Diocese: Schools Safe If Chap. 11
Bankruptcy filing won't affect Catholic school systems, official says.

By Craig T. Neises
(Burlington) Hawk Eye
October 20, 2004

If the Davenport Catholic diocese files bankruptcy in response to litigation about clergy abuse, local parishes and parochial schools would be largely unaffected.

That is the view expressed by attorneys for the diocese, and shared with school officials.

In a statement Tuesday, Deacon David Montgomery, spokes–man for Bishop William Franklin, said those attorneys "do not believe a diocesan filing for Chapter 11 reorganization jeopardizes the individual parishes or school systems."

The diocese has asked a judge in Clinton County to delay several pending lawsuits so it can negotiate settlements with insurance companies and plaintiffs. Without the delays, the diocese said it may be forced to file Chapter 11 bankruptcy as soon as Friday.

Should the diocese pursue bankruptcy — it would be the third such filing in the country. Earlier this year, diocese in Portland and Tucson, Ariz., sought Chapter 11 protection.

The effect at the local level would be a reduction in services from the diocese, Montgomery said.

Southeast Iowa's four Catholic school systems, Notre Dame in Burlington, Aquinas in Fort Madison, Marquette in West Point and Keokuk Catholic, all are operated independently of the diocese, Notre Dame administrator Dave Edwards said.

"The diocese doesn't own the parishes or the schools," said Edwards, noting that Notre Dame elementary, junior high and high school are operated by Notre Dame Schools, Inc.

Principals for Catholic schools in the diocese, which also includes Davenport, Iowa City and Ottumwa, met in their fall retreat last weekend and received an update on the possible impact of a bankruptcy filing by the diocese.

Edwards said he reassured teachers at Notre Dame on Monday about the situation.

Believing that the schools' resources and facilities are secure, Edwards said the only likely impact would be a loss of services from the diocese. Rather than having one of its own, for instance, Edwards said Notre Dame makes use of a curriculum director who is employed at the diocesan level.

Though she could not say what happens with the parishes relative to how the diocese obtains money to operate, Notre Dame business manager Deb Trine said the schools do not send any money up the ladder to Davenport.

The first civil suit against the diocese is scheduled to go to trial on Nov. 1. The diocese faces 13 cases involving 15 plaintiffs, according to court documents. Twenty–two additional claims were filed during mediation sessions in September and October.

Diocesan attorneys are working to get that first trial moved back in order to provide more time to negotiate settlements with the plaintiffs.

Failing to settle before the opening trial date seems the likely trigger for a bankruptcy filing in U.S. District Court.

"Filing for Chapter 11 ... may be the only way to fairly compensate all victims of abuse if the negotiation process fails," Franklin wrote in a statement issued Oct. 6. "Bankruptcy could also allow the diocese to continue its good works and programs."

Franklin noted that a Chapter 11 filing would not shield the diocese from claims, but would help to ensure that sufficient resources remained available for "all victims, including victims who have not yet come forward."

In a statement issued Sept. 30, Franklin provided answers to what he felt were questions that area Catholics would have if bankruptcy does occur.

Those are:

The diocese will remain in operation.

As part of a plan to be presented to the bankruptcy court, the diocese would scale down its operations.

St. Vincent's Center, an asset of the diocese, may be sold and the diocese would move its headquarters.

The assets of the diocese would be submitted to the court as part of a plan of distribution over a period of years.

Because the parishes are separate corporations, we believe that they are not assets of the diocese and should not be taken in the bankruptcy.

Franklin warned, however, that attorneys for the plaintiffs in the various lawsuits might dispute the belief that assets controlled by those local church corporations were not at issue.

"Be sure your corporate records are in good order," Franklin said in the Sept. 30 statement. "They may claim, as they have elsewhere, that the parish assets are available to them.


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