Lawyers in Milwaukee Archdiocese Bankruptcy Case Seek Mediator
By Annysa Johnson
Milwaukee Journal Sentinel
April 27, 2012
|The Catholic Archdiocese of Milwaukee, which faces more than a dozen civil fraud lawsuits over its handling of clergy sex abuse cases, filed for Chapter 11 bankruptcy protection in January. As the case proceeds, we'll have updates, analysis, documents and more.|
Lawyers for creditors in the Archdiocese of Milwaukee bankruptcy on Friday threatened to sue to recover $35 million it says the archdiocese fraudulently transferred to a parish trust before filing for Chapter 11 and asked the judge to appoint a mediator as a first step toward a settlement of the 14-month-old case.
Meanwhile, the attorney for 350 victims in the bankruptcy filed a state court lawsuit against a Caledonia parish, putting the archdiocese on notice that if parishes are separate legal entities as it argues in the bankruptcy, then they, too, will be sued.
"This is forced by the position the archdiocese has taken. They leave us no choice," said attorney Jeffrey Anderson.
Daryl Diesing, one of several attorneys representing the archdiocese, said he had not yet spoken to his client but denied unequivocally that any funds were sheltered to keep them from being tapped for a sex abuse settlement.
He was noncommittal on the request for mediation, saying, "Generally, the most important thing at this stage is to resolve which claims are eligible," he said.
The archdiocese has objected to 10 claims to date that, if successful, could lead to the dismissal of almost all of the 570 sex abuse claims filed in the case. Three of those objections have been ruled on and are pending appeals; seven have yet to be argued.
The archdiocese filed for bankruptcy in January 2011 as a way to settle its mounting sex abuse claims and create a reorganizational plan that would allow it to continue operating. Although its assets were listed as $100 million at the time, it said the vast majority of that was in designated funds that could not be used for settlement.
The threat of the $35 million lawsuit and request for mediation appear in a motion filed Friday. The motion outlines the costly legal wrangling that since has ensued.
Assets that creditors are pursuing or investigating include a $57 million cemetery trust that is already in litigation, $16 million in accounts in the archdiocese's name at JP Morgan Chase Bank and Faith in Our Future funds distributed to the archdiocese as part of a $105 million capital campaign in which proceeds were split with parishes.
Unless settled, it said, the cemetery trust dispute would require the deposition of New York Cardinal Timothy Dolan, who created the trust while archbishop of Milwaukee, and evidentiary trials to resolve disputes of facts.
The detailed filing is intended to make the case to U.S. Bankruptcy Judge Susan V. Kelley that mediation would be less costly to the archdiocese than resolving all of the pending issues detailed in the motion.
"We're spending a lot of money in this case that could otherwise go to survivors," said Jim Stang, lead attorney for the creditors' committee, which is composed of sex abuse victims.
The archdiocese's strategy has been to reduce the pool of creditors eligible for settlement. If successful, legal experts say, the archdiocese would need less money for victims and could argue that the small creditor pool doesn't justify the expensive litigation and investigations in pursuit of assets.
The lawsuit filed in Racine County Circuit Court by Anderson names St. Louis Parish in Caledonia, where now-defrocked priest Daniel Budzynski served from 1984 to 1987. The lawsuit accuses Budzynski of molesting a young altar boy, identified in the lawsuit as John Doe 21, during that time.
It alleges the parish knew or should have known that Budzynski was a threat, and that it and then-Archbishop Rembert Weakland led parents to believe he was not.