Catholic archdiocese in Oregon files for bankruptcy protection

Confronted by mounting costs of sex abuse lawsuits, the Roman Catholic Archdiocese of Portland, Ore., on Tuesday became the first diocese in U.S. history to file for Chapter 11 bankruptcy protection — a step that effectively cedes control of church operations to a federal judge.

“No diocese has ever declared bankruptcy,” said Charles Zech, an economist at Villanova University who specializes in Catholic Church finance. “There’s no precedent. They’re taking a huge risk in turning over their operations to a civil judge.”

Nor is Portland’s decision likely to be an isolated one. Last week, Tucson, Ariz., Bishop Gerald Kicanas said he was considering taking that step before an abuse trial begins in September. Boston officials recently avoided bankruptcy only by selling property worth millions of dollars.

Officials in Dallas, Santa Fe, N.M., and Louisville, Ky., have considered the option in the face of multimillion-dollar payouts to victims of sexual abuse. And many lawsuits haven’t even come to court yet.

“I’m surprised it took this long for it to happen,” said the Rev. Thomas Reese, who has written several books about Catholic Church government. “The money is simply not there any more. The court awards in some of these cases have been so big that liquid assets are gone, the insurance money has run out and people in the pews do not want to fork over money to pay for settlements.”

The filing offers several advantages for a beleaguered diocese: It allows protection of essential assets, freezes litigation and allows debts to be restructured, sometimes with reduced payments. But it also puts the financial administration of the diocese into the hands of a civil judge, who has the authority to explore every nook and cranny of church coffers, and to open its books — prospects the Vatican has long sought to avoid.

In Portland, for instance, Tuesday’s filing halted the start of a civil trial involving allegations against the late Rev. Maurice Grammond, who has been accused of molesting more than 50 boys in the 1980s. The archdiocese has already paid more than $53 million to settle more than 130 claims by people who say they were abused by priests.

Archbishop John G. Vlazny said the archdiocese tried to settle with the plaintiffs, but could not afford their offer. “The pot of gold is pretty much empty right now,” he said.

But David Slader, an attorney for the plaintiffs in the lawsuit, said the church was using the filing to avoid having the lawsuit’s allegations become public. “The bishop hasn’t begun to touch his pot,” Slader said. “He is lying.”

Archbishop John G. Vlazny answers questions during a press conference in Portland, Ore. Vlazny announced Tuesday that the Portland Archdiocese would file for Chapter 11 bankruptcy protection in the face of dozens of pending cases accusing Roman Catholic clergy of sexual abuse.

The argument will now be settled by a bankruptcy judge who may not feel bound by church laws, which prohibit a bishop from selling parish, rather than diocesan, assets to cover debts.