Gallup Diocese Bankruptcy Cost up to $1.5m

By Elizabeth Hardin-Burrola
Gallup Independent
January 22, 2015

http://gallupindependent.com/

Bankruptcy attorneys, accountants and insurance investigators have billed the Diocese of Gallup nearly $1.5 million in professional fees and expenses for just the first 10 months of the diocese’s Chapter 11 reorganization case.

The church bankruptcy, which was filed Nov. 12, 2013, is now entering its 15th month and is racking up additional professional fees and expenses with each passing month.

According to documents filed in U.S. Bankruptcy Court, four law firms, an accounting firm and an insurance archaeology company have billed the diocese $1,452,383.90 in professional fees and expenses from Nov. 12, 2013 to Sept. 30, 2014.

Just prior to the filing date, the Diocese of Gallup paid fees of $297,505.32 to three of the firms, which pushes the combined pre- and post-filing total to nearly $1.75 million.

In addition, the most recent quarterly billing statements, for the period ending Dec. 31, 2014, have yet to be submitted to the court.

Billing breakdown

Quarles & Brady, LLP, the Tucson law firm that is acting as the Gallup Diocese’s lead bankruptcy counsel, billed the lion’s share with $905,906.71 for fees and expenses from Nov. 12, 2013 to Sept. 30, 2014.*

Keegan, Linscott & Kenon, P.C., the Tucson accounting firm that has supervised the diocese’s finances throughout the bankruptcy process, billed the next highest total of $237,950.47.

The California law firm of Pachulski Stang Ziehl & Jones LLP, which represents the Official Committee of Unsecured Creditors, billed the diocese $235,172.80. Although lead attorney James I. Stang and the committee represent the interests of the 56 people who filed confidential clergy sex abuse claims against the diocese, the Diocese of Gallup is responsible for paying the law firm’s fees and expenses.

The Insurance Archaeology Group, a New York company that specializes in investigating insurance assets, billed the diocese $46,433.20.

Walker & Associates, P.C., an Albuquerque firm specializing in bankruptcy law, billed the diocese $18,062.40, which includes fees, expenses and New Mexico gross receipts taxes. Unlike the other professional firms, Walker & Associates’ total only runs through April 30, 2014.

Stelzner, Winter, Warburton, Flores, Sanchez & Dawes, P.A., also of Albuquerque, billed the diocese $8,858.45, which also includes legal fees, expenses and state gross receipts taxes. Prior to the bankruptcy filing, the Stelzner firm was the Diocese of Gallup’s primary law firm that handled clergy sex abuse lawsuits and claims.

U.S. Bankruptcy Judge David T. Thuma must approve all the professional fees and expenses. Last February Thuma warned attorneys in the case that he didn’t want to see most of the money in the reorganization going toward litigation costs.

Funding strategy

The Insurance Archaeology Group is the only professional firm to have received payment from the Gallup Diocese since the Chapter 11 petition was filed.

According to court records, the accounting and law firms will have to wait for payment until the diocese’s plan of reorganization is approved and funded.

Based on developments thus far, attorneys for both the Diocese of Gallup and the Official Committee of Unsecured Creditors have been looking to fund the reorganization plan through the diocese’s insurance coverage and by attempting to tap into the financial resources of other Catholic entities, such as the Diocese of Corpus Christi and Franciscan provinces, which allegedly allowed sexually abusive clergy to serve in the Gallup Diocese.

Although attorneys with Quarles & Brady have stated that they have worked to identify “property that is not critical to the continued mission and ministry” of the diocese that could be sold to help fund a plan of reorganization, sales of diocesan commercial property, residential lots, and ranch land have not happened yet.

Instead, earlier this month, diocesan attorneys filed a motion requesting authorization to hire an Albuquerque appraisal company to appraise five key pieces of church property in Gallup and Thoreau. At least four of the properties, the Gallup chancery office, two Catholic schools, and the diocese’s retreat center, are all very closely tied to the diocese’s mission and ministry.

Diocesan attorneys did not respond to requests for comment about those appraisal plans.

In contrast to the Diocese of Gallup’s slower moving case, a bankruptcy judge approved the Diocese of Helena’s reorganization plan last week – just one year after the Montana diocese filed its Chapter 11 petition.

According to media reports, the Helena plan includes a $16.4 million settlement for hundreds of clergy abuse survivors, plus another $4.45 million payment from the Ursuline Sisters of the Western Province to settle an abuse lawsuit filed by 45 Native American plaintiffs.

*Reporter’s Note: The figure of $905,906.71 was incorrect – over by $3,134.61 – due to an addition error by Quarles & Brady in Document No. 326, filed Nov. 14, 2014, regarding their fees and expenses from April 1 through June 30, 2014. The firm subsequently corrected the error in a later court document.