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The Baseless Threats of Catholic Dioceses Bankruptcies

The baseless recent threat by the Stockton Catholic Diocese to file Bankruptcy if more child sexual abuse cases are filed against it is just one of several threats by diocese around the state that have no factual basis and are part of an on-going concerted effort by the church to continue to protect sexual predators in its midst.

This scare tactic is in use once again by the Catholic Church as a way to confuse state legislators and to keep them from supporting SB 131, the California Child Victims Act. This legislation would give victims access to the courts to seek justice for the life time damage created by sexual abuse that was hidden by the church and other organizations that should have been protecting children not harboring predators.

Are Catholic bankruptcies a real possibility or just another scare tactic strategy to protect abusers?

Consider the following facts.

This scare tactic started in California back in 2007, when the Roman Catholic Bishop of San Diego a Corporation Sole, filed for Chapter 11 Bankruptcy protection on the eve of trial of the first of five sex abuse cases in San Diego Superior Court. The case was assigned to Federal Bankruptcy Judge, Louis de Carl Adler, who at the first hearing where everyone meets the Judge and she outlines her vision for how she wants to proceed, she emphasized that she is Catholic, her children were the products of a wonderful Catholic school education, and that this was not going to be a case based on emotions, it was going to be all about business.

As the lawyer for a majority of those victims, I sank in my chair and assumed the worst. This was troubling since ultimately, I was appointed Bankruptcy Mediation Liaison Counsel on behalf of all 144 tort victim creditors.

During seven months of litigation before Judge Adler, it became abundantly clear, that Bishop Brom had no idea what the net worth was of the his Diocese. It also became evident that he had deliberately excluded approximately $700,000,000 in cash and real estate assets under the guise that these were parish assets being held in trust. It was clear that the diocese had used the Bankruptcy as a means of low balling settlement offers to the victims. Concerned about the transfer of assets and change in tax identification numbers of certain bank accounts during the pendency of the bankruptcy, Judge Adler ordered an independent audit be performed which, in fact, corroborated several substantial misrepresentations by the Bishop.

Bishop Robert Brom, submitted schedules signed under oath to the Bankruptcy Court where he claimed that he had insufficient assets to respond to the potential claims of approximately 144 sexual abuse victims. Those schedules deliberately omitted nearly $100,000,000.00 of cash assets (in what was called the Diocesan Bank) and over $600,000,000.00 in real estate assets. Just four years earlier, in 2003, this same Bishop swore under oath in loan applications and in a statement to the California Statewide Development Authority when financing the construction of a new Catholic High School, that the funds in the Diocesan Bank were assets of the Diocese. Legal title to all of the real estate assets were in the name of the Bishop or the Bishop's corporation.

Seven months later, after an agreement to pay nearly $200,000, 000.00 to the sex abuse victims, the Bankruptcy was dismissed. At the hearing on the dismissal, Judge Adler who had previously lauded the Catholic Church had the following to say:

I decided this morning to reacquaint myself with the exact definition of disingenuous. According to Merriam Webster's it means lacking candor, also giving a false appearance of simple frankness, calculating. From what I understand of the diocese finances, having spent hours reading Mr. Nelson's report and studying four versions of the diocese scheduled assets, I think the term disingenuous as applied to the diocese description of assets available to fund the settlement is completely accurate. There is, in my view, ample property available for liquidation to fund this settlement without threatening the mission of the church. It is simply a question of how the diocese sets its priorities.

I say this because this case has ramifications beyond San Diego. There may be other diocese in this country which may be considering Chapter 11 as an easy vehicle to deal with the claims of abuse victims. I think this would be a mistake now or in the future.

Bankruptcy Judge, Louis de Carl Adler

It seems that Bishop Stephen Blaire of the Catholic Diocese of Stockton is up to the same shenanigans as Bishop Brom. He is making the same specious claims that millions of dollars in assets do not belong to the Diocese, but are parish assets. Bishop Blaire may want to take heed of the words of Judge Adler, Chapter 11 is not vehicle to deny victims justice because hiding church assets will be easily discovered in the process, just as they were in the San Diego attempt.

Once again in Stockton, the bankruptcy scare tactic is no more than a publicity stunt to attempt to give credence to the argument against the passage of SB 131, the California Child Victims Act.

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