Matano Says It Was "a Very Difficult and Painful Decision"
By Steve Orr
Rochester Democrat and Chronicle
September 12, 2019
The Roman Catholic Diocese of Rochester, facing potentially huge judgments for past sexual abuse by its priests and other ministers, filed for bankruptcy protection Thursday morning.
"This was a very difficult and painful decision," Rochester Bishop Salvatore Matano said at an afternoon news conference that detailed the action.
The diocese filed its petition for Chapter 11 reorganization in the U.S. Bankruptcy Court in Rochester at about 9:30 a.m. The petition estimates the diocese's assets as $50 million to $100 million — and its financial liabilities as $100 million to $500 million.
Rochester’s diocese becomes the first of New York state’s eight dioceses — and the 20th nationwide — to seek protection from creditors in bankruptcy court because of financial fallout from the Catholic Church’s decades-long child sexual abuse scandal.
|The Roman Catholic Diocese of Rochester filed for bankruptcy on Sept. 12, 2019. The Diocese held a press conference talking about why they did that. Bishop Salvatore R. Matano read from a prepared statement before answering questions with Lisa Passero CFO for the diocese, and Stephen Donato, with the law firm, Bond, Schoeneck, and King that is representing the diocese in the bankruptcy, beside him. (Photo: Tina MacIntyre-Yee/Rochester Democrat and Chronicle)|
The bankruptcy filing does not mean the diocese is penniless and does not mean its churches will close.
The intent of a Chapter 11 filing such as this is to reorganize the diocese’s finances, marshal funds to pay fair compensation to sex-abuse accusers and create a plan for the diocese to continue operations much as they were before.
Matano made it clear that the diocese sought Chapter 11 protection to shield itself from the impact of the legal claims, which he said could "exceed our resources."
Chapter 11 reorganization is the same process that Eastman Kodak followed in 2012-13 to shed debts and under-performing assets, becoming a smaller but still viable enterprise.
The diocese, based in Gates, encompasses 12 counties, primarily in the Finger Lakes region. An estimated 360,000 Catholics live within the diocese. It is being represented in bankruptcy court by Bond, Schoeneck & King, a Syracuse-based firm with offices in Rochester.
Impact of the Child Victims Act
|Bishop Salvatore Matano leaving federal court with attorneys for the Roman Catholic Diocese of Rochester. The diocese filed bankruptcy. (Photo: JAMIE GERMANO/ROCHESTER DEMOCRAT AND CHRONICLE)|
The bankruptcy filing is the direct result of a long-anticipated flood of litigation triggered by New York’s Child Victims Act.
The act, adopted by the state Legislature early this year, carved out a one-year window during which the statute of limitations is lifted and accusers can file legal claims for sexual abuse they suffered as children, no matter how long ago the abuse occurred.
The window opened on Aug. 14. Since then, more than 580 lawsuits have been filed statewide, with the lion’s share of them accusing Roman Catholic priests, brothers, deacons or nuns of abuse.
Nearly all of those named as a defendant the diocese where the priest or other minister worked, arguing that diocesan officials were responsible for the abuser’s conduct.
Through Wednesday, the Rochester diocese had been listed as a defendant in 59 legal claims filed under the Child Victims Act. Only the dioceses of Buffalo and Brooklyn, and the Manhattan-based archdiocese, had been named in more CVA claims.
The diocese had $55 million in net assets as of June 2018, most of it in investments and cash. But the bankruptcy filing anticipates that the accumulating weight of abuse payouts could consume those assets and threaten the diocese’s financial foundation.
The estimated liabilities in the petition, of $100 million to $500 million, reflect that reality. Diocesan officials said that estimate was based in part on the demands for damages submitted to the diocese by claimants who have filed, or intend to file, abuse suits.
More than 100 such demand notices have been submitted, the officials said. One plaintiff’s lawyer, Leander James, said he expected between 150 and 250 suits against the Rochester diocese by the time the one-year window closes next August.
James was among several lawyers who predicted that some upstate New York dioceses, including Rochester’s, could file bankruptcy in reaction to an overwhelming number of abuse lawsuits.
He has said bankruptcy reorganization can work out well for a diocese and for parishioners who were abused by Catholic clergy.
"Bankruptcy is a tool in the law, and like any tool it can be used for good or evil. I hope the bishop and his bankruptcy attorneys use this tool for the good of the survivors, the community and the protection of children," James said Thursday.
At the same time, some critics say a bankruptcy proceeding may limit the release of damning information about abuse and cover-up, leaving some victims feeling the process did not provide the public acknowledgment of their torment that they had sought.
"Settlements provided through bankruptcy court typically allow church officials to keep disclosures of abuse in house. Without having to report these allegations to the police or otherwise making them public, a full accounting of the number of abusers and who may have concealed or ignored those crimes can stay hidden," asserted a statement released by SNAP, a nationwide support group for victims of church sex abuse.
Another plaintiff's lawyer, Jeff Anderson, whose firm has filed more CVA lawsuits than any other to date, denounced the diocese's move as "very disturbing and disappointing.
"Bishop Salvatore Matano’s choice is simply a legal tactic to protect assets and prevent jury trials, and an attempt to prevent the truth from being revealed," Anderson said.
What happens to the lawsuits that have been filed?
Nineteen other Catholic dioceses or archdioceses in the U.S., including those in Minneapolis-St. Paul, Milwaukee, San Diego and Portland, Oregon, have filed for bankruptcy protection over the last 15 years. Branches of three religious orders also have filed for protection. The U.S. is divided into 177 geographic dioceses and archdioceses.
The Rochester diocese’s bankruptcy filing halts all action on the civil suits that have been filed against it and shifts those claims to the bankruptcy proceeding. The court will set a deadline by which additional claims for historic abuse must be filed.
What will ensue, lawyers have said, is a lengthy period during which the diocese’s finances will be probed and its assets cataloged, with an effort to ensure that all property or cash under the control of the diocese is brought into the fold.
In some dioceses, this has been a contentious process. Legal fights have erupted over which assets should be added into the bankruptcy case or the amount of money that local parishes should be required to provide to the final settlement.
Insurance companies will be major players
|The mausoleum in the Holy Sepulchre Cemetery in Rochester. (Photo: Max Schulte and Shawn Dowd / Rochester Democrat and Chronicle)|
The companies that provided liability insurance to the diocese during the decades in which the sexual abuse is alleged to have taken place will become major players in the proceeding. Insurers have provided a large portion of the funds used in other diocesan bankruptcy settlements.
The goal is a reorganization plan with an agreed-upon sum to fund diocesan operations going forward, and a pool of money to pay creditors, who totaled 275 in the bankruptcy petition filed Thursday morning.
Among the creditor list was the phrase "various sex abuse claimants," a reference to the people who have filed or will file accusations that they were sexually abused by church ministers as children. If their claims are deemed valid, each would get a share of the settlement pool.
A study of diocesan bankruptcies by a Penn State University law professor, Marie T. Reilly, found average payouts ranged from $60,000 to $1.4 million per accuser. The average was $371,500.
The bankruptcy proceedings of other dioceses have often taken two to four years to conclude.
Reilly and other lawyers have said there is no history of bankruptcy settlements forcing mass sell-offs of parish property or disrupting the church’s ability to minister to the faithful.