Facing hundreds of abuse claims, Albany Catholic Diocese declares bankruptcy

Times Union [Albany NY]

March 15, 2023

By Steve Hughes

Filing comes after months of brinksmanship with attorneys for victims who filed abuse claims under Child Victims Act

The Roman Catholic Diocese of Albany on Wednesday filed for Chapter 11 bankruptcy as it grapples with the financial impact of  hundreds of civil claims resulting from decades of child sexual abuse and cover-ups, both admitted and alleged.

Bishop Edward B. Scharfenberger announced the decision, which follows months of negotiations between attorneys for the diocese and plaintiffs.

In a news conference a few hours after the announcement, Scharfenberger said the diocese had come to the decision that it needed to declare bankruptcy because its financial position had become precarious.

“It had come to the point where actually our financials were showing that we were going to have a shortfall in our ability to maintain our pension (fund) and also to pay our employees,” he said. “It was now or never, basically.”

Scharfenberger added that the diocese would be able to cover its next payroll period.

In his statement, Scharfenberger said the district continued to believe that a “global mediation would have provided the most equitable distribution of the Diocese’s limited financial resources, but as more Child Victims Act cases reached large settlements, our limited self-insurance funds, which have been paying those settlements, have been depleted.”

He added that the Chapter 11 filing was the best way to ensure that all of the abuse victims with pending litigation would receive some compensation.

“The decision to file was not arrived at easily and I know it may cause pain and suffering, but we, as a Church, can get through this and grow stronger together,” he said.

Many attorneys for victims of abuse had in recent months become resigned to the possibility of a bankruptcy filing, with some noting that such an action would provide plaintiffs with a chance to get a full view of the diocese’s assets. Several complained that the diocese’s offers of a global settlement had fallen far short of a reasonable amount, and that the diocese’s legal team had continued to stonewall throughout the discovery process.

In a joint statement, a group of attorneys who represent more than 190 abuse victims suing the diocese called the decision to file for bankruptcy “spineless.”

“The Diocese of Albany’s decision to declare bankruptcy is another calculated self-effacement in a long history of cowardice,” said attorney Cynthia S. LaFave. “The Diocese’s role in shrouding — perpetuating — abuse has always taken agency from survivors. Here again, the diocese is attempting to silence and suppress the very people they purport to protect.”

The attorneys claimed that the diocese has over $600 million under its control, much more than the $10 million to $50 million in assets it claimed in the bankruptcy filing.

But that figure includes the market value of 126 parishes and missions in the diocese, which are separately incorporated and are not part of the filing, according to the diocese. During his news conference, Scharfenberger said the diocese would ask churches to contribute to the pool of money in the bankruptcy process available to abuse survivors, but that the diocese did not expect operations for individual churches or schools to change.

The bankruptcy filing also lists more than 200 creditors and $50 million to $100 million in liabilities.

The diocese has already reached settlements with dozens of victims, including one struck with the members of a family of children that Francis P. Melfe, a former Schenectady priest, was accused of secretly raising and sexually abusing over a period of years beginning in the late 1960s. 

“We don’t have the resources to settle any more,” Scharfenberger said in a video statement — a third form of his public outreach on Wednesday — that reiterated the bishop’s statements of sorrow and fellowship with the victims of clerical abuse.

In addition to putting a pause on the abuse claims, the diocese said its filing also impacts lawsuits brought by hundreds of pensioners of the former St. Clare’s Hospital in Schenectady who have for years been pushing church officials and elected leaders to make them whole. The state attorney general’s office filed its own claim last year against the diocese over the collapse of the St. Clare’s pension fund.

“That was not the diocese’s purpose for filing,” the diocese said in its statement. “While questions remain regarding the St. Clare’s pension fund, the plight of the pensioners is of great concern to Bishop Scharfenberger.”

State Sen. Jim Tedisco, who has advocated for the St. Clare’s pensioners, released a statement lambasting the diocese’s decision.

“What the Diocese announced today is absolutely shameful,” the Glenville Republican said. “They can run from their despicable actions and financial maneuverings, but they can’t hide from the Lord or the court of public opinion about what they did to all their victims, including the 1,100-plus St. Clare’s Hospital pensioners who were robbed of their retirement savings.”

St. Clare’s was closed in 2008 and merged into Ellis Hospital, and the pension plan was officially shut down in 2018 with a $50 million shortfall — despite having received $28.5 million in Medicaid benefits from the state to fully fund the plan. Of its 1,100 retirees eligible for a pension, 650 were told they would get nothing. The remaining 450 were paid 70 percent of their retirement benefits. 

Last May, state Attorney General Letitia James filed a lawsuit against the Albany Diocese and the St. Clare’s Corp., which was responsible for overseeing the pension plan. That case is ongoing. A spokesman for James said he could not comment on the St. Clare’s case because the attorney general’s office had yet to digest the 37-page bankruptcy filing by the diocese, a document that offers little more than the church’s assets and liabilities as well as a list of its creditors.

The Albany diocese — which reaches out from the Capital Region into the Catskills and southern Adirondacks, and west beyond Cooperstown — is the fifth of New York’s eight Catholic dioceses to have declared bankruptcy as a result of the financial impact of Child Victims Act claims, following Rochester, Buffalo, Syracuse and Long Island’s Rockville Centre.