First in a two-part series Diocese bankruptcy sheds light on hidden costs By Elizabeth Hardin-Burrola Gallup Independent correspondent religion@gallupindependent.com December 4, 2015 GALLUP – For the past two years, much of what has happened in the Diocese of Gallup’s bankruptcy case has taken place out of the public’s view. Most of the case’s important battles and agreements occur in private emails, phone calls and meetings between the different parties. Details about the case’s three mediation sessions — the most recent session being held in Phoenix this week — are confidential and carefully guarded. However, the bankruptcy case occasionally provides information about the Gallup Diocese that under normal circumstances would never be revealed — to either Catholics in the pews or to anyone outside chancery walls. An example of this are the monthly operating reports that diocesan attorneys file with the bankruptcy court. Each lengthy report contains several pages of expenditures that document how diocesan officials have spent church money throughout the bankruptcy. Much of the expenditures range from small purchases like postage to making large payouts like payroll. Sometimes buried between the postage and the payroll are expenditures that shed light on the inner workings of a Catholic diocese that has found itself in U.S. Bankruptcy Court because of clergy sexual abuse. Flagstaff investigators One such discovery involves payment for internal investigations Bishop James S. Wall has ordered since the Diocese of Gallup filed its Chapter 11 petition on Nov. 12, 2013. Those investigations have cost the diocese more than $22,700. A recent review of 22 months of expenditures, from December 2013 to September 2015, reveals Wall authorized four payments to Flagstaff Security Services LLC for internal investigations. In 2014, the bishop authorized payments of $4,530 in August, $4,938 in September, $3,163 in October and $10,113 in November. According to the website for Flagstaff Security Services, the firm employs retired federal law enforcement agents and it provides a variety of services including internal investigations, surveillance, asset searches, missing person cases, and tracking and locating missing inventory. The Arizona Corporation Commission lists Kenneth G. Engstrom as the firm’s agent and manager. It’s unknown what may have triggered the hiring of Flagstaff Security Services. But in April, in the midst of a dispute between attorneys for Catholic Mutual and the Gallup Diocese, Catholic Mutual filed a court document that stated of the 57 sex abuse claims filed against the diocese, a single claim alleged recent sexual abuse that occurred in July 2014. One month later, in August 2014, the Gallup Diocese began paying the Flagstaff firm for its investigative services. It’s also unclear whom Flagstaff Security Services was investigating. Repeated questions posed earlier in the year, as well as this week, have gone unanswered by the diocese’s attorneys and its media spokeswoman. Contrary to the standards set in the Charter for the Protection of Children and Young People, which was approved by the U.S. Conference of Catholic Bishops, Wall has never informed the public about this July 2014 abuse allegation or the internal investigations by Flagstaff Security Services. Wall has never informed the public about the identity of the accused abuser or the credibility of the allegation. Wall has also not explained whether the allegation was ever turned over to local law enforcement authorities for an independent investigation. Additional costs The monthly expenditure lists also shed light on the bankruptcy’s additional costs. According to quarterly reports of professional fees and expenses filed with the court, the Diocese of Gallup has racked up more than $3.2 million in bankruptcy fees as of Sept. 30. In addition to that constantly rising figure, the expenditure lists show the Gallup Diocese has paid $5,200 each quarter to the Department of Justice’s U.S. Trustee Program, for a total of $33,475 thus far. Assistant U.S. Trustee Ronald E. Andazola is assigned to the Diocese of Gallup’s bankruptcy case, and according to the Department of Justice, the primary role of the program is to serve as the “watchdog” over the bankruptcy process. The expenditure lists also detail a number of other bankruptcy costs. In May, the diocese paid $5,000 to JAMS Inc., a firm that provides mediation and arbitration services. Randall J. Newsome, a retired bankruptcy court judge and JAMS mediator, agreed to serve pro bono as the first mediator for the Diocese of Gallup’s case. That mediation proved to be unsuccessful. In July, the diocese reimbursed the Rev. Lawrence O’Keefe, the former rector of Gallup’s Sacred Heart Cathedral, $361 for his attendance at the first mediation session. In April, the diocese also paid $862 to Headquarters West Ltd., an Arizona agricultural real estate company that provides rural appraisals and ranch brokerage services. As for the reason the Diocese of Gallup filed for bankruptcy — mounting clergy sex abuse lawsuits and claims — the expenditure lists show the diocese paid $18,270 to five counseling agencies during the 22-month period. It paid $9,425 to Sokol Counseling & Consultation, $5,085 to Comprehensive Counseling Service, $1,560 to Q Counseling, $1,200 to Integrative Behavioral Health and $1,000 to the Catholic Counseling Agency. Some of these counseling services may have been provided to Gallup priests and seminarians or they may have been provided to clergy sex abuse survivors who have requested counseling assistance. In spite of repeated media requests through the years, the Diocese of Gallup has never released information as to the number of abuse allegations it has received, the amount it has spent on legal fees and settlement deals, or the amount it has paid on counseling services for abuse survivors. TOMORROW: A look at the money spent on credit cards, travel, utilities and retirement plans.

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