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Judge Orders Montana Catholic Diocese to Update Court on Settlement Plan

By Seaborn Larson
Great Falls Tribune
October 2, 2017

http://www.greatfallstribune.com/story/news/2017/10/02/judge-orders-montana-catholic-diocese-update-court-settlement-plan/723550001/

A U.S. bankruptcy judge last week ordered a hearing intended to map out the remaining settlement proceedings between the Great Falls-Billings Diocese and the 86 victims claiming they were abused by eastern Montana priests through the 1900s.

Last month, settlement negotiations ended after a two-day session without resolution. The impasse reportedly came as the parties disagreed about whether or not certain church assets are available to the settlement fund.

In the order setting the Nov. 2 hearing, Federal Bankruptcy Judge Jim Pappas asked the diocese to provide a summary of the church's income and expenses since it filed for bankruptcy in March. Primarily, the judge hopes to discuss "the factors leading to the filing of this Chapter 11 case; (the diocese's) objectives in the case, and the means by which (the diocese) hopes to achieve those objectives." The hearing also gives the diocese a chance to discuss any other topic of significance that affects the bankruptcy case.

The diocese has argued that certain assets are being held in trust for the parishes, and are therefore exempt from a settlement fund the diocese promised to create for victims when it filed for chapter 11 bankruptcy on March 31.

The creditors committee, a group of victims representing the 86 claimants in bankruptcy court proceedings, and the committee's attorneys argue that those assets should be available for the settlement.

The major church asset in contention was the Capital Asset Support Corporation,which acts as an "internal bank" for the diocese and its parishes.

After negotiations ended at an impasse last month, Jim Stang, an attorney representing the creditors committee, said the ultimate goal is to negotiate a settlement with the diocese and its insurer, Catholic Mutual.

Also last week, Pappas granted a request by the victims' group to bring in consulting firm Berkley Research Group, which would serve as an accountant and financial adviser for the creditors committee. Berkley Research has previously provided services in diocesan or religious order bankruptcy cases, including settlement cases with dioceses in California, Oregon, North Carolina and Wisconsin, according to court documents. In the North Carolina case, testimony on the research group's findings in the diocese financial records helped that victims' group secure its claim that more than $100 million held in trust in the diocese's investment account was the property of the diocese, and therefore accessible to the settlement fund.

The employment of Berkley Research Group strikes a new route toward a conclusion in the case, after Jim Stang, an attorney representing the creditors committee of victims, told the Tribune last month that the asset debate would likely have to be decided by a judge.

In this case, court documents state the diocese is contending more than $70 million in assets is being held in trust for the parishes. Court documents filed by Stang allege the diocese also moved $15 million from a deposit and loan fund to the Community Asset Support Corporation within the reach back period. This is considered the period when it would be considered a fraudulent transfer if an asset was moved out of an account in order to keep it out of reach of creditors in bankruptcy proceedings.

On Tuesday, Ford Elsaesser, an attorney representing the diocese in bankruptcy court, told the Tribune that the $15 million was not moved to the Community Asset Support Corporation in secret; that the creditors committee was made aware of the moving money, most of which consisted of deposits from the parishes and considered by the diocese to be unavailable to the settlement fund.

"We believe there's been full transparency of all of that," Elsaesser said. "There was no attempt to conceal any assets at all. For the most part, these are funds of the parishes that are from the parish savings accounts... Some of that money does belong to the diocese, there's no question about it but most if it we believe belongs to the parishes."

While the bankruptcy proceedings are currently paused, Elsaesser said the church still intends to reach a settlement with the sex abuse victims.

"We are still hopeful and still going forward in the hope that we can reach an agreed resolution with the abuse victims," he said. "We hope that through the bankruptcy process we can get fair compensation to all of them."

Contact: slarson@greatfallstribune.com

 

 

 

 

 




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