By Beth Miller
News Journal
May 15, 2011
http://www.delawareonline.com/article/20110515/NEWS01/105150374/Diocese-returns-to-US-court?odyssey=tab|mostpopular|text|FRONTPAGE
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| Bishop Francis Malooly |
The Catholic Diocese of Wilmington will be back in U.S. Bankruptcy Court Monday as Judge Christopher Sontchi hears from its creditors -- including representatives of scores of survivors of clergy sexual abuse and about 1,800 diocesan lay employees.
Most have filed objections to the diocese's disclosure statement, which maps out how it will satisfy the financial claims against it. The disclosure statement is intended to give creditors enough information to vote knowledgeably on the diocese's overall plan of reorganization.
In February, the diocese reached a settlement worth about $77 million with almost 150 abuse survivors with pending lawsuits against the diocese and several parishes. That plan, which requires the approval of the court, includes liquidation of the 80-year-old Catholic Foundation, founded by John J. Raskob and now worth about $53 million.
The lay employees, who work in Catholic parishes, schools, charitable ministries and other programs, fear their pension plan will dissolve with the diocese's other assets. The employees say they hope survivors will get every penny due them, but they are not confident that the diocese will be able to cover its obligations to its current and future retirees.
Attorney Donald Detweiler, who represents the employees, said their pension plan is only about 10 percent funded.
"The settlement plan ... is not fair and equitable because it proposes, without justification, to distribute more of the debtor's assets to certain classes of unsecured debtors than to others," the employees' objection says.
Bishop W. Francis Malooly sent a letter to diocesan employees to address those concerns last week, assuring them that adjustments to the pension fund will make it worth about $17 million by the end of this calendar year -- enough to cover commitments for more than 10 years, he said. The diocese plans to do more to ensure future funding, he said.
But Malooly said the pension plan would be frozen this year, with no further benefits added. Future pension plans are undetermined, but "the pensions you have earned in your service to the diocese and parishes will be paid," Malooly wrote.
The workers are not satisfied with assurances.
"The diocese has mismanaged the pension plan for years, has failed to inform the lay employees of the horrific state of the pension plan, has hidden the pension problem from the Catholic faithful and appears to be leaving the lay employees with no real protection or security as to the payment of their vested pension obligations in the future," Detweiler said. "Given the diocese's horrific track record with the pension plan, a lay employee may not have faith in accepting a nonbinding pledge of payment from the bishop, who may not be around in 10 years."
Problems with the pension plan started long before the diocese's settlement with the abuse survivors, but those problems only came to light during the bankruptcy.
Survivors of abuse are represented in several ways in the case, including the Official Committee of Unsecured Creditors, which includes seven survivors, and an unofficial committee of 99 survivors, represented by the Neuberger Firm, which handled the majority of the abuse cases in Delaware. The unofficial committee has filed an objection to the diocese's disclosure statement.
The Official Committee of Unsecured Creditors, though, filed an objection to the lay employees' claims late Friday, saying they are not entitled to the money they are demanding. The committee also recommends that the diocese amend its plan to give lay employees a choice: accept the reorganization plan or the lay pension plan will be terminated, with employees having access only to what is now in the pension plan.
"The lay employees demand money that they simply are not entitled to receive," the Unsecured Creditors say, "and their demand will be at the expense of sex abuse survivors who have suffered most of their lives waiting for the diocese to take responsibility for the failure of its clergy and its employees to protect the children who were entrusted to them. The lay employees committee's lip service to the global settlement with the abuse survivors belies its real goal: derailing the global settlement and prosecution of litigation at the expense of the survivors while the pensioners continue to get their monthly checks."
Diocese attorney Anthony Flynn said the diocese will file its response to objections, and the judge may order revisions to the disclosure statement at Monday's hearing. Creditors would vote whether to approve the proposal -- a process that takes about four weeks -- and a confirmation hearing could be held as soon as July to resolve remaining issues.
The diocese filed for Chapter 11 bankruptcy reorganization in 2009 as it faced scores of lawsuits alleging sexual abuse by priests. The suits were filed under provisions of Delaware's 2007 Child Victims Act, which opened a two-year window during which claims could be made that otherwise would have been barred by the statute of limitations.
In other cost-cutting moves, diocese officials recently announced that 22 employees would be laid off, its weekly newspaper would be folded, parish social ministry and the adoption program of Catholic Charities would come to an end, and departmental budgets could be cut up to 25 percent.
Contact Beth Miller at 324-2784 or bmiller@delawareonline.com.
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