BishopAccountability.org
 
  Diocese Ch. 11 Bills So Far: $791K

By Stephanie Innes
MSNBC [Tucson AZ]
January 30, 2005

TucsonAZUSA - In the four months since the Roman Catholic Diocese of Tucson filed for federal Chapter 11 bankruptcy protection, the case has amassed bills of nearly $800,000 for attorney and other business fees, according to recent court filings.

Bankruptcy experts say the tally of expenses in the case so far - $791,036 in what is mostly legal fees - is in keeping with that expected in a Chapter 11 case, although future expenses will depend on how long the case is in the court system.

An attorney working on the Chapter 11 case of the Roman Catholic Archdiocese of Portland, Ore., estimates that case's bankruptcy expenses are significantly higher than Tucson's so far - partly because the Portland archdiocese filed for Chapter 11 protection July 7, slightly more than two months before the Tucson diocese did.

There were no estimates available last week on bankruptcy costs for the Roman Catholic Diocese of Spokane, which filed for bankruptcy protection less than two months ago.

The Tucson diocese filed for federal Chapter 11 bankruptcy reorganization Sept. 20 in the face of 22 pending legal actions alleging sexual abuse of children by priests. The court has set a deadline of April 15 for those who believe they were sexually abused by a diocese priest to file a claim. The Chapter 11 plan could be approved this year if all the creditors can agree.

Creditors, including any victims with valid claims of sexual abuse, will be paid after the diocese pays the administrative costs of the bankruptcy. Federal law requires that administrative costs be paid first.

Susan Boswell, the diocese's lead attorney in the bankruptcy, did not return a call or an e-mail from the Arizona Daily Star.

Bishop Gerald F. Kicanas has said he filed for Chapter 11 bankruptcy protection as a way for the diocese, with its limited financial resources, to equitably pay all plaintiffs with valid claims, and also because it was unable to reach a reasonable settlement on the pending lawsuits.

The local diocese, which oversees 350,000 Catholics in nine Arizona counties, already had reached a $14 million settlement in 2002 with 10 men who said they were abused by members of the clergy. The diocese has not disclosed how much of that was paid through insurance.

The diocese has maintained that its 75 parishes cannot be forced to compensate abuse victims, nor can they be liquidated because they are separate financial entities. Lawyers for the Archdiocese of Portland also have maintained that its parishes are separate financial entities, though that has been challenged by the tort claimants.

"Given the position that the church has taken, the bankruptcy forum is actually an efficient forum in which to resolve the issues that have been raised by the dioceses," said Albert N. Kennedy, an attorney appointed by the federal court in the Archdiocese of Portland's Chapter 11 case to represent the tort claimants committee.

"But you also have to remember it could be done more cheaply if they would do what Orange did, and that is settle the claims. The reason it is expensive is that they are refusing to pay claims."

The Roman Catholic Diocese of Orange, in California, recently announced it would pay a record $100 million in damages to plaintiffs who claimed sexual abuse by its priests.

The bankruptcy reorganization plan proposed by the Tucson diocese calls for a "special master" to determine whether claims - 23 have been filed in addition to the 22 lawsuits - are valid. An appointment of a special master would have to be approved by creditors.

In Portland, the federal judge recently appointed five mediators to go through claims against the diocese and determine who should be compensated.

Jeffrey R. Anderson, a Minnesota attorney working with plaintiff attorneys on the Portland case, estimated Portland's bankruptcy expenses are $200,000 to $250,000 per month.

"It underscores a long strategy of trying to escape responsibility," he said. "It's more of a long series of strategies deployed by bishops at great financial cost."

The three dioceses that filed for bankruptcy protection have said Chapter 11 is a way to compensate victims of sexual abuse while continuing with the mission of the Catholic Church.

Jeff Morris, the current Robert M. Zinman scholar-in-residence at the Virginia-based American Bankruptcy Institute, said expenses of nearly $800,000 four months into a bankruptcy case sound typical, although he said there is a provision for the fees to be reconsidered at the end of the bankruptcy process. Indeed, lawyers for the parishes and the diocese in the local case have filed motions to give them the right to contest the fees submitted to the court.

"Unlike the lawyers in a private situation, these lawyers have to publicly file fee applications and very elaborate stuff that is not generally seen. There's a good reason for this - it is not necessarily the debtors' money; it's the creditors' money," Morris said.

"The advantage is that the diocese is acting in its best interests to determine what its assets are and what should be distributed to creditors."

The diocese's next court date in front of federal bankruptcy Judge James M. Marlar is scheduled for Feb. 10.

The diocese's administrative costs so far

  • A breakdown of administrative costs for the Roman Catholic Diocese of Tucson's bankruptcy, according to federal court filings:

  • Quarles & Brady Streich Lang, lead attorneys for the diocese: $316,697 - $180,975 paid prior to Sept. 20, and $135,722 billed Jan. 11.

  • Keegan, Linscott & Kenon, accountants for the diocese: $60,589 - $26,000 paid prior to Sept. 20 and $34,589 billed Jan. 11.

  • Goering, Roberts, Rubin, Brogna, Enos & Hernandez, attorneys for the diocese: $11,010 billed Jan. 7.

  • Gust Rosenfeld, attorneys for the diocese: $62,259 - $39,234 paid prior to Sept. 20 and $23,025 billed Jan. 11.

  • Stinson Morrison Hecker, attorneys for the tort claimants committee, scheduled to be paid by the diocese's bankrupt estate: $57,089 billed Jan. 3.

  • A. Bates Butler III, unknown-claims representative appointed by the court, scheduled to be paid by the diocese's bankrupt estate: $27,430 billed Jan. 7.

  • Charles L. Arnold, guardian ad litem appointed by the court and scheduled to be paid by the diocese's bankrupt estate: $33,372 billed Jan. 6.

  • Thomas A. Zlaket, attorney for the diocese on "special matters," according to court documents: $9,000 paid prior to Sept. 20.

  • Lowell Rothschild and Michael McGrath, attorneys representing the diocese's 75 parishes. They are being paid an undisclosed amount by the parishes, which maintain they are separate financial entities from the diocese. Court records filed by the diocese Sept. 20 list payments from the diocese to Rothschild and McGrath's law firm, Mesch, Clark & Rothschild, of $213,590 between Sept. 7 and Sept. 14 - days before the diocese filed for bankruptcy protection. The diocese later amended and removed the payment from its records.


 
 

Any original material on these pages is copyright © BishopAccountability.org 2004. Reproduce freely with attribution.