Federal Judge Hears Arguments over Twin Cities Archdiocese Bankruptcy Plan

By Sarah Horner
Pioneer Press
August 29, 2017

http://www.twincities.com/2017/08/29/federal-judge-hears-arguments-over-archdiocese-bankruptcy-plan/

Parties involved in the Archdiocese of St. Paul and Minneapolis bankruptcy proceedings made final arguments in front of a federal judge Tuesday, with each side making accusations of deceptive tactics and baseless claims.

The proceedings are intended to work out a plan for paying survivors of sexual abuse at the hands of clergy.

After listening to arguments by multiple attorneys, presiding U.S. Bankruptcy Judge Robert Kressel took the case under advisement. Kressel is expected to make a decision in the coming weeks on which reorganization plan will be used in the settlement.

Two plans are under consideration in the wake of the archdiocese’s Chapter 11 bankruptcy filing in January 2015.

The first was crafted by lawyers for the archdiocese and rejected by the group of survivors. The second was submitted by attorneys for the survivors.

A number of parishes in the archdiocese and representatives of various insurance companies made their objections to the survivors’ plan Tuesday.

The major difference between the plans is the amount of money accessible to survivors.

The plan submitted by the survivor group, for example, would require the archdiocese to directly pay up to $80 million, depending on the archdiocese’s existing assets, out of pocket to victims. It also calls for the immediate release of an investigative report concerning former Archbishop John Nienstedt.

The archdiocese’s plan, by comparison, calls for it to pay $13 million. There is no mention of the report on Nienstedt.

A key sticking point is over how much exposure the archdiocese’s insurers should have. The archdiocese negotiated with insurers for $114 million in claim exposure, and another $13 million in exposure for its parishes.

The survivors say the archdiocese negotiated with insurers without them. They believe the archdiocese’s assets were highly undervalued during that negotiation. They have previously said that the true claim exposure could be over $1 billion.

Church officials argue their offer would make money available more quickly to survivors, while the opposing plan would require survivors to sue the archdiocese’s insurance companies. That could significantly prolong litigation.

Describing the survivors plan as “fatally defective” in court Tuesday, an attorney for the archdiocese, Richard Anderson, argued that the group’s proposal also placed too much deciding power in the hands of one attorney — Jeff Anderson — who represents most of the claimants.

Richard Anderson added that the plan would do irreparable harm to the archdiocese and its mission.

He also took aim at what he said had been “misleading” and “false” claims by the survivors’ attorneys about the archdiocese throughout the proceedings.

“Given the public statements in this case, is it any wonder that most (survivors) voted the way they did?” Richard Anderson asked the judge. “The pattern of misrepresentation in this case includes … that the archdiocese is hiding assets, and is only devoting 1 percent of its assets … The (survivors committee) is using facts not on record. They are conflating the alleged value (of the archdiocese) … based on some report from years ago.”

An attorney for the survivor group vehemently disagreed with those arguments, maintaining during the hearing that the archdiocese was continuing to grossly underestimate its value at the expense of survivors.

“The value of the (archdiocese) exceeded $1 billion in 2010 … and the debtor wants the courts and claimants to ignore that,” attorney Robert Kugler said. “This is incredibly galling to the survivors … who have been ignored and disrespected … by the archdiocese for years.”

Although he mostly listened during the hearing, the judge did question attorneys for the survivors about the delay their plan would create in a payout.

“Looks to me we are talking years … Some (claimants) have died already,” Kressel said. “So you are rolling the dice, it seems, on this long-term thing instead of (taking the payout that is available now.)”

The judge also questioned whether the same attorneys have over-promised on the payout potential to their clients.

Speaking after the Minneapolis hearing, attorney Jeff Anderson told the survivors present not to be discouraged by the judge’s comments.

Sexual abuse survivor Jim Keenan spoke of his frustrations with the archdiocese’s legal tactics.

“It has been maddening,” Keenan said after the hearing. “They want to … wear you out, they want you to eventually give up.”

He recalled to reporters the abuse he endured as a 13-year-old boy by a priest at his family’s parish, Church of the Risen Savior in Burnsville.

“In this process, (the archdiocese) forgets why we are here,” Keenan added. “We are here because they are scared of taking responsibility (for what’s happened).”

Another attorney for the archdiocese, Charlie Rogers, again defended its plan after the hearing.

“We spent over a year vigorously negotiating with these various insurance agencies,” Roger said. “We felt that given the ages of the victims and the need to bring about healing promptly and quickly that this was the best option we could put on the table that met all the goals of the bankruptcy court .. and (was) fair.”

Contact: shorner@pioneerpress.com