ALBANY (NY)
Times Union [Albany NY]
January 15, 2023
By Brendan J. Lyons
The disclosure by Michael L. Costello, the diocese’s attorney, came during a public court conference
A longtime attorney for the Roman Catholic Diocese of Albany inadvertently disclosed during a court conference last week that it had recently offered $20 million toward a “global settlement” involving hundreds of alleged child sexual abuse victims who have filed claims against the organization or the priests and other employees accused of sexually assaulting them.
The amount of the offer — the second by the diocese — was supposed to remain confidential under a court order.
The disclosure by Michael L. Costello, the diocese’s attorney, came during a public court conference before state Supreme Court Justice L. Michael Mackey and revealed how much money the diocese had privately offered to settle the hundreds of remaining lawsuits.
But the recent offer was not accepted because the “plaintiffs liaison committee,” a group of attorneys who were facilitating mediation talks on behalf of the alleged victims, had already officially disbanded — a decision that came after they had accused the diocese and its insurers of dragging out the process and making offers that the committee at one point described as “insultingly low.”
A source familiar with the matter said the diocese’s first offer, made last summer, had been around $8 million.
“I’m just going to be careful to confine myself to information that is not beyond the restrictions of the mediation referral order,” Costello told the judge during Wednesday’s conference, when describing the diocese’s offer. “I received an email from mediator (Simone) Lelchuk in which she indicated that our $20 million — strike that. She indicated that the (plaintiffs committee) no longer exists, that it was disbanded effectively, and that the enhanced offer we had advanced was obviously not accepted.”
When asked after the proceeding about his disclosure of the $20 million figure, Costello responded in an email to the Times Union (and copied the judge’s chambers): “My comments … during the conference with Justice Mackey and counsel were provided under the privilege of the mediation referral order (issued in September),” he wrote.
But the Times Union is not subject to the confidentiality order; Costello also was not supposed to disclose the offer during a proceeding that included the public as well as numerous attorneys who were not part of the plaintiffs liaison committee.
It’s unclear whether the $20 million offer includes money that would also be contributed by the diocese’s parishes and schools, locations where many of the sexual abuse incidents are alleged to have taken place. In addition, the offer does not include compensation that could be contributed by the diocese’s insurance carriers.
Last month, as the mediation began to collapse, Costello had asked for a 120-day stay of cases nearing trial dates. He said the additional time was needed because they were working with their insurance carriers and also trying to ascertain the amount of funds that the schools and parishes within the 14-county diocese could contribute to a mass settlement.
Mallory C. Allen, an attorney whose firm represents 22 clients with claims pending against the diocese, said that because the diocese had disclosed its most recent confidential recent offer, “The public can see why the process has broken down: The diocese is grossly undervaluing the claims against them — claims which involve horrific conduct by the diocese which has profoundly and permanently impacted hundreds of people’s lives.”
“Whether or not the disclosure was inadvertent, we believe that the diocese should have been transparent about its mediation offers from the beginning,” Allen said. “To date, the diocese has broadcast to the public that it is making strides towards resolving the numerous cases against it and represented that it has made ‘significant’ offers, while simultaneously keeping the details of those offers (as well as full financial disclosure) from the public. How did the diocese expect over 400 survivors to accept an offer in its mediation program when they had failed to share the monetary amount of that offer with the public, and have still not opened their financial records to the public, so that they can gauge whether the diocese’s offer was, in fact, fair?”
Cynthia S. LaFave, whose firm along with Jeff Anderson & Associates represents 190 plaintiffs who have pending claims against the diocese, responded to Costello’s remarks during Wednesday’s court conference by noting that Anderson’s firm had recently conducted an analysis of just the Albany diocese’s real estate assets — relying on public records — and determined they are worth roughly $500 million.
She said that amount does not include all of the diocese’s property and assets, such as cash in bank accounts or the holdings of various foundations.
“It doesn’t include the schools … it just includes the diocese and the parishes,” LaFave said. “And so here we are looking at that in the context of this enhanced offer that we received from the diocese. … But as a committee, the PLC, is disbanded we find that with the enhanced offer the word ‘enhanced’ shouldn’t even be used for that offer, and we just feel that it cannot go any further.”
Costello scoffed at the $500 million estimate put forth by Anderson’s firm (which subsequently forwarded to him its 87-page report), saying he suspected it was based on assessed valuations. LaFave responded that the estimate is based on market values of the real estate holdings, which she said are “real numbers.”
“As many of us know, there are constitutional protections with respect to these institutions, and the viability to free exercise, practice their religion,” Costello said. “We shouldn’t be looking at this in a liquidation format. But the number is astounding. We’ve never seen or heard anything like that.”
The conference ended with Costello indicating the diocese would continue negotiating settlements with the plaintiffs who are willing to do so. He indicated that the diocese also would be open to conducting settlements with groups of plaintiffs and their attorneys to expedite the process.
Secret family
There have been a series of recent pre-trial settlements by the diocese, including one filed by the members of a family of children that Francis P. Melfe, a former Schenectady priest, was accused of secretly raising and sexually abusing over a period of years beginning in the late 1960s. Melfe, who died in 2019 at age 91, resigned from the priesthood in 1979.
The legal cases against him had included allegations that he stole from church coffers — often using the family of children he allegedly abused to help him count the money — and is believed to have burned down a Schenectady bar he owned and operated while serving as a priest, according to the family’s attorneys, JoAnn P. Harri and Martin Smalline.
The undisclosed settlement was finalized last week with the former priest’s biological son and his four siblings, who all alleged they had been sexually abused by the priest, who had maintained a secret relationship with the mother of those children. Now ranging in age from their 40s to 60s, the children allege they were subjected to years of emotional and sexual abuse by Melfe.
Another case settled by the diocese recently was involved Jack Cesare, an outspoken critic of the Catholic church’s handling of sexual abuse complaints as well as the law enforcement agencies that he believes turned a blind eye to that alleged corruption. Cesare reached his settlement — which he said was for $350,000 — without an attorney after he severed ties more than a year ago with the law firms that had represented him.
Cesare, who had been a supporter of the state’s Child Victims Act, including attending rallies at the state Capitol, lost significant weight when he spent three days in a South Florida jail several years ago after he was accused of making a threatening phone call to the New York governor’s office. He denied the allegations; the criminal charges in Albany were later dropped.
“I knew I wasn’t going into another year with this in my life, because it took over my life. I was fighting for myself … and my other friends who couldn’t do what I did,” Cesare said. “I paid a big price … not only with my (physical) health but my mental health.”
Costello and Albany Bishop Edward B. Scharfenberger have warned since June that the diocese may need to file for bankruptcy if cases begin going to trial with the potential for substantial verdicts and high court costs. Costello has noted that the fees associated with a bankruptcy proceeding could top $600,000 a month — money he said the diocese would rather preserve for the hundreds of victims of child sexual abuse.
Attorneys for some plaintiffs said that threat has led to some victims believing they would not get substantial settlements if there is a bankruptcy filing. But those attorneys have also noted that filing for bankruptcy would require the diocese to disclose its assets and liabilities — information that has remained secret.
At the end of last week’s hearing, Costello said the diocese will continue with “block settlements,” but he is hopeful the global mediation can be revived.
“Perhaps, as this moves along, there would be a justification here to expand this and get back to where we started,” Costello said. “Because I suspect that many of the attorneys (in this hearing) want to … bring this to a resolution that’s meaningful and timely and fair to their clients, as opposed to encouraging, suggesting that the diocese just promptly file a Chapter 11 petition, which is going to result in protracted litigation and time and less recovery for the victims (and) survivors.” But while the diocese has publicly asserted it wants what is best for the victims, it has also waged a fierce legal battle for the past three years fighting nearly every pre-trial discovery request for its internal files on clergy abuse. Those legal battles, including appeals, have dragged out the litigation at a time when many victims, accused abusers and witnesses, are beginning to die as they grow old, their attorneys said.