Settlement of Diocese of Gallup Bankruptcy Case Hits a Snag

By Olivier Uyttebrouck
Albuquerque Journal
February 3, 2016

http://www.abqjournal.com/717400/news/settlement-of-diocese-of-gallup-bankruptcy-case-hits-a-snag.html

Progress in settling the 26-month-old Diocese of Gallup bankruptcy case has stumbled because an insurer is unwilling to provide detailed financial information demanded by a representative for future sex abuse claims against the diocese, attorneys told a judge on Tuesday.

An attorney for Catholic Mutual Relief Society of America, a church-owned nonprofit that insures the diocese, said the dispute may lead Catholic Mutual to withdraw its offer to pay future claims against the diocese. Attorneys described the future claims fund as a crucial part of the settlement.

“We are very close to saying that someone else should fund their future claims fund,” said David Spector, Catholic Mutual’s attorney. “We would hate to see this deal crater.”

The Diocese of Gallup in 2013 became the ninth Roman Catholic diocese in the U.S. to file for Chapter 11 reorganization bankruptcy in response to lawsuits alleging sexual abuse of children by clergy. Mediation talks in December led to a tentative agreement on funding a settlement, but unresolved details include setting up a trust fund to pay for future claims.

U.S. Bankruptcy Judge David T. Thuma last year appointed Michael P. Murphy, the managing director of Michigan-based AlixPartners LLP, to oversee the interests of clerical sexual abuse victims who may file claims in the future.

Thuma told Murphy and AlixPartners to decide by today whether the firm could serve as the claims representative based on a review of Catholic Mutual’s financial statement. Thuma scheduled a hearing at 3 p.m. today to hear Murphy’s response.

Kim Young, director of financial advisory services at AlixPartners, said the firm needs more than the financial statement to decide whether Catholic Mutual can pay for future claims.

“We are dealing with a black box,” Young said of Catholic Mutual’s finances.

Spector said AlixPartners is seeking “an extraordinary amount” of financial documentation, including the nonprofit’s balance sheet and the ability to question its chief financial officer, which Catholic Mutual has never provided in prior bankruptcy cases.

“Catholic Mutual isn’t going to turn over any financial information unless we have a fairly clear road map about how this process is going to work,” he said.