American Catholic Church Bankruptcies: One Big Shell Game?

By A.dean
Ao Advocates
August 24, 2012

http://www.aoadvocates.co.uk/worldwide-updates/american-catholic-church-bankruptcies-one-big-shell-game/

This week, The Economist published an extensive exposé on the financial organisation and mechanisms that underlie the activities of the American Catholic Church. The writers and researchers at The Economist have outdone themselves in the depth of their investigation, and the piece is certainly worth reading in its entirety (link here).

The article details of some of the shadier financial practices of the Catholic Church—obfuscation, diversion and commingling of funds, hiding behind the Church's tax-exempt status—much of which is hardly surprising. Snippets of such information on this matter have found their way into the press in recent years, usually following major cases of clergy sexual abuse. But it is reading about the pervasiveness of these activities, and in greater detail, that truly shocks the conscience.

It is also worth highlighting that a great deal of this knowledge of Church finances has only come to be accessible as a result of litigation, and in many cases, bankruptcies, arising from sexual abuse civil suits against dioceses.

But on to some of the more striking figures—which help give a sense of just how big a presence the Catholic Church is in America. The Economist estimates that annual spending by the Church and entities owned by the Church was around $170 billion (£107.57 billion) in 2010, and that these entities together employed 1 million people. Almost 100 million Americans have been baptised into the Catholic faith, and 74 million self-identify as Catholic.

Meanwhile, sexual abuse cases against the American Catholic Church for the molestation and rape of children by priests have resulted in about $3.3 billion in settlements over the past 15 years. $3.3 billion is no small figure. But it is a pittance compared to the volume of money that the Catholic Church goes through in a year. Even if we assume that from 1996 to 2009 the Catholic Church spent half as much annually as it did in 2010, then the total settlement figures for child sexual abuse cases would make up a mere 0.24% of the Church's spending over the past 15 years. And yet, somehow, sexual abuse cases have led eight American dioceses to file for Chapter 11 bankruptcy.

As our Senior Advisor and Counsel, Jeff Anderson, notes in the article, a number of US states are considering changing or extending the statutes of limitation that apply to cases of childhood sexual abuse. This could lead to additional numbers of lawsuits. A question that these figures pose, then, is whether bankruptcies are an unavoidable outcome of sexual abuse cases—or whether better management of Church finances, and far greater honesty by Church leaders, would allow for victims of childhood sexual abuse to receive the compensation they deserve, and allow for a chastened Catholic Church to survive, and indeed thrive, as a more open, empathetic organisation that seems to care about the victims of its employees. I think that the latter is the case.

For example, did the Archdiocese of Milwaukee need to file for bankruptcy in January 2012, after it failed to reach a settlement with two dozen victims of sexual abuse? Perhaps not. Creditors in the Milwaukee bankruptcy case have questioned the motives behind a $35 million transfer of the Archdiocese's funds to a trust, and a $55.6 million transfer from archdiocesan funds to a fund for cemeteries, that pre-dated the bankruptcy. These activities have taken archdiocesan funds and placed them out of reach of use for essential Catholic activities (aside from cemetery upkeep), as well as survivors of sexual abuse. The Archdiocese's bankruptcy meant that any victims of sexual abuse by clergy or staff in the Archdiocese's employ only had until 1 February 2012 to file their claims. Any such further claims are now, conveniently and permanently, barred.

Milwaukee is not alone. Other examples of Church financial malfeasance in the context of bankruptcy abound in the article, including the deliberate undervaluing of Church property in the Diocese of San Diego, to escape full financial responsibility to creditors.

It is now clearer than ever that the Catholic Church (the American Church in particular) has substantial earthly resources in its coffers. It can make a choice to use and handle these funds responsibly, in line with a Christian spirit and financial propriety; or it can continue to play a shell game.