Judge Sorts out Tangled Church Bank Accounts

By Elizabeth Hardin-Burrola
Gallup Independent
February 12, 2014

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ALBUQUERQUE — U.S. Bankruptcy Court Judge David T. Thuma is working to find a remedy regarding a number of tangled bank accounts in the Diocese of Gallup’s Chapter 11 case.

And as document after document in the case continue to be filed, the number of problematic bank accounts continues to be identified.

Initially, the issue centered on a rather simply stated financial directive written in the Diocese of Gallup’s financial policies: “All parish bank accounts must use the Federal Employer Identification Number of the parish in order to help insure their tax exempt status. The parish must not use the FEIN of the diocese.”

Apparently, that wasn’t stated simply enough for a number of parish officials across the Gallup Diocese. Over the years, they have improperly opened bank accounts using the diocese’s tax identification number.

Unknown accounts

On Nov. 15, 2013, three days after the Gallup Diocese filed its Chapter 11 petition, Susan Boswell, the diocese’s lead bankruptcy attorney, told Thuma that diocesan officials had recently discovered a dozen Wells Fargo bank accounts that had been opened with the Gallup Diocese’s tax identification number, unbeknown to diocesan officials.

During the hearing, Thuma agreed to allow Wells Fargo to unfreeze the bank accounts so diocesan and federal bankruptcy officials could research the history and ownership of the accounts.

The basic question, of course, was do the bank accounts belong to the parishes or church entities whose officials opened the accounts, or do they belong to the Gallup Diocese because they were opened under the diocese’s tax identification number?

The broader question, which has also yet to be decided, is do the parishes and their assets also belong to the Diocese of Gallup’s estate and fall under the jurisdiction of U.S. Bankruptcy Court?

Unauthorized transfers

However, before bankruptcy officials could even begin to determine the answer to the first question, Boswell delivered more surprising news. On Jan. 27, in a motion requesting an emergency hearing, Boswell said a number of unnamed parish officials had closed some of the recently discovered accounts and moved the money into new accounts with new tax identification numbers, others had simply changed the accounts’ tax identification numbers. She also said a 13th previously unknown account had been discovered.

Of the 13 accounts, Boswell said two did belong to the diocese, one only had a one cent balance and should be closed, and one was an account that was unknown even to the parish. The remaining nine accounts had approximately $260,000 on deposit at the time the diocese filed its Chapter 11 petition.

The account for Our Lady of Fatima Church in Chinle contained the largest sum, listed at $151,467.48 the week before the bankruptcy filing.

In addition to the one account under the name of Our Lady of Fatima Church, the other accounts were listed under St. Isabel Mission in Lukachukai, Ariz. (two accounts), Risen Savior Mission in Bluewater, N.M. (two accounts), St. Mary of the Angels in Pinetop, Ariz. (one account), a Mass Intention Account in Winslow, Ariz., and St. Francis in Lumberton, N.M. (two accounts). Three of the accounts actually listed the Diocese of Gallup also on the account name.

No explanations

Although Boswell provided the names of the individuals who were authorized signers on the accounts, she did not provide the court information as to who specifically transferred the money out of the accounts. How and why the bank accounts were changed after the diocese filed for bankruptcy was also not unexplained.

In her motion, Boswell characterized the unauthorized changing of bank accounts and tax identification numbers as a result of “some miscommunications or misunderstandings” within the diocese.

Attorney James I. Stang had a different take on the situation. Stang, the legal counsel to the Unsecured Creditors Committee which represents clergy abuse victims in the diocese, asserted in a letter to those parish officials that they should be subjected to contempt sanctions for violating Thuma’s court order regarding the accounts.

More accounts

Before the hearing could be held Monday, Boswell filed yet another document stating the diocese had discovered four additional bank accounts opened with the diocese’s tax identification number. One was a Wells Fargo account for Our Lady of the Light in Cubero, N.M.. Two were Pinnacle Bank accounts for the Native American Lay Ministry program, and the last one was a certificate of deposit with Pinnacle Bank for St. Francis of Assisi in Lumberton, N.M.

During the hearing, Thuma did not appear to want to assess blame for the bank account confusion. Rather he solicited suggestions for a remedy how to monitor the normal use of the accounts while protecting the bulk of their assets. In addition to hearing from Boswell, Stang and Assistant U.S. Trustee Ronald E. Andazola, Thuma listened to suggestions from Arizona attorney Rob Charles, who told the court he had recently been hired to represent parishes in the diocese.

Thuma concluded the hearing by announcing he would prepare a draft order for all parties in the case to consider, and he continued the hearing until 11 a.m., Feb. 14.

Contact: religion@gallupindependent.com