St. Paul Archdiocese declares bankruptcy, calling it 'fairest' recourse

By Jean Hopfensperger
Star Tribune
January 17, 2015

http://www.startribune.com/local/stpaul/288823511.html

Move halts suits; archbishop, lead attorney for victims say step is necessary

The Archdiocese of St. Paul and Minneapolis filed for Chapter 11 bankruptcy Friday, becoming the 12th in the nation to say its treasury cannot withstand the unprecedented wave of lawsuits from clergy abuse victims.

The move freezes lawsuits against the church, protecting the archdiocese from creditors while allowing it to develop a reorganization plan. It also halts three abuse trials scheduled to begin Jan. 26.

The archdiocese is facing more than 20 lawsuits, with another 100 pending. The bankruptcy filing didn’t provide precise financial figures, but showed estimated liabilities of $50 million to $100 million, estimated assets of $10 million to $50 million, and estimated creditors of 200 to 999.

“Reorganization will allow the finite resources of the archdiocese to be distributed equitably among all victims/survivors,” said Archbishop John Nienstedt. “It will also permit the archdiocese to provide essential services required to continue its mission.”

The bankruptcy filing will allow the archdiocese to continue its daily operations while giving it time to reorganize its finances as a judge determines how much victims may be entitled to receive.

Unlike the other 11 dioceses that have filed bankruptcy, the Twin Cities archdiocese and the primary victims’ attorney have forged an unusually cordial working relationship, setting the stage for far less acrimony.

In news conferences Friday, both sides took pains to avoid confrontation. Nienstedt said the church is “making every effort to resolve these issues through collaboration, cooperation and reconciliation.”

Attorney Jeff Anderson, who has pursued the archdiocese on behalf of abuse victims for decades, said that the action was “necessary.”

“We’re going to do this in a way that has never been done before,” said Anderson, who has been involved in eight other church bankruptcies.

Not everyone welcomed the move, including Twin Cities victims’ attorney Patrick Noaker, whose client’s lawsuit against the Rev. Thomas Stitts was to go to trial Jan. 26. He said he was disappointed “the archdiocese chose to file bankruptcy rather than have the facts exposed at trial.”

“Bankruptcies do not protect kids,” said Noaker in a written statement. “Trials and disclosures help protect kids. The Archdiocese’s bankruptcy filing just one week before officials would have to testify in a public court with television cameras is not the conduct of an organization committed to transparency and protecting kids.”

Parishes not expecting change

The move is not expected to affect the roughly 200 Catholic parishes or schools within the archdiocese, which are incorporated separately. However, some parishes have been sued in similar bankruptcy filings elsewhere.

The archdiocese covers 12 metro counties with about 825,000 Catholics. The bankruptcy was filed by the chancery corporation, its administrative core, headquartered on Summit Avenue in St. Paul. It is a separate entity from Catholic Charities, and Catholic hospitals, schools and churches.

Anderson said that his firm would “do everything possible so that it doesn’t impede the core mission of the archdiocese.”

Nienstedt, meanwhile, acknowledged that the church may have to sell some assets. He said that he hoped for continued donations from parishioners.

The archbishop said the bankruptcy has not prompted him to consider resigning.

The relationship between an archbishop and his archdiocese “is much like a marriage,” Nienstedt said. “And we all know a marriage goes through rough times and we’re going through a rough time.”

Latest church bankruptcy

The bankruptcy is the 12th filed by U.S. archdioceses and dioceses since the Archdiocese of Portland filed in 2004. Portland settled for $90 million with 171 survivors and their attorneys.

Over the years, victims’ settlements ranged from an average of $42,000 proposed in Helena, Mont., to $1.4 million in San Diego, Anderson said. The size of the settlement in part reflects the severity of the abuse in a case and whether insurance companies contributed.

Every church bankruptcy has been sparked by clergy sex abuse lawsuits.

Victims’ advocates offered mixed reaction to Friday’s news. While the apparent goodwill between church and attorneys could lead to a more fair settlement, most still harbor mistrust after years of being ignored or challenged by the church.

“The files on the priest who abused me [the Rev. William J. Marks] still haven’t seen the light of day,” said Bob Schwiderski, a longtime survivors’ advocate. “They are saying this is all about the survivors. Yet they don’t continue to try to make sure it is.”

Barbara Dorris of the national Survivors Network of Those Abused By Priests, added: “Chapter 11 also enables Catholic officials to change the subject from, ‘Which priests and bishops put kids in harm’s way?’ to ‘How are we going to divide up church funds?’ ”

Nearly all of the top creditors listed in the filing are abuse victims, but the archdiocese docket lists a total of 1,242 creditors. “Think of anyone the archdiocese could owe money to, and they are listed,” said Mike Finnegan, an attorney working with Anderson.

One of the larger creditors that is not an abuse victim is the Church of St. Anne-St. Joseph Hien in north Minneapolis, which court documents show is owed $496,459 related to an “inter-parish loan fund.” Parish trustee Jeff Laux described it as a “deposit” to a chancery fund tapped by parishes short of cash.

Church bankruptcy proceedings have lasted anywhere from one to five years, depending on the degree of contention among the parties. Anderson predicted this bankruptcy could take about two years.

The Milwaukee archdiocese bankruptcy is an extreme case, entering its fifth year. Anderson, who represents about 350 victims there, called it a “nightmare” that will not be repeated here.

The Milwaukee archdiocese has spent $18 million on attorney fees alone, Anderson said. It also transferred assets to make them unavailable to the court for abuse survivors, he said.

Filing follows new law

The archdiocese’s filing comes 18 months after the passage of the Minnesota Child Victims Act. That law lifted the civil statute of limitations for child abuse cases, opening a three-year window for people to sue over older cases.

Since then, dozens of people have stepped forward, implicating dozens of priests in sex crimes against children across the Twin Cities.

In October, a “global agreement” was reached between the archdiocese and Anderson’s law firm, which has filed most of the lawsuits. It created new procedures for church handling of sex abuse claims, and created a financial settlement with the plaintiff identified as John Doe 1, who filed the first claim under the new law.

The bankruptcy court will now appoint a trustee, create a creditor’s committee and examine the archdiocese’s assets — typically a contentious proceeding.

The church also will continue lawsuits against insurers to force them to pay claims. Anderson is optimistic.

“The good news is that the Archdiocese of St. Paul and Minneapolis has insurance and it has a lot of it,” he said.