Gallup Diocese Files Plan to Compensate Abuse Victims

By Tom Corrigan
Wall Street Journal
March 21, 2016

http://blogs.wsj.com/bankruptcy/2016/03/21/gallup-diocese-files-plan-to-compensate-abuse-victims/

The Roman Catholic Diocese of Gallup, N.M., on Monday unveiled a $22 million reorganization plan, the bulk of which will be used to compensate 57 clergy sexual-abuse victims.

The plan, filed Monday with the U.S. Bankruptcy Court in Albuquerque, N.M., lays out how the diocese expects to repay its creditors, the vast majority of whom say they were sexually abused by the diocese’s clergy decades ago.

The Diocese of Gallup, which serves about 60,000 parishioners in New Mexico, Arizona and several Native American reservations, filed for chapter 11 protection in late 2013. The filing halted more than a dozen lawsuits related to sexual-abuse allegations.

“It is impossible to overstate the tragedy of the abuse that was inflicted on the children and teenagers of the diocese,” lawyers for the diocese said Monday in court papers.

The bankruptcy plan, which is subject to the approval of Judge David Thuma, was largely drawn up in court-ordered mediation sessions after initial talks with the diocese’s insurance carriers and other participants broke down.

The plan relies on at least $22 million to repay victims as well as lawyers and other creditors. Of that amount, $11.55 million would come from a settlement in which diocesan insurer Catholic Mutual will buy back its policies. The diocese itself is slated to contribute just over $3 million to the plan.

“This contribution is a real stretch for both the diocese and the parishes,” diocese lawyer Susan Boswell, said in an interview Monday, referring to the Gallup diocese’s status as one of the poorest dioceses in the country.

Other insurance carriers, the Diocese of Phoenix, some of the Diocese of Gallup’s parishes, two Franciscan religious orders and two foundations that support the diocese will also contribute to the restructuring plan.

In return for their contributions, the Gallup diocese and others will receive protection from future lawsuits tied to past abuse. The bankruptcy plan also restructures other aspects of the diocese’s finances, which it says will help it continue its ministries, child protection programs and services for the poor.

Non-monetary terms negotiated as part of the bankruptcy—which many victims say are more meaningful than monetary compensation and often include apology letters and provisions aimed at protecting children from abuse in the future—are still being negotiated. Victims lawyer James Stang said in court Monday that he hopes to file a list of those provisions with the court by the end of the week.

In an interview, Mr. Stang called the bankruptcy plan and the expected payout for victims a “fair deal.”

The average award per victims is expected to be greater than what victims won in the Archdiocese of Milwaukee’s bankruptcy, which came to a close in November after five years of bitter legal battling.

The archdiocese settled with nearly 600 victims for $21 million. About 350 victims shared the bulk of that settlement, and about another 100 victims each received $2,000, court papers show.

The bill for bankruptcy lawyers and other professionals in the Milwaukee Archdiocese’s case rose to about $21 million. Similar fees and expenses in Gallup will top $3 million, according to Ms. Boswell.

The Gallup diocese is one of 15 Catholic dioceses and religious orders that have used bankruptcy to address mounting sexual abuse lawsuits. Since 2004, the Catholic Church in the U.S. has paid out an estimated $3 billion to cover settlements, therapy for victims, support for offenders, attorney fees and other costs, according to a report by the U.S. Conference of Catholic Bishops.

Write to Tom Corrigan at tom.corrigan@wsj.com