Bishop Goes before Bankruptcy Trustee
By Elizabeth Hardin-Burrola
December 27, 2013
he Diocese of Gallup’s petition for Chapter 11 reorganization continues to raise far more questions about the diocese’s finances rather than provide answers.
With the initial bankruptcy filing, Gallup Bishop James S. Wall submitted an opening declaration in U.S. Bankruptcy Court stating the Gallup Diocese “is the poorest diocese in the United States” without providing any facts or figures to substantiate that claim. On Nov. 26, Wall submitted a lengthy Statement of Financial Affairs, featuring incomplete documentation of properties in Arizona and New Mexico with reportedly “unknown” real estate value.
Wall’s sworn testimony during an Unsecured Creditors Committee meeting Dec. 19 didn’t provide much more clarification. The public meeting was supposed to produce answers about the diocese’s finances to the largest group of unsecured creditors in the bankruptcy case, survivors of clergy sex abuse.
“This is an opportunity to learn what the resources of the diocese are,” Assistant U.S. Trustee Ronald Andazola said in his opening remarks.
Andazola, employed with the Department of Justice, oversaw the meeting and led the initial questioning.
Wall, however, was frequently not able to answer many of the questions posed to him about the diocese’s finances, its financial policies or the property it owns.
The individual who might have been able to answer those questions, Deacon James P. Hoy, the former diocesan chief financial officer for 14 years, was not in attendance. Hoy resigned June 30, about two months prior to the Chapter 11 announcement. Hoy’s financial policies and his financial record keeping, however, were the subject of many questions posed to the bishop.
Poorly kept records
In addition to Andazola, private attorneys John C. Manly and James I. Stang, of California, Robert E. Pastor, of Arizona, and Richard T. Fass, of Texas, all representing sex abuse claimants, also questioned the bishop.
Wall, looking somber and speaking very softly, was assisted with the questions by Christopher G. Linscott, the Diocese of Gallup’s recently hired financial consultant from Tucson. Susan G. Boswell, the diocese’s lead bankruptcy attorney, also from Tucson, occasionally advised Wall about how to answer.
During the meeting, which ran nearly four hours, Wall and Linscott testified about a variety of subjects including audits of the diocese, loans, bank accounts, clergy abuse lawsuits, an underfunded Priests Retirement Fund, oil and gas leases, and property deeds. Many of their answers spoke to a diocesan financial office in apparent disarray, with poorly kept records.
Andazola said he had been given a copy of the most recent audit of the diocese, which was for fiscal year 2012. He was given an incomplete copy, he said, and he requested the audit’s missing pages. Andazola noted the audit indicated the diocese had spent $114,000 on legal fees and settlement payments to clergy abuse victims during 2012.
Andazola also requested Wall give him a copy of the report the bishop submitted to the Vatican during his “ad limina” visit which reportedly includes financial information about the diocese.
Linscott was able to provide an annual diocesan revenue figure of $2.6 to $2.7 million for fiscal year 2012, but he was not able to specify how much revenue came from restricted or unrestricted funds. Neither Linscott nor Wall could explain some “allocations” listed in the 2012 audit.
Wall admitted he hadn’t authorized an audit of the most recent fiscal year, ending June 30, 2013, which fell just two months before his Chapter 11 announcement and which coincided with Hoy’s date of resignation. “The primary reason one wasn’t done this year was because of the costs,” Wall said.
Loans and leases
Two undated loans signed with other Catholic dioceses, $29,000 from the Archdiocese of Santa Fe and $200,000 from the Diocese of Phoenix, were arranged because the Gallup Diocese needed money to file its Chapter 11 petition, Wall explained.
The diocese also signed a $200,000 promissory note with Pinnacle Bank in 2011. Wall said he thought the money had been borrowed to assist Gallup Catholic School, but he was not sure as to the loan’s specific need.
According to Wall and Linscott, the diocese recently discovered 12 Wells Fargo bank accounts that were not in the diocese’s name but were using its tax I.D. number. Two accounts had no money, one account for the local Marriage Encounter program had $5,000, and the largest account, opened in the name of a parish on the Navajo Nation, had $150,000. Diocesan officials are now trying to determine who opened the accounts.
Although 13 clergy abuse lawsuits have been filed against the Gallup Diocese in Arizona’s Coconino County Superior Court, Wall was unaware the Gallup Diocese had an Arizona attorney representing the diocese in at least one of those cases, and he was not able to answer questions about what other Catholic dioceses or religious orders were co-defendants in the cases or which ones might share legal liability for clergy abuse claims.
Linscott admitted money intended for the Priest Retirement Fund or Pension Plan used to be deposited into a general checking account, but now the money is being put into the proper custodial account. “It is an underfunded plan,” Linscott said, adding he did not know what the total “underfunded amount” was.
Although Linscott said the diocese apparently receives about $10,000 annually from oil and gas leases, its financial office doesn’t have documentation as to where those properties are located.
And finally, Wall, Linscott and Boswell admitted that diocesan officials had to seek the help of county officials in Arizona and New Mexico to search county land records to develop a list of the diocese’s own real estate holdings.
Editor’s Note: Saturday’s Part 2 looks at the Diocese of Gallup’s list of properties and other contentious issues in the Unsecured Creditors Committee meeting.