Archdiocese of Portland, Ore., Declares Bankruptcy

By Alan Cooperman
Washington Post
July 7, 2004

The Roman Catholic archdiocese of Portland, Ore., became the first in the nation to file for bankruptcy protection yesterday under the weight of sexual abuse lawsuits that have cost it more than $53 million in claims.

[View a related interview with Cooperman.]

The Chapter 11 filing in U.S. Bankruptcy Court for the District of Oregon halted two civil trials scheduled to begin yesterday, in which alleged victims of the Rev. Maurice Grammond, a deceased priest, were seeking about $160 million in damages. About 60 additional claims involving Grammond and other Portland area priests are pending, lawyers said.

"The pot of gold is pretty much empty right now," Archbishop John G. Vlazny said.

Several U.S. dioceses have threatened to declare bankruptcy in similar circumstances over the past decade, and the archdiocese of Boston received conditional permission from the Vatican to do so in 2002. But until now every one of those dioceses, including Boston, has chosen to negotiate settlements or to take its chances in court, rather than to open its finances to outside scrutiny and risk turning over its operations to a court-appointed bankruptcy trustee.

Lawyers for alleged victims across the country said they were stunned by the filing, which will temporarily protect the archdiocese from creditors while it works out a financial reorganization plan. Some worried that it might be a turning point in the scandal that has rocked the church for 2 1/2 years.

"It's a threat we've heard so many times before. We were all thinking it was hollow," said Jeffrey R. Anderson, a Minnesota lawyer who has brought more than 100 lawsuits against the church. "I think it's a strategic move by the bishops, nationally, to try to blame victims for their problems."

In a letter to the Portland archdiocese's 356,000 Catholics, Vlazny portrayed the decision as strictly a response to a dire local situation. He said that the diocese had "worked diligently to settle claims," but that "major insurers have abandoned us" and that bankruptcy was the best way to keep the archdiocese's parishes and schools running while still paying claims.

"This is not an effort to avoid responsibility. It is, in fact, the only way I can assure that other claimants can be offered fair compensation," the archbishop said.

Lawyers for the two men whose cases were to begin back-to-back trials yesterday said they believe the archdiocese was afraid of information that would have emerged in court.

"It's not about the money," said lawyer David Slader, whose client, James Devereaux, alleges that he was abused by Grammond beginning at age 11 in 1963. "They did this because . . . they knew that in the trial they would have a public airing of how they covered up the crimes of their priests for more than 50 years. They know they can buy time by taking it into bankruptcy court and hopefully, from their point of view, the bankruptcy court will force a resolution short of a trial."

Attorney Bill Barton said his client -- identified only by the initials C.B. -- was abused between the ages of 8 and 10 in 1984-85 at the end "of a long string of Grammond victims and a long string of warnings and complaints that the archdiocese had ignored." Testimony and documentary evidence about those warnings, he said, "are what made this case so dangerous for the archdiocese."

The lawyers said they were given no notice of the bankruptcy protection filing and had arrived at Multnomah County Circuit Court yesterday morning prepared to go to trial. Instead, they found the archdiocese had called a news conference, where a somber Vlazny, 67, read his letter and briefly answered questions.

For a medium-sized diocese, Portland has faced an unusually large number of abuse claims. They include more than 50 against Grammond, who died two years ago at age 82, and more than 20 against Thomas Laughlin, a defrocked priest believed to be living in New Mexico.

As of May, 196 people had filed allegations against 41 Portland priests, dating to 1950. The archdiocese has paid $26 million, and its insurers have paid $27 million to settle about 130 claims, said Bud Bunce, a spokesman for the archdiocese. That is second in total payments only to Boston, which reached an $85 million settlement with hundreds of alleged victims this year and has sold its archbishop's mansion to help raise the money.

Bunce declined to name the archdiocese's insurance companies but said that some have refused to make additional payments. He also said the archdiocese laid off 20 employees a year ago and cut the operating budgets of all its departments by 30 to 50 percent this year.

Other dioceses that have publicly considered bankruptcy include Stockton, Calif.; Fall River, Mass.; Santa Fe, N.M.; and Tucson, which has said it will decide before two lawsuits go to trial in September. Nationally, the church has spent more than $572 million on settlements and counseling resulting from allegations by more than 10,600 alleged victims against 4,392 priests since 1950, a church-commissioned study released in February said.

It will not be clear how the bankruptcy will proceed for at least a week, when the first hearing before a judge is scheduled. Usually, businesses in Chapter 11 are run by their current management, but significant financial decisions must be approved by a court.

Creditors have a right to ask for an independent trustee to be appointed to run the archdiocese, but a judge would be "unlikely to take that step because it raises all sorts of church-state issues," said David Skeel, a bankruptcy expert at the University of Pennsylvania Law School.

Bunce said all nine Catholic hospitals in Portland, as well as seven of its 10 parochial high schools, are independently incorporated and will not be affected.


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