Twin hit of abuse claims and pandemic could push NJ Catholic dioceses toward bankruptcy

By Deena Yellin
October 19, 2020

Bishop Dennis Sullivan announced the Camden diocese will file for bankruptcy protection on Oct. 1.

[with video]

For Catholic churches around the country, it has become a familiar refrain: After shelling out millions of dollars in settlements to survivors of clergy abuse, a diocese says it's broke and declares bankruptcy. 

The Diocese of Camden, representing a half-million Catholics in 62 South Jersey parishes, became the latest to file for bankruptcy protection on Oct. 1 — 10 months after a new state law waived the statute of limitations on decades-old abuse claims.

It's unlikely to be the last. If history is any guide, bankruptcy experts say, when one diocese in a state files for Chapter 11, others often follow. In North Jersey, the dioceses of Newark and Paterson, representing some 1.7 million worshippers, are caught in the same vise of legal attacks and COVID-19 financial strains, said Charles Zech, a professor emeritus at the Villanova School of Business in Pennsylvania. 

"Given the uncertainty associated with the statute-of-limitations window in New Jersey, I suspect that every diocese in the state is in danger," he said.

To parishioners, the legal maneuvers may have little visible impact on the ground. A Camden diocese spokesman said there are no plans to cut churches, staff or programs. But the filings have angered victims' advocates and plaintiffs attorneys, who say bankruptcy is a ploy by the church to dodge legal accountability for past crimes. 

Since 2004, some 29 Roman Catholic dioceses and religious orders nationwide have filed for bankruptcy, said Marie Reilly, a professor at Penn State Law who studies bankruptcy law.

In the past year alone, four New York state dioceses have filed: Rochester, Buffalo, Syracuse and Rockville Centre, the Long Island diocese that's among the largest in the nation.

The recent spike in lawsuits against churches around the U.S. was prompted by states lifting restrictions that previously barred survivors from pursuing claims of childhood sex abuse against their abusers and the institutions that harbored them.

New Jersey lifted its statue of limitations on Dec. 1, and nearly 200 lawsuits have been filed so far against the state's five Catholic dioceses. At the same time, a Victim Compensation Program set up by the dioceses has received 692 claims and so far made settlement offers totaling $41.8 million. Survivors must give up their right to sue if they take the settlements. 

The bankruptcy process allows churches to set a tighter deadline for victims to file their claims, Reilly said. Without such a move, those cases are handled individually and proceed through litigation. "The first one to get through to a jury is likely to get the largest payout, but won't leave enough money to pay out other claims," she said. 

'An equitable solution'

Lawsuits are suspended when a diocese files for Chapter 11 protection, and the court distributes money to victims in an organized fashion. "This helps achieve an equitable solution over all people and gives everyone a pathway to compensation," Reilly said.

In Camden, the diocese was facing over 50 new abuse lawsuits and had paid some $8 million to 71 applicants to the compensation fund. The diocese last year disclosed a list of 57 clergy who were "credibly accused of" sexual abuse of minors. In the years before the creation of the compensation fund, the diocese had also paid 99 claims for a total of $10.1 million, averaging $102,000 per claim. 

The coronavirus pandemic, meanwhile, has exacerbated the financial pain, forcing churches to suspend services at which they take in weekly collections while adding new health and safety expenses. 

"If it were just the pandemic, or just the costs of the Victim Compensation Program, we could likely weather the financial impact: however, the combination of these factors has made that impracticable," Dennis J. Sullivan, the bishop of Camden, wrote in an Oct. 1 letter to parishioners explaining the bankruptcy.

Sullivan had initially urged victims to come forward and recall their abuse for the compensation fund administrators. But by July of this year, he announced that the diocese was suspending payments due to a "revenue decline." 

The Paterson Diocese, which covers Passaic, Morris and Sussex counties, is "coping the best it can with the resources it has at hand during the pandemic," said Ken Mullaney, general counsel of the Paterson Diocese. It has "no intention whatsoever to file for Chapter 11 at this time" and will continue to pay compensation fund settlements, he said.

Maria Margiotta, a spokeswoman for the Archdiocese of Newark, which includes Bergen and Essex counties, acknowledged that the archdiocese "is facing significant challenges due to the COVID-19 pandemic and the resulting economic turmoil." But steps have been taken "to safeguard its ministries and programs, to ensure the continued delivery of vital community services," she wrote in an email.

"The archdiocese will continue to monitor the evolving situation and adapt as needed," she said.

S. Todd Brown, a bankruptcy expert at the University of Buffalo School of Law, said many dioceses have been "overwhelmed by the financial burdens" of assault cases.   

"We think of the Catholic Church as having all of this money and assets, but a lot of them aren't liquid," he said. It will be difficult for the church to leave this dark era of abuse behind when it has "these cases going on for years and you don't have the means to continue the proper mission of the church."

Survivors skeptical

Advocates for clergy abuse survivors are skeptical of the church's financial struggles and say dioceses use bankruptcies as a means of withholding secrets as well as assets.

The primary motive in filing Chapter 11 is to cut down on payouts and "avoid the release of information that destroys their image," said Marci Hamilton, a University of Pennsylvania professor and CEO of Child USA, a nonprofit dedicated to fighting child abuse. 

"It's cruel to victims" who are denied both full compensation and the discovery process that would help them learn the truth about their abusers, Hamilton said. 

Trish Cahill, a Ridgewood native who says she suffered years of abuse by her uncle, a Camden Diocese priest, sued the diocese in December after being denied by the compensation fund. The bankruptcy filing has left her case in limbo. 

"They find reasons to say they are not responsible," she said. "They kept telling all of us [abuse survivors] to wait and they will help us. But the entire time, they were planning to go for bankruptcy. It's all a game." 

Under the bankruptcy guidelines, clergy abuse survivors who have not yet been offered compensation will compete for a pool of money that will be distributed by the Bankruptcy Court. 

Some attorneys see a silver lining in the filings: Their clients, already traumatized by abuse, won't have to face the additional stress of depositions, cross-examinations and opening their lives up for judgment by a jury. But survivors also won't have the opportunity to face their abusers in court — "something that many have been waiting decades to do," said Jay Mascolo of RAM Law in New Brunswick, who is representing numerous clergy abuse victims suing Camden.

Court documents indicate that the Camden Diocese has assets estimated to be worth $50 million to $100 million along with estimated liabilities of up to $50 million.

In addition to a roster of properties and vehicles, the inventory lists jewels from Pope Pius X. The pope's pectoral cross, decorated with a ruby in its center and encrusted with pearls, and an episcopal ring, which contains a large emerald surrounded by diamonds, are in the diocesan archives.



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