Diocese Nears Threshold on Bankruptcy
Decision may come this week ahead of civil trial in Yuma
By Stephanie Innes
Arizona Daily Star
August 16, 2004
As he prepares for a yearlong deployment in Iraq, U.S. Army investigator
Brandon Croly feels little hope for a resolution to the sexual-molestation
lawsuit he filed against the Roman Catholic Diocese of Tucson.
The diocese is making preparations to declare bankruptcy, and the man
accused of molesting Croly, the Rev. Fernando Manzo, has been missing
since December, when the Tucson Police Department began investigating
the allegations of sexual abuse.
Croly filed the civil action earlier this year, one of 20 pending lawsuits
against the diocese that allege sexual abuse of children by priests. Manzo
also is Croly's uncle.
The diocese could decide as early as this week whether to take the extraordinary
step of declaring bankruptcy - a move that could delay for years potentially
damaging cases such as Croly's.
If he decides to file for bankruptcy, Diocese of Tucson Bishop Gerald
F. Kicanas would follow the lead of his former Chicago colleague, Archbishop
John G. Vlazny of Portland, Ore. Tucson would become the second Catholic
diocese in the country to seek federal Chapter 11 bankruptcy protection
as a means of meeting the costs of lawsuits alleging sexual abuse of children
A PBS television crew was in Tucson last week to tape a report on the
bankruptcy deliberations, and Catholic leaders around the country will
be watching closely for Kicanas' potentially historic decision.
The bishop says he will make a decision by mid-September, when the diocese
is scheduled to go to court as a defendant in Yuma in a civil trial over
the alleged molestation of two teen-age brothers by the Rev. Juan Guillen.
Guillen is serving a prison sentence for sexually abusing another minor.
"I think the likelihood of them filing as trial grows nearer increases,"
said Jeffrey R. Anderson, a St. Paul, Minn.-based attorney representing
plaintiffs with claims of sexual abuse against the Archdiocese of Portland.
"It will happen when I come to understand that Chapter 11 is the
best and only way," Kicanas said last week. "My hope and preference
has always been to reach settlements within our resources."
Anderson noted that Vlazny filed for bankruptcy on the same morning the
Portland Archdiocese was scheduled to go to trial in a case involving
allegations of clergy abuse by the Rev. Maurice Grammond, who has been
accused of molesting more than 50 boys from the early to mid-1980s.
The closer the bishop gets to the witness stand, the more likely filing
becomes, Anderson said, adding that because diocesan bankruptcy is both
uncharted territory and complex, it could take years to resolve. He said
lawyers for the Portland Archdiocese have signaled bankruptcy proceedings
could take six years, though he said plaintiff attorneys are trying to
expedite the process.
But bankruptcy will not absolve the diocese of financial responsibility
to abuse victims, said Jim Stang, a Los Angeles-based attorney. Stang,
who is not involved with the Diocese of Tucson case, said whether it's
through mediation or jury trials, the bankruptcy court will ensure pending
legal actions such as Croly's are resolved.
It's also possible that a "future-claims representative" would
be appointed, which is what happened with some of the asbestos companies
that filed for bankruptcy, he said. The future-claims representative would
negotiate with the diocese to set up a trust for future sexual abuse claims,
Stang and Clifford Altfeld, a Tucson bankruptcy attorney who has consulted
on sex abuse cases against the diocese, both said the result of a diocesan
bankruptcy could be a campaign for more donations from parishioners to
help pay creditors.
Yet the ultimate result of bankruptcy for the diocese and its parishioners,
both in Portland and Tucson, remains unclear - the biggest point of contention
being whether it's the diocese or the parishes themselves that own individual
churches. For that reason, the Diocese of Tucson's 75 parishes have been
consulting with their own bankruptcy lawyers, separate from those representing
the diocesan administration.
In a worst-case scenario for the local church, parishes will be included
as part of the bankrupt estate - a finding with the potential to cripple
the diocese's daily operations because it gives the bankruptcy judge leeway
to rule that parishes should be liquidated to pay creditors.
But Altfeld, who has consulted with local lawyer Lynne M. Cadigan on sex
abuse cases against the diocese, predicts that liquidation of parishes,
while a legal possibility, is unlikely.
"I think in the worst case, a parish is found to be worth $1 million
and the diocese is given a choice to liquidate for the $1 million or raise
the amount equal to the assets - and they can do that over time,"
Kicanas said last week that parishes are not part of the diocese's overall
worth. He said that under church law - called canon law - the diocese
holds parish land in trust for individual churches. But some bankruptcy
experts say canon law might not hold up in court.
"It's extremely difficult to predict what will happen. It's contrary
to the spirit of canon law that the bishop would turn over control of
his diocese to another entity," said Patrick Wall, a former Benedictine
monk now working for a Costa Mesa, Calif., law firm representing plaintiffs
in priest abuse cases against the Archdiocese of Los Angeles and the Diocese
Some Catholics might be reluctant to give money to the church if they
think it will go to lawsuit settlements, Wall said.
"But in bankruptcy, everything is on the butcher block, from parishes
to schools," he said, adding that even separate entities such as
the Catholic Foundation for the Diocese of Tucson could be part of the
Kicanas maintains the purpose of declaring bankruptcy would not be delaying
pending civil actions. Rather, he says, it would be a way to ensure all
victims of abuse are treated equitably regardless of when they made claims.
He also strongly believes in continuing the operation of the diocese's
75 parishes and last week urged diocesan priests to focus on fulfilling
the mission of the Catholic Church rather than dwelling on a possible
Croly, a California father of six, understands that a resolution to his
case is not imminent. But Cadigan, his lawyer, says justice delayed is
Cadigan, who represents plaintiffs in 14 other cases against the diocese,
is skeptical that the diocese will file for bankruptcy. She says the threats
are another delay tactic.
Until his disappearance Dec. 8, Manzo was the pastor at San Felipe de
Jesus Catholic Church in Nogales, Ariz. Croly, a graduate of Tucson High
Magnet School, says Manzo sexually molested him for four years beginning
when Croly was 8.
"He made it clear to me this was the right thing to do. He said it
was God's work, and it would happen at churches, in the rectories,"
Croly said. "He gave me a lot of alcohol. Other people in the church
had to know what was happening."
Manzo, 48, has not been charged and is not named on the diocese's list
of priests with "credible" accusations of sexual abusing children
Croly said he contacted police last year after he remembered the abuse
by his uncle while conducting a military child-molestation investigation
in Hawaii as part of his job.
"It's disturbing only because I worry that he's somewhere else, acting
underneath the church," he said.
? Contact reporter Stephanie Innes at 573-4134 or at firstname.lastname@example.org.