Bishop Malooly Issues Statement on the Filing of the Plan of Reorganization

September 23, 2010

September 23, 2010 --- (Wilmington, DE) --- The Most Rev. W. Francis Malooly, Bishop of the Catholic Diocese of Wilmington, has issued the following letter to the parishioners of the diocese on the filing of the Catholic Diocese of Wilmington, Inc. Plan of Reorganization:

My Dear People:

This week we reached an important milestone in the diocesan bankruptcy case. The Catholic Diocese of Wilmington, Inc. filed with the Bankruptcy Court a Plan of Reorganization that will provide fair compensation to survivors of sexual abuse by diocesan priests; will provide security for the beneficiaries of our pension plans; will compensate our financial and trade creditors; and will enable the Diocese to emerge from bankruptcy and continue its charitable, educational and spiritual missions, and the ministries associated with them.

From our first day in Bankruptcy Court, the Diocese continually has reaffirmed its goal of reaching a consensual resolution of the claims of the survivors of clerical sex abuse. While the Plan is not supported by all creditors at this time, its filing comes after months of negotiations with the official creditor committees and other constituencies. Although it took much longer than we hoped to begin these negotiations, with the assistance of the Bankruptcy Court we entered mediation in June, under the supervision of Bankruptcy Judge Kevin Gross, and former Philadelphia Court of Common Pleas Judge Thomas Rutter, who mediated several of our cases before we filed bankruptcy. The mediation process involved the Diocese and its insurers, the Creditors Committee, the Lay Employees Committee, and certain religious orders and their insurers. I personally participated in all seven days of formal mediation over the past three months. Substantial progress was made in these negotiations, but we have not yet reached an agreement on a global settlement of all claims.

A global settlement remains our goal, and negotiations with the Creditors Committee and other constituencies are ongoing. But we face certain deadlines in the bankruptcy process that require the Diocese to file its Plan of Reorganization, to set forth how the Diocese will compensate its creditors and emerge from bankruptcy. Under the Plan a trust will be created to hold assets and pay claims. All of the unrestricted assets of the Diocese, the value of its real estate, and its insurance will be contributed to the trust. Other Catholic entities will contribute assets to the trust, to resolve abuse claims against them, thereby increasing the funds available to compensate abuse survivors. The Plan establishes a process for liquidating and allowing the claims of abuse survivors, and other claimants, to determine the amount of their compensation. The survivors, pension plan beneficiaries, and all other claimants and creditors will share pro rata in the trust assets, ensuring that everyone is treated fairly.

The funds of diocesan affiliates and parishes invested in the Pooled Investment Account may be included in the trust depending on the outcome of the appeal of the Bankruptcy Court ruling that these funds are property of the bankruptcy estate. If the appeals court upholds this ruling, then the affiliates and parishes that participate in the Pooled Investment Account still will be able to recover their pro rata share of the assets in the Plan trust. If the appeals court reverses the Bankruptcy Court ruling, then the affiliates and parishes will retain control of their funds in the Pooled Investment Account.

The Plan of Reorganization will provide substantial additional funding for the pension obligations of the Diocese. Coupled with annual contributions by the Diocese to the pension plan, this additional funding will help ensure that the participants will receive the benefits to which they are entitled.

The Plan Trust will be administered by a Trustee appointed by the Bankruptcy Court. A Plan Oversight Committee also will be appointed to advise the Trustee. The expenses of administering the Plan Trust, including any litigation costs, will be paid by the Trust.

Finally, the Plan of Reorganization includes a number of voluntary undertakings by the Diocese, and by me. These non-monetary provisions are designed to further promote healing and reconciliation, and reaffirm the commitment of the Diocese to preventing sexual abuse. In addition to our continued compliance with the Charter for the Protection of Children & Young People adopted by the U.S. Conference of Catholic Bishops in 2002, and our vigilant implementation of the For the Sake of Godís Children program established by the Diocese in 2003, the non-monetary provisions of the Plan include making publicly available documents in diocesan files related to sexual abuse by abusive clergy, religious and lay employees.

Under the Bankruptcy Rules, the Plan could be confirmed by the Court in about three months, but we anticipate that court approval will not occur that quickly. In the meantime we will continue to work with the Creditors Committee and other constituencies on a parallel track, to try to achieve the global settlement that we strongly prefer. But if continued negotiations are unsuccessful, then the Plan of Reorganization filed this week will ensure fair treatment of all survivors of abuse, our pension plan beneficiaries, and all of our creditors, and allow the Diocese to emerge from bankruptcy. The Plan will enable the Diocese to fulfill its legal and moral obligations to survivors, while continuing our charitable, educational and spiritual ministries.

There should be no tension between our obligation to compensate those who have suffered so grievously by priests in whom they placed their trust, and our duty to continue the works of the Church in this Diocese. Indeed, it is fundamental to the ministry of the Church to make reparations and otherwise see to the healing of survivors of abuse by our priests. The Plan of Reorganization filed this week will enable the Diocese both to fulfill its obligation to survivors of abuse, and to continue its other ministries. I ask for your continued support and prayers as we work to achieve these goals.

Most Rev. W. Francis Malooly

Bishop of Wilmington

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Contact: Bob Krebs 302/573-3116


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