Archive for Monday, May 9, 2005

Archdiocese bankruptcy pits parishes against victims of sex abuse

Competing claims filed for church assets

May 9, 2005

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— Roman Catholic parishes and schools are competing with alleged victims of clerical sex abuse to claim assets held by the Archdiocese of Portland, the first in the country to file for bankruptcy because of abuse settlements.

Court records show that about 340 claims, totaling $198 million, were made on the archdiocese by the April 29 deadline set by U.S. Bankruptcy Court Judge Elizabeth Perris.

The attorneys listed in the documents and the large sums sought suggest about 150 of those claims may be related to sex abuse. Because many of the claims are sealed and don't have a specific amount listed, church officials believe they could surpass $530 million.

The rest of the claims, however, have no clear ties to sex abuse allegations, with at least 37 churches and parochial schools among the claimants, seeking about $115,000.

The archdiocese is responsible for 124 Catholic parishes and more than 50 schools in western Oregon, the most populous part of the state. Investment funds and other money the archdiocese has held for them were frozen by the bankruptcy filing.

Additionally, in the coastal town of Florence, nearly 100 claimants are seeking the return of $775,000 in church building fund money that is being held by the archdiocese and is also now frozen. The church's building permits are soon to expire.

Today, Perris has scheduled the first of many hearings to determine whether parishes and schools can claim a right to their own assets or whether those assets belong to the archdiocese, making them available to alleged victims of sexual abuse.

"Our claims are not hostile claims," said Doug Pahl, an attorney representing the parishes. "They are claims that preserve the rights of parishes and parishioners to assets they think should be devoted to the charitable and religious causes for which they were intended."

The funds in question, he said, "were raised with the clear understanding that they were for missions and the purposes of the parishes and that those are distinct from ownership by the archdiocese."

He said that while parishes do not have separate corporate status, Oregon law focuses on donor intent.

But attorneys for abuse victims say parish assets should be available to pay archdiocese debts.

"All parish assets are owned, including real estate, in the name of the archbishop of Portland for the Portland Archdiocese," attorney Michael Morey said. "There is no other legal entity that is the legal owner of those properties. They have always been fully owned and controlled by the archdiocese."

He said that, in addition to parish real estate and cash, there were substantial insurance assets that should be in the pool of resources available to claimants.

Carl Felsenfeld, a law professor and bankruptcy specialist at Fordham University in New York City, said parishes and church schools were doing the smart thing by filing claims.

"If the archdiocese owes it to them, they would be well-advised to put in a claim to get it back," he said. "Otherwise it might get moved into the estate of the archdiocese to be used to pay bills generally."

He said there is a priority list under bankruptcy law that determines which creditors get paid first, but he was not sure where sex abuse victims' claims would come in. Who gets what will depend on how deep the courts determine the archdiocese's pockets are.

Assessor's records say church property is worth at least $300 million, including parishes, schools and an abbey. Creditors' attorneys estimate those assets could reach $500 million.

Before it filed for bankruptcy protection last July, the archdiocese had settled about 130 abuse lawsuits dating from 1950 through 2003 for $53 million.

The dioceses of Tucson, Ariz., and Spokane, Wash., also have filed bankruptcy claims because of sex abuse allegations.

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