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	Cash-Strapped Spokane Diocese Has Stopped Paying Its Lawyers Bankruptcy - Church Officials Had Been Paying Their Own Legal Fees As Well As Those of Alleged Victims of Sex Abuse The Oregonian March 30, 2006 http://www.oregonlive.com/news/oregonian/index.ssf?/base/news/114368553430520.xml&coll=7 SPOKANE -- The Roman Catholic Diocese of Spokane is so strapped for cash that it has stopped paying its lawyers, even as its complicated bankruptcy case enters a critical stage. The diocese sought bankruptcy protection because of claims filed by people who contend they were sexually abused by priests. The diocese for the past 16 months has paid both its own legal bills and the bills of lawyers for victims, and is running out of money even as the two sides try to settle. "I'm very concerned, obviously, about the fact that frankly every month this debtor goes further and further in the hole in terms of cash," U.S. Bankruptcy Judge Patricia Williams said during a hearing this week. "That's a fact of life that is getting worse every single month and I ask myself periodically, you know, how many churches are we going to have to sell just because we can't get to plan confirmation?" Williams said. Williams wondered whether churches or other diocese assets may have to be sold just to pay the mounting costs of the case. Diocese attorney Shaun Cross said that lawyers in the case would never ask that a church be sold to pay their fees. The diocese has about $2 million in cash, according to its most recent financial statement. It's unclear how much it owes, but legal fees alone add up to $1.4 million, according to the diocese. It has not paid lawyers in at least two months. Last fall, the U.S. trustee, a federal official who oversees bankruptcy cases, questioned how much lawyers were billing the diocese. Legal fees are a sensitive issue for Catholic parishioners, who ultimately foot the bill through donations, Cross said. News coverage of attorney fees could hamper efforts to win support for a settlement offer, he said. Cross said the lawyers at his firm expect to be paid for their work. James Stang of Los Angeles, an attorney for some victims, said he was committed to the case regardless of when or if he is paid. "If you told me we were doing this for zero, we'd finish this case," Stang told the judge. In bankruptcy cases, the corporation is responsible for paying the legal bills of its own counsel, and that of creditors. In this case, there are three separate creditor committees with their own lawyers and consultants. The committees often work together, but frequently have competing interests. For instance, the diocese has made a $45.7 million settlement offer to 75 of the 179 people who have filed sex-abuse claims. Diocese lawyers are pushing the settlement as a major step toward resolution, and lawyers for many victims have endorsed the deal. But lawyers for individual parishes, who face possibly selling churches and schools to raise some of the money, have objected. "The financial obligations proportioned by the settlement terms are well beyond the capacity of our parish to sustain," wrote Carrie Shields, Chris Laney and Mary Catherine Ruud, three members of Mary Queen of Heaven Parish in Spokane Valley. "Our unfulfilled obligation would therefore domino onto other parishes in the diocese, thus further increasing their financial load."
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