Archdiocese of St. Paul and Minneapolis Files for Chapter 11 Reorganization

Catholic Spirit
January 16, 2015

http://thecatholicspirit.com/featured/archdiocese-files-chapter-11-reorganization/

On Jan. 16, the archdiocesan corporation filed a petition for Reorganization under Chapter 11 of the U.S. Bankruptcy Code. This decision came after months of consideration and consultation with clergy and lay leadership and input from attorneys representing victims/survivors of clergy sexual abuse. Archbishop John Nienstedt and other archdiocesan leaders determined the way to respond most fairly to victims/survivors, given the finite resources of the archdiocese, was to file Chapter 11 Reorganization. This will allow all the resources available to be distributed equitably among all victims/survivors and allow the archdiocese to continue essential services to fulfill mission of the Catholic Church.

“This is not easy news to share,” said Archbishop Nienstedt. “However, over the past six to seven months, I have looked at all the options available to us and I am convinced that this decision is in the best interests of the victims/survivors and the archdiocese as a whole. I believe that it is consistent with our goal of putting victims/survivors first.”

The archdiocese has 21 pending clergy sexual abuse cases, and faces the potential for more than 100 additional suits. These cases are coming forward now because of the lifting of the civil statute of limitations on child sexual abuse under the Minnesota Child Victims Act signed into law in 2013.

The total cost to separately settle or go to trial with each pending or future claim is impossible to determine definitively. It is unknown how many additional claims there could be before the open statute of limitations window on historical claims closes in May 2016.

Although the archdiocese has insurance coverage, that coverage may not be available to pay every claim or the full amount of every claim. There are a number of reasons for this. For example, some of the archdiocese’s carriers are now insolvent; in other cases the archdiocese’s policies may require that the archdiocese fund legal verdicts before the carrier would pay (similar to a deductible on an auto policy), and policy limits may excuse carriers from covering full verdict amounts.

In its audited financial report for the fiscal year that ended June 30, 2014, released last November, the archdiocesan corporation reported that it had total operating revenue of $25,525,732 and total operating expenses of $34,646,408, resulting in a deficit of $9,120,676. The deficit can be attributed to significant expenses that are not anticipated to be ongoing in the long term, including special issues expenses related to addressing historical clergy sexual abuse cases and implementing enhanced preventative measures.

Reorganization not a means to avoid compensating victims/survivors

Reorganization under Chapter 11 is a process to resolve claims fairly and with finality, under the neutral supervision of the bankruptcy court.

Documents filed with the bankruptcy court on Friday contain basic information about the archdiocesan corporation, the reasons for the filing and the goals of the archdiocese. By filing under Chapter 11, the archdiocese has become a “debtor in possession.” As such, the archdiocese intends to retain possession and control of its assets and continue to operate pending the confirmation of a plan of Reorganization, which would conclude the Reorganization process.

Fairness for victims/survivors

Archbishop Nienstedt and other archdiocesan leaders have met with dozens of sexual abuse victims/survivors to listen closely, hear their experiences, acknowledge their pain and apologize for what they have suffered.

“Over the past year, we have all been devastated by revelations of the stories of those who have been hurt by clergy sexual abuse,” the archbishop said. “Victims, survivors and their families have personally shared their heartbreaking stories with me. Their anger, their sorrow and their intense sense of betrayal are the tragic results of unthinkably evil actions. I am sorry for their suffering.”

The archdiocese recently partnered with an independent Twin Cities-based organization, Canvas Health, to provide victim-assistance-services. Now, a person harmed by sexual misconduct can call (651) 291-4497 any time to speak with a trained professional and get assistance with counseling or other services.

This enhanced outreach to victims/survivors is an important part of a moral response, recognizing that no amount of personal outreach or financial restitution can truly atone for what they have endured.

Essential archdiocesan ministries

While many people have their most personal contact with the Church through their local parish, the archdiocesan corporation’s central offices, which employ more than 170 people, fulfill important ministries and support the good work done in parishes, Catholic schools and other local Catholic organizations in the archdiocese. The archdiocesan corporation does this by providing seminarian formation, ongoing clergy education, assignment of clergy, care for elderly and infirm priests, worship and liturgical resources, hospital and prison chaplaincy, sacramental and other record-keeping, safe environment training, parish and school staff formation and leadership development opportunities; outreach to young people, those with disabilities, newly married couples and others; evangelization and catechesis events and programs; and spiritual leadership from the archbishop. It also provides centralized parish and school employee benefits administration, accounting support and other back-office services.

Good work of parish, Catholic schools, other Catholic organizations continues

The Archdiocese of St. Paul and Minneapolis has a geographic area of 12 metro-area counties and is home to an estimated 825,000 Catholics in 187 parishes.

Local Catholic organizations such as parishes, schools, cemeteries and charities are organized as separate corporations, which are legally distinct from the archdiocesan corporation, so they are not included in the Reorganization filing.

“The good work of parishes, Catholic schools and other organizations will continue,” said Father Charles Lachowitzer, vicar general and moderator of the curia. “Parents should have no concerns about registering their children for Catholic school, parishes planning for confirmation should continue their preparations, and people who rely on food shelves, homeless shelters, elderly ministry, English-language tutoring, and other services provided by parishes and other Catholic organizations in our community will continue to be served.”

Confronting sexual abuse in Church ministry

Archdiocesan officials immediately report suspected child abuse to law enforcement, cooperate fully with police investigations and disclose the names of clergy with substantiated claims of sexual abuse of a minor made against them.

In the last decade, the archdiocese has implemented sexual abuse awareness and safe environment education for adults and children. Since 2005, nearly 83,000 members of the clergy, candidates for ordination, parish employees, teachers, parish and school volunteers, and others in service in the local Church have undergone VIRTUS safe environment training. Since 2006, more than 100,000 children in Catholic schools and faith formation programs have participated in age-appropriate personal safety lessons.

Since 2002, when the archdiocese began using its current background check vendor, more than 123,000 background checks have been run on clergy, employees and volunteers in parishes, schools and other services in the local Church. The archdiocese first required background checks for clergy and employees in 1993.

In October 2014, the archdiocese and St. Paul law firm Jeff Anderson and Associates reached an agreement to settle the Doe 1 litigation. Doe 1 was abused in the mid-1970s by Thomas Adamson, a priest of the Diocese of Winona who was assigned at parishes within the archdiocese. This October settlement was not a settlement of all sexual abuse claims against the archdiocese, but it was an important step forward in working with plaintiffs’ attorneys to seek fair resolution of claims. As a sign of this commitment of working with those representing victims/survivors and as part of global settlement negotiations, the archdiocese committed to a set of 17 child protection protocols, including provisions for enhanced victim/survivor outreach, ongoing disclosure of substantiated claims, and additional steps to protect minors and prevent sexual misconduct in Church ministry.

Cooperation continues

The archdiocese continues to build on relationships mutually forged with victims/survivors and their representatives to promote healing and prevent future abuse. Archdiocesan attorneys reached out to plaintiffs’ attorneys with pending cases against the archdiocese to ensure they knew that Reorganization was one option being considered for fair resolution of claims. Attorneys representing the archdiocese communicated that it was not fair to give priority to the claim of one party, based on trial scheduling or other factors, potentially at the expense of others with claims.

What’s next

The archdiocese is the 12th U.S. diocese to file for bankruptcy protection due to clergy sexual abuse lawsuits. The length of time from filing until a diocese emerges from Chapter 11 protection has varied widely in past Reorganizations. Archdiocesan leaders hope to maintain positive working relationships with all parties to expedite the process as much as possible, for the benefit of everyone.

“My team and I are committed to coming to the fairest resolution possible for victims/survivors while allowing the archdiocese to continue essential services required for the mission of the Catholic Church,” Archbishop Nienstedt said Jan. 16. “By taking this action, we are not avoiding our responsibilities to those who have been affected at this time in our Church’s history. Instead, we are facing our responsibilities and holding ourselves accountable.”

Reorganization basics

The archdiocesan corporation expects the court’s permission to continue to function in the ordinary course while pursuing a Reorganization, similar to other dioceses that have sought bankruptcy Reorganization in recent years.

Parishes are separately incorporated and are not filing for Reorganization. Parishes in the archdiocese have been separately incorporated under a religious corporation statute dating back to the 1800s.

Catholic schools are either ministries of a parish/parishes or are separately incorporated and are not filing for Reorganization.

Parish and Catholic school employees are employees of the parish/Catholic school where they work.

It is premature to speculate on potential impact of Reorganization on 403(b), pension, medical or other employee or priest benefits. We are seeking court approval to maintain such plans during the course of the Reorganization. Such relief has been granted in other diocesan Reorganizations.

The archdiocesan corporation has already taken significant expense reduction steps in order to balance its budget and make resources available to meet its obligations.

Timeline of important dates since fall 2013

Press releases and more information related to these events may be found on SafeCatholicSPM.org

Oct. 6, 2013 - Naming of Vicar for Ministerial Standards

Oct. 6, 2013 – Announcement that independent Safe Environment and Ministerial Standards Task Force would be formed

Nov. 14, 2013 – Archdiocese retains Kinsale Management Consulting to conduct independent review of clergy files

Dec. 5, 2013 – First set of name disclosures of priests with substantiated claims of sexual abuse against them

Feb. 17, 2014 - Second set of name disclosures of priests with substantiated claims of sexual abuse against them

April 14, 2014 – Safe Environment and Ministerial Standards Task Force Report and Recommendations released; Archbishop John Nienstedt pledges to implement

April and May 2014 - Posting of depositions of Archbishop Nienstedt, Former Vicars General Father Peter Laird and Father Kevin McDonough, former Chancellor for Civil Affairs Andrew Eisenzimmer and others

May 22, 2014 – Third set of name disclosures of priests with substantiated claims of sexual abuse against them (also included two religious brothers)

Sept. 15, 2014 - Tim O’Malley begins work as Director of Ministerial Standards and Safe Environment

Oct. 13, 2014 - Historic Doe 1 settlement announcement with Jeff Anderson and Associates signals new era of cooperation and collaboration in pursuit of common goals of protecting young people and helping victims/survivors and their loved ones in healing

Oct. 13, 2014 - Michael Campion begins work as Assistant Director of Ministerial Standards and Safe Environment

Oct. 23, 2014 - Fourth set of name disclosures of priests with substantiated claims of sexual abuse against them

Dec. 4, 2014 - Partnership announced with Canvas Health to provide victim/survivor assistance by independent professionals 24/7