Diocese Questioned about Finances
By Elizabeth Hardin-Burrola
December 28, 2013
Bishop James S. Wall’s recent testimony during the Diocese of Gallup’s Unsecured Creditors Committee meeting raised questions about just how well prepared diocesan officials were when they filed their Chapter 11 petition.
Wall and Christopher G. Linscott, the diocese’s recently hired financial consultant from Tucson, Ariz., offered sworn testimony about the Gallup Diocese’s finances at the public meeting, which was held in Albuquerque’s U.S. Bankruptcy Court Dec. 19. They were accompanied by Susan G. Boswell, the diocese’s lead bankruptcy attorney from Tucson, and Thomas D. Walker, its Albuquerque bankruptcy attorney.
Assistant U.S. Trustee Ronald E. Andazola, the Department of Justice official who conducted the meeting, asked the bishop what goals he had for the submission of a Chapter 11 reorganization plan.
“In terms of dates, not any hard dates,” Wall said. “As soon as possible.”
Andazola also asked Wall if the diocese was considering the liquidation of property to raise settlement money for clergy sex abuse claimants.
“I think we’re looking at everything. ... We want to come up with a good fund,” Wall said.
But just how long will Wall have to submit a reorganization plan and raise settlement money? The timeline requirements of the federal bankruptcy court system and the vocal expectations of attorneys representing sex abuse claimants may force some “hard dates” on the Gallup bishop.
Two of those attorneys, John C. Manly of California and Robert E. Pastor of Arizona, co-counsels currently representing 14 sex abuse claimants, questioned why the Gallup Diocese filed its Chapter 11 petition without first taking the time to assemble complete and accurate financial data.
Manly, appearing to scoff when Linscott and Wall could not provide a figure for the diocese’s net worth, asked them if they didn’t think it would have been “a good first step” to determine the diocese’s net worth before filing for bankruptcy.
Under questioning by Pastor, Wall admitted he had been considering Chapter 11 reorganization for a long time and had begun talking with bankruptcy attorney Boswell about two years ago. Wall also agreed that Manly and Pastor had met with Boswell and Deacon James P. Hoy, the former diocesan chief financial officer, to discuss the diocese’s possible bankruptcy plans 18 months ago, in June 2012.
Pastor raised the ire of Boswell when he produced a 12-page confidential financial document that he said included a list of all real estate the Gallup Diocese owns in Arizona and New Mexico, along with financial values listed for each property.
Wall has submitted a Statement of Financial Affairs to the bankruptcy court, which includes a list of diocesan-owned property, but without any financial values included.
According to Pastor, attorneys for the diocese produced the confidential financial document during litigation negotiations involving the first clergy sex abuse lawsuit Pastor filed in Arizona’s Coconino County Superior Court.
Earlier in the meeting, Andazola had similarly questioned why the Gallup chancery property had been valued at more than $315,000 in a 2012 fiscal year audit report, but was listed as having an “unknown value” in the bankruptcy documents.
When Pastor attempted to give Wall a copy of the 12-page confidential document to review, Boswell jumped up from her seat, grabbed the document, and threw it back on Pastor’s table. After some bickering between the attorneys on different types of real estate valuations, Boswell agreed to accept the document for Wall and provide a copy to Andazola.
Much of the meeting’s testimony focused on the more than 160 pieces of “trust” and “real” property listed by Wall in his Statement of Financial Affairs and the differences between real estate replacement value and market value.
Because the diocese has not maintained a record of all its properties or copies of all its deeds, diocesan officials said they had to ask county officials in both states to search land records for diocesan property. According to Boswell, the diocese is now trying to retain brokers who can determine the market value of key properties.
“To date it has been a challenge,” Boswell admitted, explaining that the diocese owns various properties in widespread locations.
Other testimony centered on the diocese’s legal argument that Gallup priests and Gallup parishes are somehow separate from the Diocese of Gallup.
“No they’re not employees of the diocese,” Linscott said of Catholic priests working in the Diocese. Later in his testimony, Linscott admitted some parishes might need to contribute money to the diocese for settlements with sex abuse claimants.
When Manly asked Wall how much money parishes can spend without approval from the chancery or if parishes can enter into contracts without the chancery’s approval, Wall admitted he did not know the answers.
“Well, they’re on the website,” Manly said, explaining the Gallup Diocese had the information posted online under its fiscal guidelines.
“Can parishes fire their pastors?” Manly asked the bishop.
“I don’t believe so,” Wall replied.
Walker, the diocese’s Albuquerque attorney, angrily objected twice to Manly and Pastor’s line of questioning during the meeting. At one point, Walker held out his right arm in a blocking motion toward Pastor and said, “This isn’t a deposition, do you know that?”
This first Unsecured Creditors Committee meeting exceeded its scheduled time and ran nearly four hours. It will reconvene at 10 a.m., Jan. 23, in Judge David T. Thuma’s courtroom, located in Albuquerque’s U.S. Bankruptcy Court, 500 Gold Ave. S.W. The newly appointed committee, composed of seven clergy sex abuse survivors from the Gallup Diocese, should have an attorney by that date who will be able to ask further questions about diocesan finances. The meeting is open to the public.