Diocese’s Efforts to Shirk Responsibility in Deep Trouble

Chapter 11 of the U.S. Bankruptcy Code is a pretty sweet deal for corporations. In essence, you get to keep doing business exactly as before, except you don’t have to pay your bills. Paradoxically, filing for Chapter 11 protection also opens up new avenues of financing that responsible corporations can’t even dream of getting. Ultimately, the bankruptcy court will approve a plan for payment of pre-filing debts at pennies on the dollar. Once the plan is approved, all the corporation’s pre-petition debts are discharged.

Chapter 11 also provides a neat little vehicle for avoiding civil liability. Filing a bankruptcy petition imposes an automatic stay on all efforts to collect pre-petition debts. The stay applies to exiting lawsuits. During the 1980s and 1990s, scores of manufacturers of asbestos-containing products used the Bankruptcy Code to avoid full civil liability for conduct that came this –><– close to qualifying as murder.

Well, guess what. A Catholic Diocese is a corporation entitled to file under Chapter 11. On February 27, 2007, the Catholic Diocese of San Diego became the fifth diocese to file for bankruptcy protection because of pending civil lawsuits for damages arising from sexual abuse by priests. The filing stayed proceedings in some 127 then-pending lawsuits, the first of which was scheduled to go to trial the following morning.

Earlier this month, a court-appointed expert submitted a report detailing some rather egregious bankruptcy-related misconduct on the part of the Diocese. The report pissed off the bankruptcy judge enough that she issued an Order to Show Cause Why Case Should Not Be Dismissed (PDF, 8 pages) on August 10. The order describes some of the expert’s more troubling findings, including: parishes hiding assets; failure to fully disclose Diocese-owned land and bank accounts; reporting assets at assessed values instead of fair market value; and failure to disclose facts about its cash management system. A hearing on the Order is scheduled for September 6.

But that’s not the end of the Diocese’s problems. The bankruptcy judge issued an order (PDF, 14 pages) late last week granting motions to remand forty-two of the abuse cases to the state courts from which they came. The Diocese had previously removed all 127 cases to federal court per 28 U.S.C. § 1452. Judge Adler expressed her continuing skepticism about whether the Diocese is acting in good faith. The order notes that the Diocese’s current offer to settle the whole group of cases is well below the state average for such claims.

Thank the Blessed Baby Jesus that this bankruptcy case didn’t wind up on the docket of a judge willing to rubber-stamp every misdeed Holy Mother Church chooses to perpetrate.

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  • illusory tenant  On August 27, 2007 at 9:21 pm

    We’re Catholics, all our faith is good!

  • San Diego Survivor  On August 30, 2007 at 7:49 am

    This Diocese was the dumping ground for pedophile priests, and the priests were grouped in parishes in San Diego County, where many children were sexually abused.

    When the San Bernardino Diocese was carved out of the San Diego Diocese, all the known perps were placed in the new Diocese, and the abuses continued.

    The problem with these idiots at the top, is they don’t have a clue, that forgiving a pedophile doesn’t stop them from continuing to abuse children, and expecting the abused children to forgive them is even more damaging to the victim, and then to deny the victim counseling, or simple acknowledgment that it even happened. I hope they all end up in Hell.


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