Archdiocesan Bankruptcy Case Moves One More Step Forward

By Annysa Johnson
Milwaukee Journal Sentinel
April 18, 2014

The Catholic Archdiocese of Milwaukee, which faces more than a dozen civil fraud lawsuits over its handling of clergy sex abuse cases, filed for Chapter 11 bankruptcy protection in January. As the case proceeds, we'll have updates, analysis, documents and more.

The Archdiocese of Milwaukee won a victory in its bankruptcy Thursday when U.S. Bankruptcy Judge Susan V. Kelley agreed to move forward with a key document that, once approved, would put the local church one step closer to exiting its 3-year old Chapter 11 proceedings.

Kelley stressed Thursday that she was not taking up the archdiocese's reorganization plan, only its accompanying disclosure statement, which is intended to give creditors enough information to vote on the plan.

Attorneys for the creditors committee, which includes sex abuse survivors, had asked Kelley to delay acting on the statement. They argued the judge should first decide a separate point of contention: whether the archdiocese had the right to include in the reorganization plan that a pending lawsuit over $60 million in archdiocesan cemetery funds would be settled.

Kelley denied those requests, saying she was determined to move the case forward.

"I am very sensitive to finishing this case," the judge told a packed courtroom and more than 15 attorneys.

"If the plan can't be confirmed, it should be dismissed," said Kelley. "So, let's try to get there and make some decisions."

Once approved, the disclosure statement would be sent along with the reorganization plan to creditors who have standing to vote on it. That vote is just one of many steps still ahead as attorneys continue to litigate the overall plan, which must ultimately be approved or rejected by Kelley.

Jerry Topczewski, chief of staff for Archbishop Jerome Listecki, lauded Kelley's decision to move ahead with the disclosure statement.

"We have turned a corner," Topczewski said in an email. "And we want to keep the proceeding moving forward so that ... the archdiocese can emerge from bankruptcy and continue its charitable, spiritual and educational mission within this community."

Sex abuse survivors and supporters packed the courtroom for the morning half of the hearing and voiced their concerns about the plan, which they consider inadequate, outside the courtroom.

"I'm here because I want justice," said David Huddleston of Maryland, who was molested by the late Father Lawrence Murphy at St. John's School for the Deaf when he was 12 and 13.

The archdiocese filed for Chapter 11 bankruptcy protection in January 2011 to deal with its mounting sexual abuse claims. The case is one of the largest such Catholic Church bankruptcies to date, with 575 individuals filing sex abuse claims.

As part of its reorganization plan, the archdiocese would set aside up to $4 million to compensate 128 individuals molested by diocesean priests who the diocese had reason to believe were a danger to children, and establish a $500,000 therapy fund. If approved, it would be the smallest settlement offered in a church bankruptcy to date.

On Thursday, Kelley walked the attorneys including those for the archdiocese's insurance companies through a highly technical edit of the disclosure statement, striking phrases she considered inflammatory or misleading, and calling for more detail in some areas. She struck, for example, references by the creditors committee that the plan was "morally repugnant," and the archdiocese's assertion that the creditors committee caused it to incur millions in legal fees.

She asked the archdiocese to elaborate on why Listecki invited victims to file claims, vowing to treat them fairly, then tried to get those claims thrown out. And she asked it to explain why it is singling out one group of survivors the 128 for compensation.

There is little common ground between the lawyers for the archdiocese and the creditors committee, who disagree on many of the facts surrounding the bankruptcy and the way each has articulated them in the statement.

Tempers flared at one point, and Kelley cut them off, saying, "This case is hard enough without the mudslinging by the lawyers."

Kelley attempted Thursday to set a hearing schedule for the reorganization plan but postponed that until Tuesday when lawyers could not come to an agreement on how to move forward.








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