Diocese Weighs Finances

By Todd Ruger
Quad-City Times
September 18, 2004,1035511

The financial impact of sex abuse lawsuits on the Catholic Diocese of Davenport depends mainly on three things — the size of any settlement or damages awarded in court proceedings, the insurance it has to cover any claims and its ability to cover the rest.

All three are up in the air.

As the diocese spends four days this month discussing out-of-court settlements with 37 men alleging a priest in the diocese sexually abused them decades ago, the attorney representing the men has yet to tell the diocese how much money they seek.

If those talks fail, verdicts could go either way in any case argued before a jury.

Meanwhile, the diocese has hired an insurance archeologist to find out what the church’s insurance coverage was during those years, and what part of settlements or claims insurance companies might pay.

Bishop William Franklin has already said — in a letter to parishioners addressing the manner in which the diocese is defending itself in court — the diocese has a legal right and obligation “to defend itself from bankruptcy.”

Diocese attorney Rand Wonio said the diocese still hopes for “reasonable” settlements or the Iowa Supreme Court to agree with its arguments that the lawsuits should be thrown out because they are too old.

Whether parishes in the diocese’s 22 Iowa counties could be drawn in to help cover claims or settlements has yet to be decided in any court, attorneys said.

However, church leaders are keeping an eye on the recent filing of bankruptcy by the Archdiocese of Portland, Ore., due to large claims from similar lawsuits.

Although no one in the Davenport diocese has discussed filing for bankruptcy, “Some people are watching with interest,” Wonio said.

Potential claims and diocesan funds

At least 37 men seek damages from the Davenport diocese. Attorney Craig Levien filed lawsuits on behalf of 18 men and has said 19 others are willing to negotiate their claims outside of the courtroom.

The men allege in lawsuits they were sexually abused by a priest in the Davenport diocese. The diocese knew about sexual abuse by priests as far back as the 1950s but moved those priests to different parishes without telling parishioners, the lawsuits claim.

Reports about priest sexual abuse lawsuits around the country show plaintiffs each receiving anywhere from around $150,000 in group settlements to more than $3 million in court proceedings.

An attorney handling 500 sexual abuse claims against the Archdiocese of Los Angeles asked insurance companies to put aside at least $3.1 million per case, saying the amount is justified based on jury verdicts and settlements of other clergy sexual-abuse lawsuits around the United States.

The diocese has already said one plaintiff in a Lee County, Iowa, lawsuit against Vicar General Monsignor Drake Shafer has asked for more than $1 million. Shafer is on leave pending the conclusion of the lawsuit.

Levien said he can’t discuss the amounts his clients seek. Attorneys for the diocese continue to ask the court to compel Levien to disclose the amounts to them.

At $500,000 per claimant, the diocese would face more than $18 million if the cases were proved. If the upper range of $3 million prevailed, it could total more than $100 million.

“We don’t have $500,000 per claimant,” diocese attorney Wonio said.

The diocese reported total net assets of about $10 million in an audited financial statement published in the Catholic Messenger last November, which included real estate, portfolios and other assets.

Franklin told parishioners in the letter that “the financial assets of the diocese are limited” and “the diocese must resist huge award payments to a few that will restrict the diocese from providing services to others.”

Attorneys for the plaintiffs believe the diocese can manage any claims with investment funds, insurance and borrowing ability without restricting services.

“Davenport is one of those dioceses that have long claimed they don’t have the means or ability to pay,” said attorney Jeff Anderson of St. Paul, Minn., co-counsel on lawsuits against the Davenport diocese and involved in other dioceses across the nation, including Portland.

“The majority of (dioceses) have made that claim, and when scrutinized, they misrepresented their assets and amount of insurance,” Anderson said.

Parishes at risk?

Twelve land parcels owned by the diocese in Scott County have an assessed value of about $6.5 million, county assessor and auditor records show.

The assessed value of the property owned by the diocese in Scott County alone jumps to $56 million if parishes and schools are included, and up to around $112 million if St. Ambrose University is included, according to county records.

Could those assets be drawn into any claims the diocese can’t afford?

“That’s a question the courts have never really had to decide,” Anderson said, adding that the question will likely be tackled in the Portland archdiocese bankruptcy filing.

But he said the Davenport bishops, who made decisions to place pedophile priests in parishes, also make decisions about parish finances.

“Every diocese has articles of incorporation that invest in the bishop all control over financial dealings,” Anderson said of his experiences with lawsuits against dioceses across the nation.

Wonio also said the courts have never ruled on the issue, but the Davenport diocese differs from the Portland archdiocese because each church is registered with the Iowa Secretary of State as a separate corporation.

“We’re very confident the separate corporations protects the parishes,” Wonio said.

Parishes, schools and St. Ambrose University are all registered under separate corporations, but the president of those corporations is Bishop Franklin, according to state records.

In many cases, the registering agent or director is listed as Shafer, accused of sexual abuse in the Lee County lawsuit.

Insurance coverage

The diocese has said that it has been unable to locate records of insurance coverage for decades-old claims.

It continues to be in discussions with the insurance companies, Wonio said.

“We don’t know how much the insurance companies are going to contribute at this point,” Wonio said.

He said he can’t comment further.

Levien said the diocese has insurance coverage of at least $500,000 since the early 1970s.

That information is just one of the issues and legal motions still pending before a string of trials scheduled to begin in less than two months.

Levien said his plaintiffs want the diocese to be held accountable for the wrongdoing they committed.

“I believe that it is a debt that they owe,” Levien said. “If they have to make some compromises, that’s what has to be done when wrongdoing occurs.”

Todd Ruger can be contacted at (563) 383-2493 or


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