By Tom Saul
Quad-City Times [Davenport IA]
October 15, 2006
http://www.qctimes.com/articles/2006/10/15/news/local/doc4531c7f74d727956636129.txt
Bishop William Franklin offers a succinct promise to contributors on the Diocese of Davenport's Web site as the organization launches its annual fund drive for $3.64 million to pay for yearly operating expenses.
"We understand that parishioners are concerned about where their Annual Diocesan Appeal donations will be spent," Franklin said. "Be assured that none of your appeal dollars will be used in lawsuits against the diocese."
Its 84 parishes in 22 southeast Iowa counties will be expected to kick in $2.57 million of the total of this year's drive over the next 12 months, the diocese says. That is about 70 percent of its operating budget.
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Al Burke, left, and Michl Uhde, both victims of abuse by priests, talk outside Sacred Heart Cathedral in Davenport last week following a news conference where concerns were expressed about the Davenport Diocese's filing of bankruptcy. Photo by Jeff Cook / Quad-City Times |
"Money collected in the pledge envelopes is paid to the parish and is deposited into the parish account," Franklin said in themessage. "One-twelfth of the parish goal is sent to the diocese monthly beginning in October of 2006."
Last week, the diocese chose to enter Chapter 11 bankruptcy in the wake of a wave of clergy sex abuse claims. As part of its filing, it released a list of assets that totaled nearly $7 million. Diocese bankruptcy lawyer Richard Davidson promised that every cent would be used to aid victims and said money raised by the appeal cannot be touched by potential litigants.
"The parishes are raising the money," Davidson said of his claim that they are separate legal entities and the diocese has no real control over them. "What the parishes do with their own money is not up to the diocese. The parishes are making a gift to the diocese."
But Davenport attorney Craig Levien, who represents dozens of sex abuse victims, points to Franklin's message regarding the 2006 appeal and what he says are instructions to each parish on the amount each is required to contribute.
Before the bankruptcy reaches a point of resolution, Levien said, he intends to explore just how independent the parishes are of diocesan control. If, ultimately, they are found to be mere subsidiaries of the diocese, there could be tens of millions of dollars more available to aid victims and settle claims.
"It will be a matter of the bankruptcy judge deciding or sending it to state court for a decision," Levien said. "But, if there is a ruling that they are part of the diocese, the amount of assets available could increase by a factor of thirty- to fifty-fold."
On Thursday, the diocese announced that Martin Amos, an auxiliary bishop in the diocese of Cleveland, will replace Franklin as of Nov. 20. At a news conference announcing the change, Amos acknowledged that the bankruptcy "will have serious implications" for the diocese and that people have concerns, but he said he needs to learn more about the process before he could comment on it.
In Spokane, Wash., where the Diocese of Spokane was among the first in the nation to file for bankruptcy in an effort to shield itself from injury verdicts by abuse victims, the process has been under way for nearly two years. Shaun Cross, the diocese's lead bankruptcy attorney, said its 81 parishes will likely end up contributing several million dollars toward a final settlement.
Although the parishes are separate legal entities, Cross said, "they are so interconnected with the diocese that they are like wholly owned subsidiaries."
In addition, abuse is alleged to have occurred at 22 of the 81 parishes, Cross said.
"They housed alleged predators," Cross said of some parishes. "If they can own and hold property, they can be sued for what happened on those properties."
Davenport diocese assets
The bankruptcy filing offers a rare look inside the finances of the entity that employs 37 people, houses and supports the bishop, promotes religious education, faith-building and social action, offers assistance and training to clergy and lay people, leads a community of more than 100,000 of the Roman Catholic faithful and serves as its voice.
As a religious institution that is exempt from taxation and many forms of public disclosure, the inner workings of the diocese are most often shrouded in secrecy. That said, its finances reveal that it is run in large part like most any other business.
Documents in the bankruptcy filing include records of assets and liabilities, ownership of real estate, an inventory of thousands of items ranging from the most common of office equipment, vehicles and furniture to sacred items such as altars, tabernacles and priests vestments to 14 items of jewelry and ornate religious objects kept in a safe deposit box at Quad-City Bank and Trust in Moline.
There is also a list of bank accounts and a petty cash account totaling $21,043, more than a dozen insurance policies with an unknown value, investments of $4.49 million and "restricted" gifts and funds received by the diocese totaling $1.45 million that it says are not subject to claims by creditors.
On the liability side of the ledger, the single biggest claim belongs to Michl Uhde, a victim of clergy sex abuse who, on Sept. 18, won a jury award of $1.53 million for future medical expenses, lost wages, lost function of the mind and pain and suffering. Uhde said he suffered abuse at the hands of Monsignor Thomas J. Feeney when he was a child. Feeney died in 1981.
Among the other liabilities are those that belong to the diocese's 37 employees. They include $40,785 for wages and $9,165 for state and federal payroll taxes owed between Oct. 1 and Oct. 10, and $70,489 for accrued vacation time. The diocese has no bank or mortgage debt.
While a summary sheet indicates that assets surpass liabilities, the filing also lists pending sex abuse cases and says estimated claims could run as high as $100 million.
The bankruptcy filing is meant to put a "stay" on active court cases and eventually create a "bar date" by which those who think they have sex abuse claims will be required to make them, Davidson said. The diocese expects it will have to liquidate all its assets and that all the money will go to victims.
"We don't anticipate that any money will be left over," Davidson said. "We're not even going to ask for it if any money is left over. We're looking for this to bring closure to this entire matter."
What happens to the assets
The assets themselves will be cashed in or sold, Davidson said. Although many things the diocese declares in the bankruptcy filing are listed as having a value that is unknown, there is the $4.49 million in investments, Davidson said.
Four parcels of real estate have a total assessed value of $2.53 million. Those include St. Vincent's Pastoral Center in Davenport, which includes the diocese headquarters and apartments for retired priests; Franklin's home at 2761 Scott St. in Davenport; a house in north central Davenport; and a west Davenport farm.
Cashing in of insurance policies will likely bring in more money, but Davidson declined to offer an estimate of their value. Factors such as when they were purchased, what they cover and how the companies will interpret that coverage will likely have to be sorted out in court.
In Spokane, six insurance policies brought in $20.5 million, Cross said. That brought to $32 million the amount that will be distributed eventually to clergy sex abuse victims in that diocese. Five parties involved in that case are under a gag order as they meet with a federal mediator to reach a settlement in the bankruptcy. Cross said he expects the case to be resolved by the middle of next year.
The thousands of items of equipment, furniture, tools, vehicles, religious objects and other items catalogued in the Davenport bankruptcy filing also have an unknown value but will likely bring in no more than $10,000, Davidson said. Instead of an auction or sale open to the public, they will likely be sold as a single lot to a single buyer.
That will include the religious objects and sacred items, Davidson said. Everything will go.
"Many of those kinds of things will have little significance to those who are not Catholic," Davidson said. "If the diocese decides that it wants them, it will have to raise the money and buy them back at fair market value. The same with the buildings."
The diocese will continue as a business, even if it has to operate out of rented space, Davidson said. In addition to the bankruptcy, he has filed a series of motions asking the court to keep bank accounts and the diocese money management system active, maintain property, liability and casualty insurance, keep utilities on and continue employee payroll and benefits.
As for the employees, they are not expected to suffer any financial losses by the time the bankruptcy is resolved, Davidson said.
"The diocese will continue to get income from gifts from parishes that it provides services for," he said. "We will continue to ask parishes to support the diocese operation."
The bankruptcy also will have no impact on a 2004 settlement reached between the diocese and 38 abuse victims who were paid a total of $9 million.
"The money has already been paid out," Davidson said. "I don't see how the bankruptcy could affect that settlement."
Parishes separate
The next step in the process will be to put together a plan and review it with creditors and claimants and allow the diocese to continue to offer administrative and pastoral services to the region's Catholics, Davidson said.
"It is a terrible thing that happened, but we can't unring the bell," Davidson said of the sex abuse scandal that brought on the bankruptcy. "As a church, we need to bring closure to this. This is the only way, legally, to bring closure. Otherwise, in Iowa, you can be sued virtually forever."
But there are still questions about whether proceeds from the annual appeal can be used to pay victims and whether parishes in the diocese should contribute to any settlement, Levien said.
Contrary to Franklin's assurance to donors that money from the diocesan appeal will not be used to resolve the scandal, "they can't carve out money and say it is off limits," Levien said. "A bankruptcy is a bankruptcy."
The bankruptcy will make available documents that are likely to shed new light on the true relationship, financial and otherwise, between the diocese and its parishes, Levien said. He plans to investigate whether the bishop and the diocese control the parishes and if they are answerable to the diocese.
"We'll look at the financial arrangements," Levien said. "We've not had access to that kind of information before, but we will in the bankruptcy. We believe that the bishop controls the finances of the parishes and that he can shut down a parish and sell it and keep the money."
The Diocese of Davenport doesn't own the parishes it serves, Davidson said flatly. During its annual fund appeal, the diocese "suggests" amounts that parishes should contribute to the goal, "but it's not a legal obligation. We're not going to take them to court if we don't get it," he said.
If Levien wanted to go after individual parishes, he should have sued them, Davidson said. Instead, he sued the diocese.
In Spokane, the diocese can show that its individual parishes have their own legal status and "a separate legal existence from the diocese," Cross said. Still, many of their affairs are intertwined. That is one reason parishes will eventually contribute millions to the settlement there.
Business affairs of parishes and the Diocese of Davenport are also interconnected. In the case of Sacred Heart Cathedral in Davenport, which owns property assessed at $5.47 million, state documents list Franklin as president of a nonprofit entity that controls it. He is also listed in state records as president of the nonprofit legal entity that controls the diocese.
"We didn't sue individual parishes because we believed the diocese had adequate resources to resolve this," Levien said. "The diocese, by its action of filing for bankruptcy, is jeopardizing its parishes."
Tom Saul can be contacted at (563) 383-2453 or tsaul@qctimes.com.
Assets, liabilities
A bankruptcy filed by the Diocese of Davenport on Tuesday includes an overview of the organization's assets and liabilities. In all, there are $7 million in investments and real estate. There are also unknown amounts in furniture, equipment and other items and insurance policies. The filing lists $1.6 million in liabilities, but the diocese expects further claims from sex abuse victims of as much as $100 million.
The breakdown is as follows:
Assets
Investments — $4.49 million
Real estate — $2.53 million
Insurance policies — Unknown
Furniture, equipment, etc. — Unknown
Liabilities
Mortgages and other bank debt — None
Wages of 37 employees from Oct. 1 to Oct. 10 — $40,785
State and federal payroll withholding taxes — $9,165
Accrued vacation time for 37 employees — $70,489
Award to Michl Uhde (sex abuse trial) — $1.53 million
About the diocese
Information about the Roman Catholic Diocese of Davenport:
Established: 1881
Parishes: 84, covering 11,438 square miles and 22 counties in southeast Iowa
Schools: 18 parish-related elementary schools and seven high schools.
Parishioners: 106,000
Employees: 37
GOULD LAWSUIT
An Oct. 23 trial set in the case of Michael Gould, who accused the Diocese of Davenport, Bishop Lawrence Soens and Regina High School in Iowa City of sexual abuse, has been postponed after the diocese filed for Chapter 11 bankruptcy and reorganization Tuesday. Gould's is one of five pending abuse cases against the diocese and another case that is before the Iowa Supreme Court listed in the diocese's bankruptcy filing. Soens served for 15 years in the Quad-City area and was principal at Regina High. He also served as bishop in the Sioux City diocese. He is retired.
Inventory of items
A 31-page inventory of furniture, equipment, sacred items, jewelry and other things included in the bankruptcy filing includes everything from the exquisite to the mundane. No value has been placed on the list of thousands of items, but a Diocese of Davenport attorney estimated that they would bring about $10,000 if sold as a single lot. Among the items are:
19 crucifixes
A lock box containing 14 precious and semi-precious items of jewelry and sacred objects, including a silver cross with diamonds, a gold ring set with an amethyst, a Vatican Council II ring and a ring set with pearls and green stones
Altars, tabernacles, kneelers, sanctuary lamp, priests' vestments and stoles, holy water stands and fountains, chalice
Set of Catholic Messenger newspapers from 1881 to present
Shot glasses, bar glasses, liquor cabinet
Riding mowers, wood chipper, tractor, battery charger, drill press, snow blowers
30 serving trays, 200 plates, 200 bowls, 200 cups, 6 coffee decanters, 2 food serving lines, gas grill, fryer, meat grinder
Properties listed
The Diocese of Davenport lists in the bankruptcy filing four pieces of real estate that it owns. While the filing itself does not list their values, the Davenport city assessor has put their total value at $2.5 million.
House
803 E. 39th St., Davenport
Description: Two-story frame structure; 100-foot by 285-foot lot
Assessed value: $81,740
Farm
3718 Telegraph Road, Davenport
Description: A house and outbuildings; 25.5 acres
Assessed value: $110,630
Duplex
2761 Scott St., Davenport, home of Bishop William Franklin
Description: Two-story frame structure; 77.3-foot by 107-foot lot
Assessed value: $196,260
St.Vincent's Pastoral Center,
diocesan headquarters
2706 Gaines St., Davenport
Description: Includes four buildings; 9.47 acres
Assessed value: $2.147 million
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