Spokane diocese seeks bankruptcy to
shield assets from abuse suits
By Claudia Rowe: Seattle Post-Intelligencer Reporter
November 11, 2004
Claiming poverty in the face of a mountain of lawsuits from
people who say they were sexually abused by priests, the Spokane
Diocese announced plans yesterday to file for Chapter 11 bankruptcy
protection before the end of the month.
The move would open the diocese's financial and personnel files
to an unusual level of public scrutiny and outside oversight, legal
experts say, but it would also safeguard the diocese from potentially
onerous sexual abuse lawsuits to come.
Nationally, fallout from the sexual abuse scandal convulsing the
Roman Catholic Church is estimated to have cost dioceses more than $1
billion in settlements and related expenses. In the past four months,
dioceses in Portland and in Tucson, Ariz. have sought bankruptcy
protection, claiming that it is the only way to ensure compensation for
all victims. But those financial benefits are still unknown.
"No process can guarantee justice," said Spokane Bishop William
Skylstad, who plans to file for Chapter 11 protection by Nov. 29, the
day an abuse lawsuit against the church is scheduled to begin. The move
would halt that civil suit -- for now.
Skylstad said the legal protection guarantees that such hefty lawsuits
brought early on do not deplete church funds that other victims might
"Chapter 11 protects those who have been harmed from losing a
race to the courthouse," Skylstad said.
Triggered by a breakdown in settlement negotiations involving 28
plaintiffs last week, the filing would halt progress on several
impending lawsuits and shield the diocese from the onerous demands of
creditors in the short term.
But for men prepared to prove their claims of abuse in court,
the bishop's plan sounded like nothing more than a way for church
officials to evade responsibility.
"The tragedy behind the bankruptcy filing is that at the last
minute -- three weeks from trial -- Spokane files and delays those
victims' right to the courthouse," said Mike Pfau, an attorney who won
$8.6 million from the Seattle Archdiocese in a clerical abuse case and
is now representing two dozen men accusing Spokane priest Patrick
O'Donnell of molesting them.
Beyond O'Donnell's alleged acts, the men claim that Spokane's
bishops knew their cleric was a sexual predator, and did nothing to
"Through this whole thing they've really been looking to escape
judgment," said Mike Corrigan, a plaintiff in one of the O'Donnell
cases, who described being fondled by the priest on an end-of-the-year
school trip in 1976, when he was 14.
"They used to scare us with the concept of eternal punishment
for sin and they impressed on us not only the need for confession but
for some tangible act of contrition," he said. "I think that's more
than a little ironic now -- either they've forgotten about it or they
don't think it applies to them."
Chapter 11, he added, was just "another way for them to put off
what we see as a day of reckoning for them, and we're not going to give
Skylstad, who is expected to become president of the U.S.
Conference of Catholic Bishops on Monday, said 125 people have claimed
abuse by priests in the Spokane diocese, and that about half had hired
In the last five years, the diocese has paid about $280,203 to
cover legal claims, counseling and medication costs for three victims,
according to figures provided by Vicar General Steve Dublinski. The
diocese expected to pay $130,000 more to two more victims in the near
future, he added, and 19 pending lawsuits are seeking claims in the
"tens of millions."
"The financial obligations being demanded by plaintiffs are
beyond the means of the diocese to pay," Dublinski said. "So the only
fair, equitable and just way to deal with this is Chapter 11
Chapter 11 also would set a deadline, after which no more sexual
abuse claims could be brought.
"It's pretty much a technique to buy time so they can get their
house in order," said Chuck Zech, an economics professor at Villanova
University, who studies finances in the Catholic church.
The expectation, based on the way businesses handle Chapter 11,
is that a judge will determine the total amount of Spokane's assets and
parcel out rewards to victims in a way that ensures the diocese's
schools, charities and other day-to-day activities could continue.
A finance report published earlier this year showed that the
Spokane diocese, comprising 81 parishes serving about 25,000 families,
had almost $10 million in net assets, although most of those were
restricted funds, said Michael Miller, secretary for business affairs.
"We are not a wealthy diocese," Skylstad said in announcing the
Chapter 11 decision.
The report, however, did not account for school or parish
properties, and Miller described each parish as a separate entity -- in
other words, not part of the diocese's budget. Church law, he added,
holds that a bishop cannot sell parish property for diocesan purposes.
"That really is the larger issue," said Zech, the church finance
expert. "If parish property is not owned by the diocese, then who owns
it? The parishioners? In the Catholic church's hierarchy, that could
become a cause of real consternation. Parishioners then could be making
decisions about how the property is used or who their priest should be."
Zech continued: "You have to assume that this is really a last
resource because the diocese will have to reveal all kinds of
information -- about their finances and how they deal with priests --
all kinds of stuff they would rather not. It's all going to be public
now, wide open."