Lawyer Wants Church Funds Frozen

By Gillian Flaccus
The Associated Press, carried in Contra Costa Times [Los Angeles]
September 2, 2004

LOS ANGELES - A lawyer for alleged victims of sexual abuse by priests alleged Wednesday that the Roman Catholic Diocese of San Diego used questionable financial tactics to secure a nearly $30 million bond to build three high schools.

A motion filed in Los Angeles County Superior Court alleges that the diocese created a "straw corporation" last year and gifted it with property worth $30 million to $325 million. The property was used as collateral for a federal tax-exempt bond issued to the new corporation.

The motion alleges that the corporation was created to avoid disclosing sexual abuse lawsuits that would have disqualified the diocese from the bond.

It asks Judge Haley Fromholz to reverse the transfers and freeze the diocese's remaining assets, including property, bank accounts and investment portfolios. A hearing has not been scheduled on the motion.

Fromholz is the judge overseeing all Southern California clergy abuse cases.

Diocese officials said bond underwriters required them to form the new corporation to manage money dedicated to school construction. Chancellor Rodrigo Valdivia has said the diocese would be reimbursed for the properties' assessed value after the corporation had repaid the full amount of the 30-year bond.

"We don't try to do illegal things," he said when questions about the issue first arose last month.

Andrea Leavitt, the San Diego attorney who filed the motion, said there are about 145 claims of sexual abuse against the diocese and she was concerned that the transfer of assets threatened her clients' ability to collect on any future settlements.

"They were transferring away substantial amounts of property which could be used to settle the judgment for these victims who've been terribly, terribly hurt," said Leavitt, who represents about 10 plaintiffs. "It becomes very important -- especially if they may not have insurance coverage to indemnify them -- that they preserve these properties."

Diocesan attorney Dan White and H.L. Hal Gardner, the diocesan finance officer whose signature appears on many of the bond application documents, did not return calls for comment Wednesday.

Catholic Secondary Education-Diocese of San Diego, Inc., was incorporated April 9, 2003. The corporation shares the diocese's mailing address and processing agent, according to filings with the California secretary of state.


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