Twin Cities Archdiocese May File for Bankruptcy

by | November 21, 2014

By Jean Hopfensperger and Tony Kennedy

Citing growing financial trouble linked to clergy sex abuse cases, the Archdiocese of St. Paul and Minneapolis Thursday raised the prospect that it will seek bankruptcy protection.

In its annual report in the Catholic Spirit online newspaper, archdiocese officials said the unfolding settlements of clergy sex abuse cases are a key factor.

The report says litigation claims are expected to grow beyond the $5.3 million the chancery has reserved for them.

"Due to the above there is substantial doubt regarding the Chancery Corporation's being able to continue as a going concern," the report says.

"We have settled only two of the legal cases involving clerical sexual abuse of minors," Archbishop John Nienstedt wrote in his column. "There are 20 more trials that are scheduled. There is still another year and a half for the window created in May 2013, lifting the Statutes of Limitations. We have no idea how many more legal claims may be made against us."

Archdiocese CFO Thomas Mertens said that the archdiocese would not use reorganization "as a tool to avoid compensating victims/survivors. It would be a way to respond to all victims/survivors by allowing the available funds to be equitably distributed to all who have made claims, not just those who have the earliest trial dates or settlements.'

St. Paul attorney Jeff Anderson, whose firm represents many of the plaintiffs in the clergy sex abuse cases, declined to say whether he believes the archdiocese is sincere in saying that it would not be an attempt to evade abuse payouts. Anderson said that his first priority is to continue poring through church documents for evidence of abuse, and sharing that information with police and the public.

"Actions speak louder than words, so I'll make judgments on their actions and not about their words, and that remains to be seen," Anderson said Thursday at a news conference in which he announced a clergy sex abuse lawsuit against the Crosier order.

Last week the archdiocese announced plans to cut 20 percent of the chancery's operating budget, or more than $5 million, in response to growing financial pressures resulting from clergy sex abuse lawsuits and other spending. Staff layoffs in the central office as well as a reduction in some parish support services are expected in the move, which may be followed by the sale of some church assets.

The annual report says the archdiocese had a deficit of $9.1 million in the year ending June 30, 2014. Total church assets were down 17.5 percent to $48.9 million. The biggest decline was in cash contributions, which fell 59 percent to $3.9 million (from $9.5 million).

But much of that decline comes from the decision to establish the Catholic Services Appeal _ one of the Archdiocese's biggest annual fundraising campaigns _ as a separate foundation.

According to the report, the archdiocese spent $4.2 million on sex abuse investigations in the past fiscal year. Costs included: "outside professions provided expertise in the areas of legal, investigative, communications, insurance and financial matters. The majority of these expenses were related to review of priest files, investigation of insurance coverage and analysis of financial options."

If it seeks bankruptcy, the archdiocese will join Milwaukee and others that have faced mounting costs to settle sex abuse claims.

The Rev. James Connell, a retired Catholic priest and canon lawyer in Milwaukee, said there's still no end in sight to the bankruptcy proceedings in the Milwaukee archdiocese that began in July 2011, after Anderson filed suit on behalf of clergy abuse plaintiffs.

He said many former victims of clergy sexual abuse went into the process believing the archdiocese would take care of them. But as time went on, they experienced rejection. In February 2014, the archdiocese took a stance in bankruptcy court that none of the 575 claims made by sexual abuse victims had judicial merit, Connell said.

"Don't assume that it is all clear-cut and simple," the priest said. "Seek out the truth about the process."

Connell, who has worked as an advocate for survivors of clergy sex abuse, said he believes that many ordinary parishioners in the Milwaukee area are exasperated by the bankruptcy case. As part of the proceedings, the archdiocese had to post legal notices in the entrances of all its churches, schools and offices, announcing the deadline for claims.

"Many people in the pews believe this isn't healing anything," Connell said.

Bankruptcy Law Professor Ralph Anzivino of Catholic-owned Marquette University in Milwaukee, said a big bone of contention could evolve over the assets of individual parishes and whether they should be available to fund claims made against the archdiocese.

"That could be a big-deal issue," Anzivino said. "That has to be solved."

Since 2004, nine U.S. Catholic dioceses have filed for bankruptcy court protection as part of the clergy sexual abuse crisis that now threatens the finances of the Twin Cities archdiocese. The most recent church bankruptcies were filed in January 2014 by the dioceses of Stockton, Calif., and Helena, Mont.

The first bankruptcy petition in the series came from the Archdiocese of Portland, Ore. In between, filings were made by church leaders in Tucson, Ariz.; Spokane, Wash.; Davenport, Iowa; Fairbanks, Alaska; Wilmington, Del.; Gallup, N.M.; and Milwaukee.

At least one case, a Chapter 11 bankruptcy petition filed in 2007 by the Diocese of San Diego, flatly failed. The judge ruled that San Diego's petition was an attempt to avoid standard litigation of sex abuse claims.

Still other places, like the Catholic church in Boston, chose not to enter bankruptcy court. Instead, Boston and other Catholic enclaves sold assets as a way to pay claims made by the victims of predatory priests.

(Staff researcher John Wareham contributed to this report.)

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