Diocese Bankruptcy Deal Sets Aside $15 Million for Victims

By Almendra Carpizo
Calaveras Enterprise
September 23, 2016

The Diocese of Stockton on Tuesday announced a plan that could result in its exit out of bankruptcy more than two years after legal costs stemming from dozens of child sexual-abuse lawsuits depleted its funds.

What impact that would have on priest molestation victims in Calaveras County was not immediately clear. John C. Manley, an attorney who has represented some of the victims at St. Andrew’s Parish in San Andreas, did not immediately respond to a telephone message.

Both the Rev. Oliver O’Grady, who was convicted of molestation charges and featured in the noted documentary “See No Evil” and later the Rev. Michael Kelley served stints at St. Andrew’s Parish in San Andreas.

The Calaveras County District Attorney’s Office in 2011 filed criminal charges against Kelly. Kelly was accused of molesting a 10-year-old boy over a two-year period while serving at the church. In 2014, Kelly was indicted and a judge issued a warrant for his arrest. He is believed to be living in Ireland. However, the case was withdrawn this year because the victim died, a District Attorney’s Office spokeswoman said Thursday.

In 2012, the Diocese of Stockton settled a case with one of Kelly’s victims for $3.75 million.

Bishop Stephen E. Blaire this week said the diocese, which filed for bankruptcy in January 2014, negotiated with all the parties involved to reach a consensual plan, which includes:

• $15 million to survivors of sexual abuse and a trust for the benefit of survivors.

• Payment of at least 50 percent of what is owed to unsecured creditors.

• Restructuring of unsecured loans.

• Funding from the plan will come from the Diocese of Stockton, settling with insurance carriers and other entities associated with the diocese.

The $15 million settlement agreed upon by the diocese, the plaintiffs’ attorneys and insurance companies is to “provide for the healing of the survivors,” Blaire said during a news conference. The diocese is responsible for $9.89 million of the total amount.

The Bishop said the plan, if accepted, will allow the diocese to exit bankruptcy by the end of the year and continue operating.

Blaire said the plan will settle the cases of 27 victims, including several from Calaveras County, who came forward during the period of bankruptcy. He said $750,000 out of the $15 million will be set aside for any future plaintiffs who did not come forward in that time frame.

Prior to this proposed settlement, the diocese had already paid tens of millions of dollars for judgment, settlements and legal expenses brought on by molestation lawsuits over two decades, which led the diocese to file for bankruptcy in 2014, according to Stockton Record archives.

At the time, Stockton became the nation’s 10th diocese to file for federal bankruptcy court protection.

“The abuse crisis has been one of the most painful experiences in my life,” Blaire said Tuesday. “I’ve been here 17 years, and from the day I arrived I’ve had to address that issue.

“It’s a great relief to be able to file (the consensual plan) … I’m hoping the judge next month accepts it and it will become final.”

Coming out of bankruptcy will continue to have its challenges, said Blaire, who turns 75 in December and is then required by Canon Law to submit a letter asking for permission to retire. The diocese lost its priest retirement fund, and the insurance reserves are at a bare minimum, and both will have to be rebuilt, he added.

“It’s going to be a challenge, but it will be a fresh start for all of us,” he said. “I think the people of this diocese will be relieved … people have been supportive and understand the situation we’ve been in.

“I stand here in awe of the faith of our Catholic people because imagine going through a crisis like this in the church and what keeps the people going is their faith, it really is their faith.”

The Diocese of Stockton, which covers San Joaquin, Calaveras, Alpine, Mono, Stanislaus and Tuolumne counties and has a Catholic population of 216,520, recently underwent an audit by the Charter for the Protection of Children and Young People. Blaire said there are no compliance issues.

“I honestly believe that we are really out in front now because of how awful (the sexual abuse) was …” he said. “It’s the No. 1 priority for us in our parishes.”








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