Lawyer Fees Reach $11 Million for Twin Cities Archdiocese

By Jean Hopfensperger
Star Tribune
September 21, 2016

http://www.startribune.com/lawyer-fees-reach-11-million-for-twin-cities-archdiocese/394364831/

The Archdiocese of St. Paul and Minneapolis has racked up $11 million in fees to attorneys and other professionals since declaring bankruptcy in January 2015.

Another $1 million is divided between the U.S. Conference of Catholic Bishops and the Minnesota Catholic Conference, a lobbying organization.

Child support payments of about $600 also show up on many monthly financial reports, as well as thousands of dollars in mundane expenses ranging from catering to counseling to shredding services.

The spending, revealed in the archdiocese's monthly financial reports filed in U.S. Bankruptcy Court, offers a rare view of the financial operations of the archdiocese — home to a reported 800,000 Catholics in the 12-county metro area.

This year alone, attorney and professional fees reached nearly $6 million through July. They ranged from $388,000 to $867,000 a month for at least five law firms and dozens of staffers. Legal fees accounted for most of that amount.

That's on top of more than $5 million spent last year.

Tom Mertens, chief financial officer of the archdiocese, said the archdiocese pays for "a variety of professionals," not just its own attorneys. In an e-mailed statement, he stressed that archdiocese "continues to work on increasing the amount available to sexual abuse claimants."

More than 400 clergy sex abuse claims have been filed with the court since the archdiocese filed for bankruptcy last year.

Soaring legal fees are not new in bankruptcies, but they've drawn particular attention in church cases nationally.

"Lawyer fees in bankruptcies are always a hot issue," said Temple University law professor Jonathan Lipson, a national expert on church bankruptcies.

"On the other hand, you need to look at the case," he said. "Are they producing value? If they come to a settlement sooner rather than later, that is value."

Making public the cost of legal counsel, as well as ordinary archdiocese spending, is particularly important because Catholics in the pews provide the biggest share of archdiocese funding, said Charles Zech, director of the Center for the Study of Church Management at Villanova University in Pennsylvania.

Parishes contribute 65 percent of the archdiocese's budget, its annual reports show. Those contributions were $22 million in fiscal 2015, according to its financial report.

"People like to know where their money is going," said Zech. "Spending a quarter to a half of your monthly revenue on attorneys is disconcerting."

The figures come as the bankruptcy, now in its 21st month, shows no sign of concluding. The archdiocese and the committee representing abuse victims filed conflicting financial reorganization plans with the court in recent months, which Lipson calls "a recipe for high legal fees."

$11 million and counting

The archdiocese accrued at least $5 million in fees during the first year of bankruptcy, according to court compensation requests.

It racked up nearly another $6 million through July of this year, the last month available.

Under bankruptcy law, the archdiocese must pay for its legal counsel as well as attorneys for the victims' committee — the unsecured creditors' committee — and the parishes' committee.

In addition, the archdiocese has separate attorneys in a Ramsey County criminal lawsuit related to its handling of former St. Paul priest Curtis Wehmeyer. The charges were dropped in July. It also paid for real estate services in the sale of four archdiocese properties generating about $8 million.

The archdiocese's last attorney payment made was $2.6 million in May, reports say. A $3.1 million balance remained through July, including:

• $1.2 million to bankruptcy counsel Briggs and Morgan.

• $50,000 to legal counsel Meier, Kennedy & Quinn.

• $902,000 to Stinson Leonard Street, victims' attorneys.

• $556,000 for parish committee attorneys

• $320,200 to Fredrikson & Byron for Ramsey County case.

Archdiocese bankruptcy attorney Charles Rogers said his firm has worked to minimize expenses, but the case is complex. There are claim-by-claim evaluations, he said, including from schools and parishes "to determine what share of liability might be for the 400 claims."

There are also negotiations with more than 10 insurance companies dating back to claims in the 1940s.

"We have hundreds of moving parts," said Rogers.

A dozen dioceses and archdioceses in the United States have filed for bankruptcy in the wake of clergy abuse claims. Their attorney fees varied, based on size and circumstances.

The Diocese of Helena, Mont., considered a model of efficiency after settling its bankruptcy in 13 months, spent $2.5 million with 362 claims ending in 2014. The Milwaukee Archdiocese, considered a worst-case scenario, accrued at least $20 million in legal fees in a protracted battle in which the archdiocese challenged all 575 claims.

Judging whether the Twin Cities archdiocese fees are reasonable is not simple, said Lipson.

"It's hard to know whether to blame anyone, and if so, who," said Lipson. "I believe the big danger in these cases is the main parties view bankruptcy court as another court to continue their civil litigation, and not as a forum to resolve financial distress."

Child support?

Attorneys' fees aside, the line items in the reports that stand out are those marked "Garnishments/Child Support — Cash." Going back to last September, the garnishments show up every month except April and July, and average about $600 a month.

Mertens, in a written statement, said the line item was a "payroll category" and "does not mean that account is designated specifically for child support payments."

The December garnishments, for example, were for an employee with an education loan, he said. Subsequent garnishments paid off the loan in April, he said.

Financial reports, however, indicate the child support garnishments continued in May and June, but not July, the last report available.

The financial reports also provide a peek into the church's day-to-day expenses. The archdiocese spends nearly half of its annual budget on priest services and administrative offices and staff. Everyday spending ranges from IT repairs to catering events to candy purchases.

In June, for example, a $1,294 fee is listed from MGM Wine and Spirits referenced "Archbishop Hebda" — a likely reference to his installation ceremony.

Good coffee and clean water are also on tap. There's a $613 bill from Berry Coffee and $84 bill from Culligan in July. Cleaning up paperwork goes to Shred Right, billed $218 that month.

Retired priests apparently are well fed. In July, Coborn's food made deliveries of $1,189 and $1,652 to their Byrne Residence in St. Paul, and there's a $519 bill from Northwestern Fruit Co.

Seeing such information "is absolutely rare," said Zech.

"You'd never see this kind of detail unless there is a situation like this," he said.