US diocese files for bankruptcy ahead of abuse case
NIALL STANAGE/The Irish Times
October 20, 2009
THE CATHOLIC diocese of Wilmington has become the seventh diocese in the US to file for bankruptcy protection while facing a barrage of claims for compensation from people who allege they were abused by clergy.
The diocese, which serves about 233,000 Catholics in the states of Delaware and Maryland, made the filing late on Sunday. A civil case brought by a 57-year-old man who claims he was molested more than 100 times by a now-defrocked priest was due to start yesterday.
The bishop who heads the diocese, Dr Francis Malooly, described the filing in a statement as “a painful decision, one that I hoped and prayed I would never have to make”. He believed the diocese had no other choice and that the filing was “in no way intended to dodge responsibility for past criminal misconduct”.
His claims were met with scorn by Thomas Neuberger, a lawyer based in Wilmington, Delaware, who represents 88 people with abuse claims against the diocese.
“It’s part of their continuing cover-up,” Mr Neuberger told The Irish Times. “They have done everything they can to cover up their misdeeds.”
He claimed that delaying court cases for as long as possible was part of what he termed a “national playbook” adopted by the Catholic Church in the US when confronting abuse scandals.
“We have five or six people who are dying and they are going to lose their trial dates as a result of this,” he said. “The longer they [the Church hierarchy] delay, the more people will die.”
Mr Neuberger added that he intended to deploy forensic accountants to examine the diocese’s accounts in a bid to determine if it was trying to hide assets.
Bob Krebs, a spokesman for the diocese, responded: “We don’t see this as a delaying tactic at all. If anything, this is going to bring about a quicker resolution to all the cases because all of this will be decided by a bankruptcy judge.
“Before, we had numerous cases scheduled out to 2011 and other cases not even scheduled, so this could have gone on for three or four years.”
Mr Krebs also stated that the bankruptcy protection process would lead to “more transparency, if anything”, regarding the financial position of the diocese.
The first Catholic diocese to file for bankruptcy protection in the US was that of Portland, Oregon, in 2004. Since then, dioceses in the states of California, Arizona, Washington, Iowa and Alaska have followed suit.
Chapter 11 filings, as bankruptcy protection applications are known, are most commonly used by corporations to hold off immediate demands for payment by creditors while the corporation goes through some form of reorganisation. If the reorganisation is successful, the company than “emerges” from chapter 11.
In a question-and-answer document distributed yesterday, the Wilmington diocese made no estimate of how long it would remain under bankruptcy protection, pledging only to emerge “as soon as possible”.
The current plight of the diocese dates back to the passage of the Delaware Child Victims Act in 2007. The legislation lifted, for a two-year period, the statute of limitations that had previously been in place for civil law suits pertaining to child sexual abuse.
At least 190 plaintiffs filed claims, about two-thirds of which were filed against the diocese or individual parish churches. Estimates of the likely total bill hover around $100 million (€67 million).
Filing for bankruptcy: AIB a creditor
The diocese of Wilmington names only two creditors in its bankruptcy filings to whom specific fees are owed – and one of them is Allied Irish Banks (AIB).
According to the court documents, AIB has a valid claim regarding a letter of credit in the sum of $11 million. The Wilmington Trust Company, a retail and commercial bank, is also owed $11 million, though this pertains to a loan rather than a letter of credit.
A footnote regarding the AIB claim states that the “amount owed as of the bankruptcy petition date may be significantly less” than the figure given.
A letter of credit is, in lay terms, a promise to pay a given amount. The device is often used in international trade where it functions somewhat like a guaranteed cheque.
Little is known about the specifics of the arrangement between AIB and the diocese.
A spokesperson for the bank, contacted yesterday, declined to comment on its chances of recovering the money owed.
The letter of credit appears to have been organised through an AIB office on New York’s Park Avenue.
The diocese estimates its total assets as between $50 million and $100 million in the court documents.
Estimated debts are given as between $100 million and $500 million, while the total number of creditors is estimated to be between 200 and 999. NIALL STANAGE