly moved from parish to parish years ago. The larger question is whether the archdiocese or any individual parishes could be capsized by a wave of red ink from new lawsuits. Faced with pending trials and mounting claims by victims of priest abuse, five dioceses in the United States filed for bankruptcy in the past 3 1/2 years - an option cited by Dolan as a possibility here. The Archdiocese of Portland, Ore., was the first to seek Chapter 11 protection, followed by the dioceses of Tucson, Ariz., Spokane, Wash., Davenport, Iowa, and San Diego. They haven't closed or sold parishes or schools, but their cases offer other lessons on what the future could hold for the church in southeastern Wisconsin. If Milwaukee charted a course to bankruptcy, would it be like the Diocese of Tucson? It is held up by some observers as a model. Tucson filed for bankruptcy protection in September 2004 and reached a reorganization settlement within a year, remarkably quickly. All parties were said to have been focused and willing to compromise. The question of whether parish property was owned by the parishes or the diocese was not an issue. A settlement pool of $22.2 million was created for the 54 claimants, including $5 million set aside for future claims. Insurance companies paid $14.8 million, the diocese's 75 parishes paid $2 million, and the diocese paid the rest, partly by selling diocesan land. Then there is the Diocese of Spokane, where about 80 parishes voluntarily agreed to provide $10 million toward the $48 million agreement with the 176 claimants, an unprecedented participation. Perhaps of equal importance, the settlement also required Spokane Bishop William Skylstad to publicly support eliminating statutes of limitations on child sex crimes, visit each parish where children were abused to urge parishioners to come forward with reports of abuse, allow victims to publicly address the parishes where they were abused, and take other steps. Or could Milwaukee be like San Diego? That diocese filed for bankruptcy protection in February 2007 to put off going to trial in more than 140 civil suits. Although a settlement was reached out of bankruptcy court about eight months later, the bankruptcy court judge chastised the diocese for "disingenuously" reporting its finances to parishioners and for needlessly seeking bankruptcy protection, saying bankruptcy court should not be used to try to hammer down the claims of the abused. "In San Diego, things were so contentious, and the records were in such a mess, that the judge appointed an independent forensic accountant to go into the individual parishes and the diocese to find out what assets were there and what liabilities were there," said Fred Naffziger, a corporate attorney and professor of business law at Indiana University South Bend who has followed the diocesan bankruptcies. The auditor, he said, found that some parishes were hiding what totaled millions of dollars to avoid paying an annual assessment, or tax, to the diocese. Such payments on income are common. "The question arose, did the bishop know this and was the money being hidden from the creditors?" he said. "This angered the bankruptcy judge. There had been all kinds of fights and hostilities between the creditors and the diocese until the judge said, 'Why shouldn't I throw this out of court?' Very quickly, the diocese came up with a financial settlement that was very generous." Intrusive and costly Naffziger sees bankruptcy as having mixed results for dioceses. It's intrusive, forcing dioceses to open up their financial and business activities. And attorneys' fees and other costs can easily exceed $1 million in just a year in a contentious bankruptcy. On the other hand, it "brings order out of chaos" by moving all civil suits and other legal actions into one court, he said. It provides a balanced distribution of the assets, and it lets dioceses avoid punitive damages for gross negligence when cases go to trial. "Dozens of dioceses have threatened bankruptcy," said David Clohessy, national director of the Survivors Network of those Abused by Priests. "It's an extraordinarily powerful negotiating ploy and threat. The five dioceses that have chosen bankruptcy, we are absolutely convinced, have done so to protect secrets, not assets." The church hierarchy does not want to have to get on the witness stand and testify, he said. They learned that when Boston's Cardinal Bernard Law had to give sworn depositions and then resigned amid the furor over his handling of sexual abuse, Clohessy added Jeff Anderson, a St. Paul attorney who represents clergy-abuse victims, said, "In every instance, except in Tucson, (the bankruptcy filing) was on the 11th hour of the first trial that was going to fully expose the secrets that have been kept so long by that diocese." Insurance companies have ended up paying about 80% of the settlement costs in the hundreds of cases he has handled, Anderson said, making the actual costs to the dioceses less than claimed. And, he added, the complex corporate structures of dioceses make it difficult to determine assets. Bishops routinely under-represent their financial picture and claim hardship, he contended, adding that real estate often is listed at its acquisition cost rather than current value. Local church officials say they're not misrepresenting the archdiocese's condition. John Rothstein, an attorney representing the Milwaukee Archdiocese, rebutted Anderson's claim of insurers picking up the bulk of the settlement costs: "I wish that were true, and it should be, but historically on the cases I've known - and in Milwaukee - that is not how it has occurred." Who owns property? For parishioners, the key question is whether parish buildings and assets are owned by the bishop or the parishes. There have been conflicting decisions by judges, but the bankruptcies have been settled before appeals resolved the question, Naffziger said. Parishes either are incorporated separately, or a diocese is organized as a "corporation sole," in which the bishop holds parish property and assets in trust for the parishioners, he said. Incorporating separately protects a parish from claims against the diocese, except if a parish's assets and liabilities were commingled with the diocese's and if an abusive priest served at the parish, Naffziger said. Anderson said parishes have not been vulnerable in court simply because a bishop assigned an abusive priest to them. Rothstein said parishes here have been separate corporations for decades, which protects them from claims against the archdiocese. Whatever happens in the coming months, the archdiocese - which says it already is financially strapped - has millions of dollars of potential exposure in new sexual-abuse lawsuits. So far, seven people have lawsuits pending against the archdiocese in Milwaukee County as a result of a Wisconsin Supreme Court ruling last year that allows churches to be sued for fraud if they moved abusive clergy from parish to parish without warning parishioners. And a bill pending in the state Legislature could allow many more lawsuits by giving childhood victims of sexual abuse a limited time to file lawsuits for negligence no matter how long ago the abuse occurred, and by eliminating time limits in future cases. Decades-old details Victims have long said that limits should be changed in these older cases because they often have not realized the damage done to them - or been psychologically able to come forward - until decades later. Opponents have cited the difficulty in mounting a defense decades later. Dolan has opposed the bill, telling a legislative committee last month that the archdiocese had made many changes to protect children, reached mediated settlements with nearly 170 victims, sold property, cut back programs and is "at the limit of our ability to pay massive tort settlements." State Sens. Julie Lassa (D-Stevens Point) and Lena Taylor (D-Milwaukee) said they are hopeful that negotiations will let the Legislature pass the bill, but time may run out, since the Legislature is scheduled to adjourn in less than six weeks. Lassa and Taylor are among a group of co-sponsors. Lassa said behind-the-scenes talks are going on to find a bill that both Senate and Assembly leaders can agree on. "It's something that's very important for victims," Lassa said.
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