Diocese bankruptcy settlement hits a snag By Elizabeth Hardin-Burrola Gallup Independent correspondent religion@gallupindependent.com February 3, 2016 ALBUQUERQUE – Attorneys for the Diocese of Gallup will not be filing a plan of reorganization in U.S. Bankruptcy Court this week as they had predicted in January. And hopes for a finalized settlement agreement with clergy sex abuse claimants might be sabotaged by an ongoing dispute between two parties in the bankruptcy case. The dispute, which has been the subject of vague discussions in previous hearings, spilled out into open court during a status hearing Tuesday before Judge David T. Thuma. It involves an impasse between Michael P. Murphy, the future claims representative, and Catholic Mutual, which offers liability coverage to the Gallup Diocese. As the future claims representative, Murphy will represent anyone who might come forward in the future with a clergy sex abuse claim against the diocese. Catholic Mutual has agreed to issue a certificate coverage to the diocese to cover the amount of the future claims fund. Most of Tuesday’s hearing was dominated by back and forth discussion of the divisive issue separating Murphy and Catholic Mutual — how much of an inquiry into Catholic Mutual’s financial condition Murphy should be allowed as part of his fiduciary duty and how much financial information Catholic Mutual is willing to provide Murphy. David Spector, an attorney for Catholic Mutual, objected to the “extraordinary review of the books and records of the financial condition of Catholic Mutual” that he claimed Murphy and Young Kim, Murphy’s representative in court, were insistent on receiving. Spector said Catholic Mutual was willing to let Murphy view only a financial balance sheet — after Murphy had signed an “ironclad protective order” that would protect the confidential nature of the information. “But that is as far as we’ll go,” Spector said. “We won’t go any further. Mr. Murphy and Mr. Kim have insisted that that is the starting point.” Under questioning by Thuma, Kim was unwilling to say Murphy might not want further financial information from Catholic Mutual. Kim noted that Catholic Mutual is not regulated or overseen by any organization and it is not a rated insurer. Spector, who threatened to withdraw financing for the future claims fund, also complained that Murphy had been recommended for the future claims representative position by attorneys representing clergy sex abuse claimants. That, however, is not backed up in the court record. Murphy was actually nominated by attorneys for the Diocese of Gallup in a court motion filed Feb. 11, 2015. Diocesan attorneys cited Murphy’s experience as the future claims representative in church bankruptcy cases in Stockton, California; Fairbanks, Alaska; and Davenport, Iowa. James Stang, legal counsel for the Official Committee of Unsecured Creditors, which represents the interests of clergy sex abuse claimants, weighed into the dispute and expressed frustration that the Gallup Diocese’s settlement could fall apart if Catholic Mutual does not finance the future claims fund. “Are we really going to lose this entire deal because people are speculating that someone’s going to be unreasonable or someone’s going to refuse to offer an answer to a question?” Stang said. “And that’s what’s frustrating me. I just can’t understand why we can’t at least start the first step on this path and see where it goes.” By the end of the nearly hour long hearing, the judge also appeared frustrated by the lack of resolution. Addressing diocesan attorney Lori Winkelman, Thuma asked, “What happens to your time line if this conversation just continues ad nauseam and we never get anywhere?” “We’ve got to get this figured out,” Thuma added, “and we’ve got to do it soon.” Thuma then scheduled another continued status hearing Wednesday afternoon, and he instructed Kim to talk with Murphy and communicate Murphy’s views to the other parties in the bankruptcy prior to Wednesday’s hearing.

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