By Annysa Johnson
Milwaukee Journal Sentinel
March 23, 2011
http://www.jsonline.com/features/religion/118549224.html
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| The Catholic Archdiocese of Milwaukee, which faces more than a dozen civil fraud lawsuits over its handling of clergy sex abuse cases, filed for Chapter 11 bankruptcy protection in January. As the case proceeds, we'll have updates, analysis, documents and more. |
While bankruptcy has stalled the pending court cases against the Archdiocese of Milwaukee over its handling of clergy sex abuse cases, its biggest benefactor is waging its own battle - now before the U.S. Supreme Court - over allegedly fraudulent securities practices by energy conglomerate Halliburton Co.
The Erica P. John Fund, known until 2009 as the Archdiocese of Milwaukee Supporting Fund, is the lead plaintiff in an 8-year-old class-action lawsuit alleging that Halliburton made false statements about its business between 1999 and 2001, causing investors to lose money when it corrected those statements and its stock price declined.
At issue before the Supreme Court is whether plaintiffs should have to prove "loss causation" - in this case whether Halliburton's corrected statements caused the price drop and subsequent losses - in order to be certified as a class action.
Such a requirement, said John Fund attorney Carl Goldfarb, would place an undue burden on plaintiffs and effectively keep many securities fraud cases out of court.
"It's a very significant hurdle, very difficult to show at that early state without litigation, without discovery," Goldfarb said.
"It will keep cases from getting certified as class actions. And, because it's prohibitively expensive to pursue these cases individually, it will mean many plaintiffs will find the courthouse doors closed to them," he said.
Attorneys for Halliburton did not return e-mail messages seeking comment.
The nonprofit Erica P. John Fund, which has given millions of dollars to the archdiocese and other organizations over the years, is among a number of revenue sources expected to be scrutinized by creditors in the archdiocese's bankruptcy.
Victims and their attorneys question the timing of the name change in 2009, suggesting it may have been intended to obscure the fund's true purpose - to financially support the archdiocese - and may have been part of a broader effort by the archdiocese to shield its resources from being used for sex abuse claims.
Last month, plaintiffs attorney Jeff Anderson questioned the transfer of $130 million off the church's books since 2004 - $75 million in an investment fund and $55 million into a cemetery trust. Church officials said the investment money belonged to parishes, which are separately incorporated from the archdiocese, and that the cemetery funds had always been restricted to that purpose.
The John Fund referred all questions to its attorneys. Goldfarb said the name was changed to honor its founder, who remains on the three-member board of directors, along with her daughter Paula John and Milwaukee Archbishop Jerome Listecki.
Archdiocese spokesman Jerry Topczewski said the John Fund, as a private foundation, cannot be tapped to pay sex church abuse settlements and that its grants obtained by the archdiocese are restricted to specific uses.
Used for hush money
Proceeds from the fund - more specifically, from the sale of a property it donated - were used to pay $450,000 in hush money in 1998 to a man who claimed to have been sexually assaulted by then-Archbishop Rembert Weakland when he was a seminary student years earlier. Weakland, who abruptly retired after the payment became public in 2002, has maintained that the relationship was consensual.
Topczewski said the building was donated before Erica John dictated that no family funds could be used to pay sex-abuse settlements. And federal authorities investigated the allocation but found no wrongdoing by the archdiocese because the money had not been diverted from a specific purpose.
The fund also gave $1.5 million in 1997 to endow chairs in Weakland's name in universities in Rome.
The Erica P. John Fund has contributed about $600,000 a year to the Archdiocese of Milwaukee in recent years, down from about $1 million annually in the past, according to Topczewski.
Erica John established the Archdiocese of Milwaukee Supporting Fund in 1992 with $70 million from the former DeRance Foundation, once the world's largest Catholic charity, which had been founded by her late ex-husband, Miller Brewing heir Harry John.
Golfarb declined to comment on the size of the fund or its assets. But a 2002 Journal Sentinel story said it had contributed more than $52 million in grants in the previous decade.
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