The Baltimore Banner [Baltimore MD]
March 17, 2023
By Hallie Miller and Dylan Segelbaum
The email from the Archdiocese of Baltimore came with an ask.
The ask: Encouraging the community to lobby against proposed legislation advancing in the Maryland General Assembly that would give more survivors of child sexual abuse the ability to file lawsuits against the church and other institutions complicit in those crimes.
The proposals, the March 12 message read,would create two different classes of survivors. That’s because the legislation would cap damages such as pain and suffering against private institutions at $1.5 million, but limit judgments against public institutions to $890,000. And that “greatly increases the financial harm to the Church and its ministries,” the email stated in bold.
“Twenty-six dioceses have already filed for bankruptcy caused by similar laws in other states,” the email continued, “and more are expected.”
The Archdiocese of Baltimore has not stated that it is considering filing for bankruptcy, and a spokesperson, Christian Kendzierski, said the church will not speculate on the potential effect of a civil lookback window. But besides this legislative push, the archdiocese is facing the imminent release of a redacted 456-page grand jury report that identified 158 priests accused of sexual abuse and torture of more than 600 people in the last 80 years.https://buy.tinypass.com/checkout/template/cacheableShow?aid=yacOo1smpu&templateId=OTJZVH8SQF4C&offerId=fakeOfferId&experienceId=EXV7WPXD1GBX&iframeId=offer_ccb81ff53906463d5bc4-0&displayMode=inline&pianoIdUrl=https%3A%2F%2Fid.tinypass.com%2Fid%2F&widget=template&url=https%3A%2F%2Fwww.thebaltimorebanner.com
The potential for waves of lawsuits could inflict great financial pressure upon the institution, causing it to seek protection from liability and take steps to soften the blow, litigation and accountancy experts say.
In fiscal year 2022, the Archdiocese of Baltimore reported some $250 million in total assets, according to its latest combined financial statements. That includes some $48 million in property and equipment and more than $36 million in cash.
Across the United States, various institutions that faced sexual abuse allegations — ranging from the Boy Scouts of America to USA Gymnastics — have filed for bankruptcy. Attorneys who work on this kind of litigation say it’s a recurrent legal maneuver that offers several benefits to those who take advantage of it — and disadvantages to those seeking justice.
“This is a very common defense tactic in the corporate malfeasance world,” said Suzanne Sangree, Baltimore-based senior counsel at the Grant & Eisenhofer law firm , which is helping represent survivors of church sex abuse. “Their tactics are the same as the worst colluding organizations in the country.”
‘They’re not broke’
Corporations tend to declare bankruptcy if laws or amendments are put in place that allow for survivors of sexual abuse to come forward after an original statute of limitations has expired, said Helene Weiss, a partner at Marsh Law Firm in New York. In that state, at least seven dioceses have filed for bankruptcy protection, she said.
If lawsuits started to be filed in Maryland, attorneys from the state could begin to engage in discovery, which might reveal even greater findings than the contents of the grand jury report, Weiss said — including who knew what and when.
Bankruptcy can limit claims and cap liability, making it a popular go-to legal resource for businesses and corporations that seek to continue operations. It would place an automatic halt on pending lawsuits and discovery, Weiss said.
“We’ve seen the Boy Scouts of America and different dioceses declare bankruptcy when we know they still have substantial assets,” Weiss said. “They’re not broke, they’re just doing a financial maneuver.”
Historically, archdioceses and dioceses have used clever tactics to conceal the extent of their assets, said Jack Ruhl, professor of accountancy at Western Michigan University who has studied church finance. Forensic accountants have found proof of money funneled into cemeteries, convalescent homes, schools and other places that may make it tougher to determine their finances, he said.
Ruhl said he believes that the Archdiocese of Baltimore could seek bankruptcy protection, which would grind proceedings to a halt.
“And while bankruptcy is in progress, attorneys fees keep mounting up,” he said. “By the time bankruptcy court determines what survivors get, there are far fewer assets.”
Softening the blow of a lookback window
If it’s well-planned, there are a lot of benefits for an archdiocese or diocese filing for bankruptcy, said Devin Storey, a partner at the Zalkin Law Firm in San Diego who represents survivors of sexual assault.
Storey said organizations that go through bankruptcy and have a judge confirm their plan of reorganization are entitled to a discharge of past liabilities.
So even if a state changes the statute of limitations or passes a lookback window, he said, an archdiocese or diocese can argue that survivors who did not bring a claim have no right to sue. Federal law preempts state law, Storey said.
That’s in addition, he said, to obtaining channeling injunctions and third-party releases.
For instance, the Boy Scouts of America had its plan of reorganization confirmed that included a release for regional councils and sponsoring organizations, Storey said. Archdioceses and dioceses, he said, could look to obtain the same for parishes, schools and ancillary organizations.
“The discharge at the end of a bankruptcy gives the diocese certainty: The lawsuits are over,” Storey said. “It really does provide a vehicle for a clean break from any past liability for sexual abuse,” he later added.
Storey said archdioceses and dioceses typically file for bankruptcy after a legislative change because of potential liabilities. He said there will often be a pot of money set aside for future or unknown claims, so survivors can later come in through the bankruptcy court.
People who experience sexual abuse in the future, he said, can still file claims.
The Diocese of Harrisburg recently emerged from bankruptcy almost three years after filing in 2020. The church had cited years of financial hardship that were exacerbated when the Pennsylvania Attorney General’s Office released a landmark, almost 900-page grand jury report about sexual abuse cover-up in six out of eight dioceses in the state.
More than 60 survivors of clergy sexual abuse filed claims during the process.
The diocese and related entities agreed to create a trust fund for survivors and contribute $7.5 million. Meanwhile, insurance companies moved to pay an additional $10.75 million.
Nate Foote — a partner at Andreozzi + Foote in Harrisburg, Pennsylvania, which represents survivors of sexual abuse — said that the Archdiocese of Baltimore could see hundreds of lawsuits filed against it if lawmakers pass a lookback window.
By filing for bankruptcy, Foote said, an archdiocese or diocese can get a jump-start on negotiating cases. People whose claims are outside the statute of limitations when there is no lookback window have no value other than in the bankruptcy process, he said.
“If you file for bankruptcy prior to the passage of a window, and your bankruptcy resolves prior to the passage of a window, it allows for a different evaluation of the claim values,” Foote said. “That’s a really helpful negotiating position for them.”
Bankruptcy is a multiyear process, he said, that costs millions of dollars.
But Foote said survivors who pursued claims when the Diocese of Harrisburg filed for bankruptcy will end up receiving far more than people who accepted settlements before litigation.
‘Victims or survivors are not going to go away’
Bankruptcy, though, can affect survivors of clergy sexual abuse in other ways that have nothing to do with money, including depriving them of the opportunity to obtain justice in a courtroom.
Kurt Wolfgang, executive director of the Maryland Crime Victims’ Resource Center, represents survivors of clergy sexual abuse. He said he’s talked to his clients about the possibility of an Archdiocese of Baltimore bankruptcy.
The damage that survivors have experienced, he said, is incalculable.
“Money is not exactly high on their priority list, to tell you the truth,” Wolfgang said. “Vindication is — and trying to make things right.”
One of the main reasons that the Catholic Church uses bankruptcy is to stop people from filing lawsuits and prevent survivors from being heard, said David Lorenz, Maryland director of the Survivors Network of those Abused by Priests, or SNAP.
He said he knows few survivors who want to file a lawsuit. Instead, Lorenz said, most want to share their story and see the church remove the perpetrator.
Lorenz said people sometimes want money to pay for therapy or help putting their lives back together. But often, survivors only sue if they find the church stonewalling them.
“There’s a lot to be said to getting in front of a room and saying your whole story,” Lorenz said. “What would bring me peace is for survivors to get their day in court,” he added. “That would bring me peace.”
The Catholic Church weaponizes bankruptcy by creating “a war of attrition,” said Mitchell Garabedian, an attorney in Boston who specializes in clergy sexual abuse cases.
Because bankruptcy cases last for years, Garabedian said, survivors — many of whom come forward after they turn 50 — could die. And evidence might be lost.
Garabedian represents 97 clients in the bankruptcy case of the Diocese of Rochester, which filed more than three years ago — and, he said, “there’s no light at the end of the tunnel.”
“What the Catholic Church has to understand is, victims or survivors are not going to go away,” Garabedian said.
“They are going to continue to fight to seek justice. And they will win,” he added. “Clergy sexual abuse has to be stopped — and will be stopped.”
This story has been corrected to reflect the nature of the Archdiocese of Baltimore’s email, which did not solicit donations.